“House of Lords relaxes certainty test for discretionary trusts”
A trust deed provided benefits for employees of a company and their relatives and dependants. The trustees sought directions on whether they were bound to distribute income or could accumulate it, raising questions about the validity of the trust given uncertainty about who qualified as beneficiaries.
Whether the trust was valid despite uncertainty in identifying all potential beneficiaries, and what test should apply to determine certainty of objects in discretionary trusts.
The trust was valid. The test for certainty of objects in discretionary trusts should be whether it can be said with certainty whether any given individual is or is not a member of the class, not whether a complete list of beneficiaries can be compiled.
This decision revolutionized trust law by making discretionary trusts with large, indefinite classes of beneficiaries legally viable, greatly expanding their practical utility in estate planning and employee benefit schemes.
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OSCOLA Citation
McPhail v Doulton [1971] AC 424 (HL)
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