Has anyone ever come across the “Letter of Wishes”, drafted into NRB Disc Trust Will, itself? Such that there is a clause, setting out the wish that the trust fund be used to primarily fund the surviving spouse. My gut reaction is that HMRC would look at that and suggest the Trust is a sham, with the end result being that the Trust clause is simply read as a gift to the surviving spouse of the NRB amount or an IPDI of the same amount, with a disc. trust tacked on the end. The Will does state that the clause is not to fetter the discretion of the trustees, but I feel that’s flying in the face of a disc. trust.
Perhaps the best approach might be to say that it is a question of “interpretation” rather than of a “sham”.
Here I am speaking from outside the jurisdiction by reference to Lord Diplock’s clear common law definition in the case of Snoop.
The term sham implies that the document itself is misleading as to the reality underlying it, when in fact in this case, it is clear on its face. The cause is part of the express trust
It would be a shame were HMRC to be allowed to abuse the concept of “sham”, as their French and continental colleagues do on a regular basis rendering any attempt to defend the legality of a trust entirely compromised ad litem.
The English jurisdiction may need to set a clear example, before any trust is immediately declarable as void outside the jurisdiction of its interpretation and enforcement for the sole reason that it is a trust …
Although this is against “usual practice”, I do not believe HMRC could reasonably construe such a clause as subverting the discretionary trust. As a letter of wishes would normally be a separate document, confidential to the executors and/or trustee, the inclusion of the guidance within the will creates greater transparency and, therefore, should be more acceptable to HMRC.
My main concerns with the inclusion of the wishes within the will are that if any factors should change, it will be necessary to make a new will, or a codicil, even if the other terms of the will are unaltered. Also, as a letter of wishes is normally “confidential”, in order to protect the trustees’ ability to exercise their discretion without members of the beneficiary class constantly “looking over their shoulder“, it seems to me that this can open the trustees’ decisions to greater (and, perhaps, unwelcome) scrutiny.
Although my suspicion is that the testator may have wanted the clause included so that the beneficiaries were fully aware of the intention that the surviving spouse should be properly looked after, it also suggests there may well be objections by members of the wider class of beneficiaries to adopting such a strategy. Whilst I would expect HMRC not to raise any queries, the beneficiaries may be less relaxed.