Absolute entitlement: mergers of interests: non-mergers
However sometimes an intended merger does not succeed, because there are other interests which have been overlooked. Therefore the person who now has the interests of the life tenant and the remaindermen does not have all the interests and there is no occasion of absolute entitlement.
An example is where the life tenant of an English trust has a `protective’ life interest. Section 33 Trustee Act 1925 provides that where a protective interest is created, then if the life tenant commits an act which would deprive him of the income, this is replaced by discretionary trusts for the life tenant and his or her immediate family. Such a life tenant cannot therefore assign or surrender his or her life interest to the remaindermen because this brings into play the discretionary trusts. By providing for the protective life interest to terminate on an act of bankruptcy, it can be protected from the life tenant’s creditors.
Scottish law has a different concept, the `alimentary liferent’. So far as it does not exceed what is needed to maintain the liferenter at the level to which he or she is accustomed, the alimentary liferent is safe from the claims of the liferenter’s creditors. The alimentary liferent may not be surrendered without the consent of the Court under Section 1(4) Trusts (Scotland) Act 1961.
Another example which may be met is where the interest of the remaindermen is contingent, not vested. A contingent interest is one which will only vest on the occurrence of a particular contingency. A typical example would be for the trust deed to give A a life interest, with remainder to such of B C and D as are alive at A’s death. The interests of B C and D do not vest until A’s death, because they must be alive then to get anything. There is the possibility that they may all die before A does. Therefore someone else, who may be specified in the deed, or may be the settlor or his heirs, has an interest under the deed. A surrender by the life tenant would not then be an occasion of absolute entitlement.