A DOV included a trust in its schedule and defined the trust fund as including items A and B, or assets representing them for the time being-with no power to accept other assets.
The body of the deed left items A, B and C on the trusts, as the draftsman forgot to delete reference to C.
Is item C a trust asset, or can it be argued that the trustees had no power to accept it, so even though they signed the Deed the gift of C is invalid?
Simon Northcott
Hard to say as a matter of construction without the DOV in front of me, but it may be there are arguments either way: Trustees don’t need an express power to accept further assets onto the trusts of an existing settlement.
Express powers to accept further assets usually deal either with specific types of property (and are unlikely to be necessary) or with the trustees’ right to refuse to accept additions (which is also likely to be unnecessary). See Kessler under “Power to accept additional funds or onerous property”.
But if this was a drafting error, the answer may be rectification, by consent between the parties or otherwise.
Mark Hubbard
Barrister
Thanks Mark, that is most helpful.
It clearly was a drafting error, as reference to item C was correctly deleted in the schedule to the deed defining the trust fund, but was left in by mistake in the main body of the deed when listing the items gifted under the DOV.
If it is rectified by consent of the parties, where does that leave things from a taxation point of view?Like you, I think it likely the Trustees could be said to have accepted item C as subject to the trust by virtue of their signature of the DOV, which referred to item C being gifted to them. There were also included the usual iht and cgt elections, so that item C would vest in the trustees at the probate value.
If the Trustees agree to the DOV being rectified without a court order confirming it would be treated as if in the rectified form for tax purposes, will it not be seen as a disposal by the trustees for tax purposes back in favour of the donor-who is not even a member of the class of beneficiaries?
Would not a court order be needed to get round these tax and trust issues in relation to rectification, or does a voluntary rectification by consent have the same effect in this respect as a court order, making it as if this is what the DOV said at the outset for tax and trust purposes?
Simon Northcott