Property into lifetime trust - paperwork missing

(Kirsty) #1

I have some new clients who have made wills and entered into an arrangement with a well known/notorious asset planning company. They have set up a lifetime trust for their property and made wills alongside. The problem being the company has now gone into administration. They have no original documents, only scanned copies. They would like to disregard the trust entirely (nothing has been effected at HMLR) and make new wills with us, with a simple life interest in half the property for spouse. My question really is can they disregard the trust that was created, as the original deed is gone, or what would be the best way to approach it?

Kirsty Cartwright
St Helens Law

(andrew.goodman) #2

I would not be concerned about the lack of original deeds if you have copies.

But I would not ignore the trust. If they are the trustees, they may well be able to advance the property back to themselves by an advance, appointment or (with a lot of these trusts being sold) revocation. They could do that in a single page.

If they are not the trustees and there is a TR1 in a file transferring legal title to the company or others, I would first see if they have power to appoint/remove trustees and take it from there.

Andrew Goodman
Osborne Clarke LLP

(Paul Saunders) #3

The fact is that the trust exists, and cannot just be ignored because it is “convenient” to do so.

The fact that the original paperwork is missing does not invalidate the trust. It is fortunate that copies are available - consideration might be given to the clients making a statutory declaration in respect of the missing documents, confirming that the copies are “true” copies of the originals.

If the copy trust deed(s) include powers to wind up the trust and distribute the property to the settlors, then that route could be adopted, although there will be tax considerations. An alternative is to apply to court for the trust to be set aside if it is considered to have been “mis-sold” i.e. entered into under a mistake. Whilst liabilities would arise, payable either out of the trust or by the clients, it may be possible to claim reimbursement against the company if it carried PII.

Are your clients the trustees, or is the trustee the company now in administration or an associate of it?

If the clients are the trustees, they can control what happens, going forward. If not, and the trustees are unwilling, or unable, to cooperate, it may also be necessary to apply to court for the appointment of replacement trustees.

In any event, sounds like the clients need to make new wills ASAP giving a life interest in a half share of such property as they might own, rather than specifying a particular property.

Paul Saunders

(Graeme Lindop) #4

I suspect the answer to this question will depend on who the trustees of the lifetime trust are and the nature of the trust document. If your clients are the trustees of the trust, they could have established it by declaring they hold the legal title to the property on the trusts set out in the trust document. If so, there would be no need to make any changes at the Land Registry other than, possibly, registering a restriction against the title. I do not see the lack of the actual document as a problem as there is evidence of its contents in the form of the scanned copy.

If there is no declaration of trust over the property, then the clients will still have the option of whether or not to add the property to the trust – it will remain their decision and they cannot be forced to make the addition.

Graeme Lindop

Coles Miller Solicitors LLP

(Kirsty) #5

Thank you for replies! I understand the clients are the trustees but I have not actually had sight of any of the documents yet! I will hopefully have them this week and will have a bit more information.

Kirsty Cartwright
St Helens Law

(Kirsty) #6

Thanks for responses - I have now had an opportunity to review the papers. Clients and children are trustees. The trusts states it is irrevocable. It does not allow any applications of capital or income to the settlors, only beneficiaries. The powers of appointment can only be exercised after the death of the Settlor and the power of advancement can only be used for the benefit of the beneficiaries, not S. The drafting is questionable. The initial trust was then supplemented with an additional deed adding the property to the trust. The tenancy has not been severed at HMLR and I can’t see a severance in the copy documents I have. Any ideas would be appreciated.

Kirsty Cartwright
St Helens Law

(Paul Saunders) #7

It is not clear what has been settled – the whole property or only a share in it – nor whether both spouses are settlors, or only one of them.

If the whole property was settled, there would seem no need for severance, even if it was jointly owned by the settlors.

Even if jointly owned and only one of the joint owners is settling their “share”, it can be argued that the common law rules apply to sever the tenancy as they acted in a manner inconsistent with the continuation of the joint tenancy.

Mindful that, in the original posting, reference was to settlement of “their” property, if the settlor(s) are living in the property, despite being excluded from enjoying the benefit of trust property, is there a significant issue both for IHT (reservation of benefit) and a breach of trust (the trustees allowing occupation by non-beneficiaries). If the settlors are paying a market rent for their continued occupation, these issues may go away. If this was not explained to them at the time, might it be sufficiently fundamental to their decision to create the trust to be used as grounds for an application to court for the trust to be set aside as having been made under a mistake?

Paul Saunders

(andrew.goodman) #8

Who are the beneficiaries and what are the current trusts? presumably there must be something allowing the settlors to live in the house.

Andrew Goodman
Osborne Clarke LLP

(Kirsty) #9

Hi Paul and Andrew thanks for your replies. Apologies for any confusion. Each spouse has their own preservation trust and each have settled their “half” of the property into the trust by way of supplemental deed. Beneficiaries are their spouse and descendants. The “principal beneficiary” is defined as the settlor. They are actually under the combined Nil rate band.
The trust says:
" The Trustees shall hold the Trust Fund upon the following Trusts namely:
Subject to the provisions of this deed and any supplemental deed or amending deed
(1) Upon trust to permit the Principal Beneficiary to have the use occupation and enjoyment thereof and to receive the income therefrom during the lifetime of the principal beneficiary.
(2) If at any time during the lifetime of the PB the TF shall comprise any dwellinghouse etc…or share or interest therein the Ts shall at the request of the PB allow the PB to occupy such dwellinghouse etc…during the lifetime of the PB for so long as the PB shall desire and there shall be no sale…without the written consent of the PB during the lifetime of the PB… provided always the PB shall during such period of occupation pay all rates taxes and outgoings payable…keep in good condition etc"

Kirsty Cartwright
St Helens Law