I am preparing a will with the jewellery to be given to the executors with a precatory trust and a separate letter of wishes.
The difficulty is that the proposed executors are partners of this firm, and although the intention is clear and I have no doubt that the partners would act in good faith on the instructions, my understanding is that it still essentially is an outright gift to them. Is there a conduct issue here, or am I overthinking it?
Ben Leach
Molesworths Bright Clegg
I see no issue of misconduct if the wishes are carried out.
But what are they to do if one of the intended recipients has predeceased the testator? It would be awkward if an article of substantial value remained in their hands.
Tim Gibbons
It will depend upon the actual wording of the gift whether or not the executors take absolutely.
I suggest it would be worthwhile reading Wynn-Parry’s judgment in Re Stirling (deceased), 1934, in which he also reviewed the then existing precedents.
To cover off Tim’s point, the letter of wishes, or other direction, might suggest that any items which are not listed, or where the intended recipient has died, should be given to residue. Alternatively, although not necessarily the best way forward, consideration might be given to providing for beneficiaries to be able to disclaim an entitlement in part (and not just the “all or nothing” approach).
It should be noted that s.143 IHTA 1984, also includes a 2 year time limit.
Paul Saunders
Precatory trusts give rise to a number of potential problems. ‘Reading back’ is achieved for IHT if assets are distributed in accordance with the testator’s wishes (s. 143 IHTA). But what about CGT? And what if the executor dies after the testator and before the wishes have been carried out? The assets will pass as part of the executor’s estate (subject to IHT).
If there are valuable assets it is probably better to leave them in a short term discretionary trust - which is, I think, the approach favoured in Practical Will Precedents.
Paul Davies
Clarke Willmott LLP