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Review Your SQE 1 Practice Records

Timing: 00:00:00

Laura executes a declaration of trust in which she transfers her shareholding in Acme Corporation to her trustees to be held on trust. The trust provides that John and Sarah will be entitled to the dividends from the shares, and after the last of them has died, ownership of the shares will pass to Emma. Which of the following statements best describes the position?

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The correct answer is B. Laura's trust creates an interest in the dividends (i.e., the income) produced by the shares, and this entitlement to the income lasts for the lives of the specified beneficiaries. The trust is not charitable, and the trustees have no discretion as to which beneficiaries to pay the income to. 

Key Point: A life interest trust is one where the income from the trust property is given to one or more beneficiaries for their lifetimes, with the capital passing to another beneficiary or beneficiaries after their death.

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