Deed of Variation of Life Interest Trust

Morning All

I have another Deed of Variation query if users wouldn’t mind providing their views…

the Will says “I GIVE my freehold farm and lands… unto my Trustees UPON TRUST to sell call in and convert the same into money with power to postpone the sale thereof and TO HOLD the net sale proceeds of sale thereof and the net rents and profits until sale UPON TRUST for my said wife during her lifetime and from and after her death UPON TRUST for my children who shall be living at the death of my said wife in equal shares absolutely PROVIDED should any of my children have predeceased my wife leaving issue then such issue shall take equally”

The Will was signed in 1975 and there are no additional Trust administration clauses.

The deceased has three adult children, all of whom wish to convert the outright gift on wife’s death into a Discretionary Trust as one of the children actively runs a farming business and lives in the farmhouse and they want to recognise that he has added value to the Trust Assets more than the others.

However, has anyone yet attained a vested interest in order to sign a Variation given that the class of beneficiary crystallises on wife’s death?.. unless all grandchildren signed the Will as well but then the class doesn’t necessarily end with that generation either?

Jennifer Howell
Swayne Johnson Solicitors

The form of the trust can only be changed, whether by deed of variation or otherwise, if all the possible beneficiaries are ascertainable and of age (applying Sanders v. Vautier, 1841).

In the situation described, this is not the case. Although it may be possible to apply for court approval on behalf of the minor and unborn beneficiaries to change the form of the trust, it appears the proposal is intended for the benefit of one of the sons (an adult beneficiary) and not for the benefit of the minor and unborn beneficiaries.

It would be possible for the widow to effectively resettle the income entitlement upon discretionary trusts by way of variation, but not the capital entitlement. As the trust fund is already settled by the will, provided the s.62(7) TCGA 1992 declaration is made the deceased would be treated as the settlor for both CGT and income tax purposes (Schedules 12 and 13 Finance Act 2008), and not the widow. However, “spouse” exemption would be lost and the value of the trust fund would be a chargeable transfer in the estate of the deceased.

Paul Saunders

In the circumstances I think it would be open to the children to vary the trust to the extent of their entitlements i.e. as though the trust had said words to the effect of “and on the death of my wife if all my children survive her to hold on discretionary trusts as set out below … etc”. In other words the desired variation will be effective but only if all the children survive the widow.

Paul Davies
Clarke Willmott LLP

Thank you Paul, you’ve appear to have clarified what I suspected would be the main sticking points.

Jennifer Howell
Swayne Johnson Solicitors

Greetings from Brisbane Australia. I wonder if the contingent remaindermen could covenant now that if the three of them attain vested interests, then these will be re-settled according to certain terms set out in the covenant. The covenant could be made conditional in its operation upon the three contingent remaindermen taking vested interests.

BlueKey Conveyancing Pty Ltd