The testator has passed away and left a will behind. In the will, the testator has appointed trustees to hold the residue of his estate on trust for his grandson, provided that the grandson attains the age of 25. However, the will does not contain any express powers. During the grandson's minority, the trustees have been using the income for his maintenance, education, or benefit, and accumulating the surplus income. Currently, the grandson has just turned 18 years old.
What should the trustees do with the surplus income accumulated during the grandson's minority?
The testator has passed away and left a will behind. In the will, the testator has appointed trustees to hold the residue of his estate on trust for his grandson, provided that the grandson attains the age of 25. However, the will does not contain any express powers. During the grandson's minority, the trustees have been using the income for his maintenance, education, or benefit, and accumulating the surplus income. Currently, the grandson has just turned 18 years old.
What should the trustees do with the surplus income accumulated during the grandson's minority?
Hold the surplus income as capital until the grandson is 25 or dies under that age.
D) According to the will, the trustees are required to hold any surplus income as capital until the testator's grandson reaches the age of 25 or until he dies before that age.
If the trustees have been accumulating surplus income during the grandson's minority, the accumulated income will become part of the capital once the grandson turns 18. When the grandson's interest in capital becomes vested, he becomes entitled to the accumulated income as well as the capital. In this case, the grandson's interest in the capital will vest when he is 25, and at that time, he will become entitled to claim the income accumulated while he was under 18, along with the capital of the fund.
If the grandson dies before he turns 25, his interest in the capital will fail. In the absence of any substitutional gift in the will, the fund will pass on to the testator's estate along with the income accumulated while the grandson was under 18.
Option (A) is incorrect because the income accumulated during the grandson's minority accrues to capital, and he is only entitled to claim the income generated after he turns 18.
Options (B) and (C) are incorrect because once the grandson is 18, the trustees have no further discretion in relation to the income or the accumulation of income.
Option (E) is incorrect because a resulting trust will only arise if the grandson dies before he is 25.