We have a will with a right of occupation clause allowing the surviving wife to remain in the deceased husband’s half of the property (the wife owns the other half) for as long as she wishes, but with no express power allowing the wife and the trustees of the will trust to move/downsize.
The trust says that on sale of the property, the proceeds fall into residue, so will this definitely happen or is there any other way the trust can continue into a new property?
tom callaghan
Edward Harte LLP
On the face of it the trust comes to an end and the trustees have no power to reinvest trust funds in a replacement property for the spouse’s benefit.
If the remainder beneficiaries are all of full age then it could be done with their agreement.
There might be a right to claim a variation of the terms of the will under IPFDA 1975 if the life interest does not represent a reasonable provision. Or there may have been some misunderstanding during the will making process giving rise to a possible claim for rectification or a claim against the will draftsman. The time limits for these actions will be critical.
If the remainder beneficiaries are minor children of the deceased living with the wife then the will trustees may decide in the exercise of powers under TOLATA 1996 to invest in a share in the replacement property for the occupation of those children. As they each reach the age of majority they may be prepared to agree to extend the wife’s right of occupation.
Tim Gibbons
Many thanks. One more point is that the Will contains a general power to invest, vary and transpose investments, so in your view, do you believe this power could be used to alter the property subject to the trust without the sale triggering the end of the trust?
tom callaghan
Edward Harte LLP
Surely you need to start by considering the terms not only of the Will, but
also the trust of land; and appreciate that the trustee(s) of the Will
trusts and those of the trust of land may well be different persons - so
for example Tim’s reference to ToLaTA should perhaps refer to the trustees
of the trust of land, not the will trustees?
It may be that the widow is the [surviving] trustee of land, and may also
be the [sole] executor/trustee of the Will, but do not let this distract
you from the reality.
Reference has been made to the terms of the Will, and possible variations
thereto, but what about the trust of land? Have you investigated the
"purpose" of that trust?
Only after full consideration of all possible options under both trusts can
you offer best advice to both sets of trustees [unless the circumstances
are such that seperate advice is appropriate].
Kevin Mullen
I agree with Tim Gibbons. The widow has not been given a life interest, just a right to occupy the property (both would of course amount to an IIP but this does not mean they are the same thing). Absent any additional words, the right would not carry over to a replacement property. Here, there appears to be express wording that actually confirms the widow has no right to occupy a replacement property.
The trustees could use the power of investment to invest the proceeds but it would not affect the beneficial position and they would be investing residue. Presumably the residuary beneficiaries have absolute interests.
The only solution I could see would be via the consent/agreement of the residuary beneficiaries. It may well be in their interests if the downsizing releases funds to them earlier than might otherwise be the case.
TLATA might help the widow to remain in occupation if she had no absolute right to do so (but could show it was the clear intent at purchase) - she could certainly use it to force the trustees to sell. I don’t think it could ever be used to authorise/force the trustees to then purchase a replacement property.
Andrew Goodman
Osborne Clarke LLP