Gift of Residue


(gill.collins) #1

Is it possible to make a gift of residue to an individual beneficiary contingent upon them being solvent with a substitute provision to go elsewhere if they are not?

Any suggested wording if this can be done.

Gill Collins
Warwick & Barker


(Paul Saunders) #2

“Solvent” can have a range of meanings and its precise definition may need to be set out in the will.

Whilst I am sure it is possible to craft a suitable clause, the executor will have a significant evidential burden if, at the relevant time, the preferred beneficiary is not obviously “solvent”. The risk, though, is that when the clause comes to be considered following the death, it might be held to be void for uncertainty, or is so tightly worded that it may otherwise fail to give effect to the testator’s intention.

My preference would be to create a 2 year discretionary trust, setting out in a letter of wishes the criteria to be applied when distributing residue. This may help reduce potential expenditure on a forensic accounting procedure if the preferred beneficiary is in a questionable financial position.

Either way, the testator will be relying upon the executor’s/trustee’s appreciation and understanding of the circumstances of the preferred beneficiary.

Paul Saunders