Practical Law UK Glossary 8-382-6103 (Approx. 5 pages)
Glossary
Power of advancement
A power that enables trustees to pay or apply capital to, or for the benefit of, a beneficiary. Trustees may apply capital for the benefit of a beneficiary by creating new trusts for him (a settled advance).
A power of advancement may be statutory or express. The statutory power in section 32 of the Trustee Act 1925 is subject to four restrictions:
The power can be exercised only in favour of a beneficiary who has an interest in capital (which may be a contingent or remainder interest) and not, for example, in favour of a beneficiary who can only benefit if the trustees exercise a discretionary power.
For trusts created before 1 October 2014, it applies only to half of a beneficiary's interest in the trust fund. Most modern trust documents extend the power to apply to the whole of a beneficiary's share, but older trust documents and simple will trusts often do not. This restriction has been removed by section 8 of the Inheritance and Trustees' Powers Act 2014 for trusts and will trusts created or arising on or after 1 October 2014.
Any beneficiary with a prior interest (such as a life tenant) must consent to the exercise of the power.
Advances must be taken into account when the beneficiaries who receive them later become entitled to capital.
The most common form of express power is a power in an interest in possession trust to pay capital to a life tenant who has no interest in capital.