Capital and income

Traditional trust lawyers distinguish sharply between capital and income. This distinction is of course enshrined in the beneficial interests given under traditional trust instruments, where a ‘life tenant’ will be entitled to the income received and the capital will eventually pass to the remaindermen. This distinction was no doubt important to settlors who attributed their prosperity to following the maxim ‘Never spend capital’. No doubt they would have feared that the intended beneficiaries of a younger generation might forgo such prudence (rather like the parties before the Family Division in Robson v Robson [2010] EWCA Civ 1171 – see para 96).