TSEM6018 - Legal background to trusts & estates: the law in England & Wales - legal interest & equitable (beneficial) interest

A legal interest is a right in property governed by statute and common law. An equitable (beneficial) interest is a right in property governed by the law of equity. Both interests in a property co-exist, and are not necessarily held by one person. A person may have the legal interest but no benefits, whilst someone else has all the benefits. If one person owns both interests, he can use and enjoy the property. He is entitled to anything produced from it. This can be pleasure, income or crops.

Sometimes the law requires the separation of the legal interest from the beneficial interest.

Interests are held separately

If the interests are held separately, provisions stop the owner of the legal interest prejudicing the rights of the person with the beneficial interest. These provisions are governed by

• the laws of equity, and
• the statutory provisions governing trusts.

As a result of the separation, the owner of the legal interest becomes a trustee.