In relation to the disposition of a beneficiary's interest when a property is sold, which statement is correct?

• A. The beneficiary's interest remains with the beneficiary
• B. The beneficiary's interest disappears on sale
• C. The beneficiary's interest is overreached and forms part of the sale proceeds paid to beneficiaries
• D. The beneficiary's interest becomes a mortgage on the sale proceeds

Answer: (C)

When land is held on trust and the trustees sell it, the beneficiaries’ equitable interests can be overreached. This means the land itself is transferred free of those interests, and the beneficiaries’ rights move to the sale proceeds. The money from the sale is held on trust for the beneficiaries, so their beneficial interests are realized in the proceeds rather than in the land itself. This process is called overreaching, and it typically requires two or more trustees (or a trust corporation) to be involved in the sale.

So the correct statement is that the beneficiary's interest is overreached and forms part of the sale proceeds paid to beneficiaries. The other options don’t fit this mechanism: the interest doesn’t stay with the land, it doesn’t simply disappear, and it isn’t a mortgage on the proceeds.