united-kingdom trusts-and-estates
What happens if a beneficiary becomes the sole trustee?
<p>For obvious reasons, a trust cannot be formed where a person is both sole trustee and sole beneficiary. Such a person would hold both the legal and the equitable interest, so there would be nothing held in trust.</p>
<p>My question is, what happens if this situation comes about after the trust if formed? E.g. A is sole beneficary and A and B together are the trustees, but then B dies or resigns. Does the trust automatically collapse since A now holds both the legal and equitable interest? Related, is there automatic vesting of the trust property in A if B dies (as opposed to resigns)? <a href="https://www.legislation.gov.uk/ukpga/Geo5/15-16/19/section/40" rel="nofollow noreferrer">Section 40 of the Trustee Act 1925</a> seems to be silent on this point.</p>

<p>The Act is silent because...</p>
<blockquote>
<p>There is no legal necessity for the settlor, trustee and beneficiary
to be different people or organisations. It is sometimes beneficial
for an individual to establish a trust in which they are also the
trustee and beneficiary; this is perfectly possible in English law.
This can be particularly useful for tax purposes.</p>
</blockquote>
<p><a href="http://www.estatesortrusts.co.uk/what-are-trustees-and-beneficiaries.html" rel="nofollow noreferrer">http://www.estatesortrusts.co.uk/what-are-trustees-and-beneficiaries.html</a></p>

<p>The trust comes to an end. This is known as the doctrine of merger. See Virgo, <em><a href="https://books.google.com.au/books?id=HFbwDwAAQBAJ" rel="nofollow noreferrer">The Principles of Equity and Trusts</a></em> (2020) at [3.5.3]:</p>
<blockquote>
<p>In the same way that the person with sole legal and beneficial title to property does not also have an equitable proprietary interest, once an equitable interest has been created, it will be lost if the property is transferred to a person who has sole legal and beneficial title to it. Another way of expressing this principle is by recognizing that one person cannot hold property on trust for only themself: <em>Re Selous</em> [1901] 1 Ch 921, 922.</p>
<p>This is illustrated by <em>Re Cook</em> [1948] Ch 212, in which land was held on trust by a husband and wife for themselves. Since there were two of them, each could hold the legal title to the land on trust for themself and the other. But, when the husband died, the entire interest in the property, both legal and equitable, vested in the wife. It was held that the legal interest had swallowed up the equitable, so that there was a merger of the two interests, and it followed that the trust was terminated. As Harman J recognized, 'you cannot have a trust existing when nobody is interested under it except the trustee, because nobody can enforce it and there is, in fact, no trust in existence' (at 215).</p>
</blockquote>
