Deed of Variation question about trustees

(Ian Wells) #1

I have a situation where a deed of variation is made to a will that originally appointed the Bank as executors and trustees. The deed of variation appoints two new executors (family members), but there is nothing replacing the bank as trustee. The deed of variation is to bypass a grandparent in favour of her grandchildren, all of whom are under 18. In the absence of anything appointing new trustees in the deed of variation itself, should there be a supplementary deed or some other paperwork to appoint persons other than the bank as trustees?

Ian Wells
Emery Little

(Paul Saunders) #2

You cannot use a deed of variation to change the executors.

The effect of the deed might be to appoint the family members to act as
trustees together with the bank. However, without knowing what the deed
actually says, it can only be guesswork as to what it does.

Paul Saunders

(Ian Wells) #3

Thanks. My issue is that the will names the bank as “executors and trustees”, and the deed of variation names two family members as executors. My clients (not the executors) state thet are to be trustees but they haven’t provided anything that confirms the bank have stepped aside as executors, nor anything that appoints alternative trustees. Am i right in thinking that there needs to be some documentary evidence of the trustees being appointed if I am not to assume it remains as the bank?

Ian Wells
Emery Little

(Simon James Northcott) #4

If the wording of the Will and DOV are such that no trustees are appointed of the gift to the grandchildren, and it appears that the Bank on the exact wording are the trustees, they will need to retire in favour of others
as trustees. It is hard to advise without sight of the documents.

Simon Northcott

(Paul Saunders) #5

Unless the will provides otherwise, the power to appoint trustees vests
in the bank, as executor. Even if TLATA applies, can the beneficiaries
exercise the power before assets are appropriated to the trustees

Paul Saunders

(Ian Wells) #6

Thank you for your response. I appreciate that without sight of the documents it’s hard to be specific, but you seem to have confirmed my thinking…
Ian Wells
Emery Little

(Graeme Lindop) #7

I agree that a DoV cannot change the Executors. However, I am not sure how the Bank can be a trustee of the gift by the grandparent into the trust for the grandchildren. Was the Bank a party to the DoV? If not, it seems to me that the Bank must account to the grandparent for their entitlement in the estate. It would then be up to the grandparent to pass the funds on to the family “trustees” to give effect to the DoV.

It is not unusual for a DoV to try and recreate the Will to reflect the desired beneficial interests. This may be the way in which the family members were appointed as “Executors” when the intention was to appoint them as trustees of the redirected legacy. If the family members were parties to the DoV, this would reinforce their appointment as trustees and their acceptance of their duties.

Graeme Lindop

Coles Miller Solicitors LLP

(Ian Wells) #8

The wording in the original will appoints the bank as executors and trustees. If the DoV is creating an additional not supplementary trust to the one in the original will, doesn’t the appointment of the bank as trustee include all trusts under the will and the DoV? If not, shouldn’t the DoV appoint the trustees for the trust it is establishing?

Ian Wells
Emery Little

(Simon James Northcott) #9

As I said, it depends on the precise wording of the documents. If the grandmother has assigned her interest in the Will to minors, and given notice of it to the Bank, then the Bank will hold that interest in trust for
minors and would need to deal with it accordingly.

Simon Northcott

(Paul Saunders) #10

It seems the drafter of the variation erred in designating the family members as “executors” rather than “trustees”. As you cannot appoint an executor by deed of variation, I suggest their purported appointment is void, so that it is only the bank that is the executor and trustee.

In looking at the next step, I believe the first question is whether there has been any distribution to the original beneficiary.

If there has been no distribution, then as Simon has said, upon receipt of a copy of the deed, the executors are on notice of the gift into trust. However, have they been instructed to give effect to that gift? If not, can they safely assume that instruction as the beneficiary might already have set monies aside to satisfy the gift.

A similar question arises if a sufficient distribution has been made, as the beneficiary might intend those monies be impressed with the trust. If the monies are already held by the beneficiary, I believe that the trustee will be the beneficiary, as the person holding the trust assets when the trust was declared, and not the bank.

In the absence of anything in the deed about whether the trust is imposed on assets in the original beneficiary’s hands, prima facie it is the entitlement in the executor’s hands that needs to be considered. In this case, in the absence of any thing to the contrary, I believe the bank will be the trustee.

If it is intended that the trustees be the family members, the bank will need to appoint them (although it might be worthwhile approaching Chancery counsel to make sure that such action does not just exacerbate the problem).

Paul Saunders

(Ian Wells) #11

Further developments.

The deed of variation creates trusts for grandchildren to the age of 18. The original will has a caluse allowing parents to receive minors legacy or share of residue, which is a full discharge of the trustees responsibility for that share. Does the trust continue to exist for these minor beneficiairies if the trustees do indeed pay or transfer the share of residue or legacy to the minors parents? Under what relationship do the parents hold the share or legacy for their children?

Ian Wells
Emery Little

(Paul Saunders) #12

The parents will hold the monies as trustee for their child(ren).

The decision on whether or not to make such payments will depend on the nature of the gift(s) to the grandchildren. Are they vested, or contingent upon them attaining age 18.

If vested, then there may be no objection to the payments being made to the parents, provided that you can be satisfied the parents will apply the monies appropriately.

If the grandchildren’s entitlements are contingent, the amount of each individual grandchild’s entitlement has yet to be determined, and the monies should not be paid over to the parents, unless the trustees first exercise their s.32 TA 1925 power of advancement to effectively remove the contingency (but is this what the original beneficiary had in mind?).

Paul Saunders