Generally speaking, there are no strictures as to who may be a beneficiary of a trust; a beneficiary can be a minor, or under a mental disability (in fact many trusts are created specifically for persons with those legal disadvantages). It is also possible to have trusts for unborn children, although the trusts must vest within the applicable perpetuity period.
A Cestui Que trust of this nature is set up by the government when the birth of a baby is registered. On registration, the baby becomes a 'person', 'child' or legal fiction in the eyes of the law. The number on the back (or front) of the birth certificate is the account number or bond tracking number. This trust is held by the government and is given value based on the potential future commercial activity of that 'person'. Although the trust is set up by the government, and is held in trust by the Chancellor of the Exchequer, it is perfectly possible for the named 'person' linked to the bond tracking number to relinquish his legal fiction and become a human being or 'freeman-on-the-land' at which point he can demand access to the funds contained within.
From the perspective of the trustees' duties, it is most common to differentiate between:
Where a trust gives rise to sequential interests, from a tax perspective (and also from the point of view of trustee's duties), it is often necessary to differentiate beneficiaries sequentially, between:
For the purposes of various exercise of beneficiaries' rights, it is often necessary to distinguish between:
In the case of a fixed trust, the beneficiaries' interest is proprietary; they are the owners of an equitable interest in the property held under the trust.
The position is slightly different in the case of a discretionary trust; in such cases the beneficiaries are dependent upon the exercise by the trustees of their powers under the trust instrument in their favour.
Similarly, where a trust gives rise to successive interest, the title of a remainderman is a prospective, or contingent, interest; although unlike a discretionary beneficiary, this is still a species of property that can be dealt with, much in the same was as a contingent or prospective debt.
Historically, whilst the courts have been fairly amenable to the use of trusts in tax planning, as tax planning schemes have become more aggressive, so the courts have increasingly taken a restrictive view of the tax treatment of trusts.
Although individual countries tend to have very detailed rules about the taxation of trusts, the three mechanisms whereby taxation is usually assessed is by either treating (i) the trust as a separately taxable entity in its own right, (ii) treating the trust property as still the property of the settlor, and (iii) treating the trust property as belonging absolutely to the beneficiaries. Some jurisdictions apply different combinations of the rules in income tax, capital gains tax and inheritance tax.
Because an interest under a trust is a species of property, adult beneficiaries of sound mind are able to deal with their rights under the trust fund as they could with any other species of property. They can sell it, assign it, exchange it, release it, mortgage it, and do most other things that they could do with a chose in action.
If all of the beneficiaries of the trust are adults and of sound mind, then they can terminate the trust under the rule in Saunders v Vautier, and require the trustees to transfer absolute legal title to the trust assets to the beneficiaries.
Colonial First State Investments decision illustrates difficulty in a unit trust qualifying as a fixed trust.(Case overview)
Mar 02, 2011; The recent Federal Court decision of Colonial First State Investments Ltd v Commissioner of Taxation  FCA 16 further...