protective trust

Protective trusts refers to trusts created for the purpose of protecting certain beneficiaries under which the trustees are charged with the payment of an income or other income to be paid periodically throughout the life of that person or for a period lesser than that. The forfeiture clause usually inserted in protective trusts indicates that on the occurrence of a certain event, the interest of the principal beneficiaries will be determined in the case of a series of beneficiaries, such that others can take benefit too from the trust. In some other cases, the forfeiture clause may indicate the occurrence of certain events upon which the principal beneficiary will be deprived of income or some part of it. Re Sartoris’ Estate (1892) 1 Ch. 11.

The grounds for the forfeiture of a beneficiary’s interest in a trust are the following:

• a. In the event of the beneficiary committing a breach of the trust terms.
• b. The bankruptcy of the beneficiary, so as to prevent the income of the principal beneficiary from being available to the trustee in bankruptcy. Re Walker (1939) Ch. 974.
• c. When an order of sequestration of the beneficiary’s income for contempt of court. Re Barring’s Settlement Trusts [1940] Ch. 737.
• d. When the principal beneficiary executed a deed of variation which gives up his right to part of his income in certain situations.