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Power of Maintenance

The trustees have a discretion as to whether to maintain the beneficiary.

Payments by way of maintenance are payments out of income to provide for routine necessities such as education, clothing, food and lodging. A power to maintain is not implied into the trust instrument. It must be expressly given or the trustee can rely on the provision in Section 36 of Trustee Act 1949. An infant can’t give a valid receipt for the income. A valid receipt may be given to the trustees by the parent of the infants. If the infant is married, he may give a valid receipt himself.

Section 36(2)

The income arising out of the trust fund should be accumulated and invested in authorised investment. Any surplus income after the making of payment is accumulated, the trustees may use these accumulations at any time during the infancy as if there were income arising in the current year, thereby making the income available for maintenance purposes.

Section 36(1)

Trustees have discretionary power to maintain an infant beneficiary out of his share of the income. It is applicable if there is any other fund applicable for the maintenance or if any person is bound by law for the maintenance or education.

This discretionary power must be exercised subject to the proviso under the same section that;

a) The beneficiaries must be an infant

b) The infant must have a beneficial interest.

c) The income arising out of the infants share is applicable to the maintenance, until the infant attains his interest under the trust, must be held for his benefit.

Trustees also must have regard to, while exercising their discretion, the following matters set out in the proviso under the same section;

a) The age of the infant

b) His requirements

c) The general circumstances of the case

d) Other income available for maintenance.

Trustees should not normally give the infant money in excess of his needs if he has other financial resources.

The power to maintain can only arise where the beneficiary is entitled to receive intermediate income under the trust. This will be the case either where his interest is vested or where it is a contingent interest which carries the intermediate income. For example:

If the infant’s share does not carry income, then there can be no maintenance. This involves a situation where a trust instrument states RM10,000 to A when he attains 23 years old, the income to B until then. This gift does not carry interest income to A, therefore no maintenance can be given to A.

Under Section 36(1) the money may be paid to the parent or guardian of the infant or directly for his benefit. If the infant is married, they may pay it directly to him.

The power to maintain ceases when the beneficiary reaches the age of majority. Even if his interest is still contingent, the trustees must pay the whole of the income to him until he obtains a vested interest or dies.

Section 57

The court has inherent jurisdiction to approve the use of income or even capital for the maintenance of infant beneficiaries.

Cases

  1. Wilson v Turner

[Refer case worksheet]

  1. Bryant v Hickely

If the discretion is exercised in good faith the court will not interfere.

  1. Re Greenwood

Although Section 19 protects trustees if they acted in good faith, it was held that this protection is only given if the trustees had actively exercised their discretion.

  1. Bryant v Hickley

[Refer case worksheet]