DoV where Discretionary Trust of residue

Trusts Discussion
1

We have many clients who have discretionary trusts in their wills of the residue to protect against future spouses, bankruptcies etc. The trusts are for the benefit of their children and future descendants including those yet unborn. In view of the new RNRB they may want to give the residue outright to their children. Is this possible using a DoV even though the beneficiaries are minors and unborn? If so what acts need to be incorporated in the DoVs?

Rosie Tejani
London Wills

2

A variation contained in an instrument valid under s.142 IHTA 1984, applies for all purposes of the IHTA. Accordingly, a valid variation may make the RNRB available to the estate even though it would not otherwise be available under the terms of the will.

There is no reason why the beneficiaries under the deed cannot be minors, or unborn, provided that the trusts created under the variation are not void for any reason.

If the property in question is within a discretionary trust of residue created by the will, s.142 may not be appropriate unless the class of beneficiaries is closed and none of them are minors. That the question suggests an appointment in favour of unborn issue suggests the discretionary class might not be closed. In which case, the executors or trustees (depending upon who has the power of appointment) should consider if their aim can be achieved by an appointment qualifying under s.144 IHTA. If correctly dealt with, this can also bring the RNRB into play.

Paul Saunders

3

Another way to “sort” the problem would be to rely on s.144 of IHTA 1984 - to read back the will and appoint the property outright within two years to the lineal descendants rather than leaving it in trust.

Shaun Hughes
Swayne Johnson

4

Thank you Paul and Shaun. Shaun - Is this always possible? I keep reading in books ‘as long as the trustees have power…’ Are statutory provisions and inclusion of STEP provisions sufficient to allow outright appointment?

Rosie Tejani
London Wills

5

s.144 can be relied upon on relevant property trusts regardless.
Shaun Hughes
Swayne Johnson