Substitute Gift (s33 Wills Act 1837)


(Duncan Mayes) #1

The matter concerns the estate of a farmer C who died in 1973 (the terms of his will initiated a bequest as at 2016).

His Will dated 1964 divided his residuary into three respective shares, one part each for his three children: R, J and B.

However, he did not leave the 1/3 to his daughter B absolutely (she was about to divorce her husband), so rather he created a trust to hold her 1/3 called the “Settled Share” whereby she would receive the income during her lifetime, and for the capital, to pass absolutely to her living lineage, as follows:

“In trust as to both capital and income of the Settled Share for such of the children of my daughter B as are living at her death and attain the age of twenty one years and if more than one in equal shares absolutely AND of there shall be no such child of my daughter B then my trustees shall hold the Settled Share as an accretion to the shares of my other children [R and J] or their issue in my residuary estate”.

B died in 2016 aged 93.

B’s son R had died in 1998 aged only 46 leaving three children L D and T. As at B’s death in 2016 her three grandchildren of her son’s branch were all living, aged 39, 36 (and 33 years respectively) on the one hand and on the other her daughter S was also living aged 66.

In mid 2017 (over a years since B’s death) R’s three children L D and T became aware of C’s Will through B’s sister J (aged nearly 90). It was her belief that L D and T were entitled to 50% of the Settled Share.

L D and T contacted S through her solicitor requesting:

(1) A schedule of the trustees of the Settled Share since inception
(2) A schedule of the assets comprising the Settled Share as at the death of B
(3) A valuation of the Settled Share as at the death of B
(4) Confirmation by return that 50% of the capital assets of the Settled Share would be transferred to L D and T between them in equal shares.

Since that time, S’s solicitor has refused to furnish L D and T with any of the information requested, and further stated that they are not entitled to any of the Settled Share. It is understood that S has transferred 100% of the assets comprising the Settled Share into her name.

Case Law in Hives v Machin [2017] EWHC 1414 (Ch) demonstrates that on identical wording…:

“to such of my children A B and C who shall be living at my death and if more than one in equal shares”

…that, in this case at hand, then L D and T are entitled to the 50% of the Settled Share that their deceased father R would have otherwise received (as per s33 of the Wills Act 1837).

The only difference here is that as this was a deferred bequest (with the assets being held in trust) intended to skip B and to instead take effect to her living lineage as at the as at the death/termination of the trust i.e. B’s death on 3 March 2016. R died before the date that the bequest took effect.

However, from the wording of s33, it presumes that bequests take effect (are vested in the beneficiary as at the date of death of the testator for the beneficiary to enjoy). But in this case the assets were assigned to the trust to defer the effect of the bequest to Bs living lineage in 2016.

If the date was 1973, this would amount to ignoring the existence of the trust (which held and deferred the effect of the bequest to the beneficiary until 2016), accepting that the bequest actually took effect in 1973 (which it did not and if it did then R would have received 50% then), and further would remove the effect of the statue of s33 for a 43 year period between 1973 and 2016.

The question is:

On the basis that the precedent established in Hives V Machin (with identical wording) would apply in principle, then would the Court interpret the effective date for the purposes of the bequest taking effect as at 1973 (death of C) or 2016 (death/termination of the trust to which the assets were assigned in 1973 to take effect in 2016)?

If 2016, then as R died in 1998 (i. e. before 2016 for the purposes of s33) s33 would therefore apply and would substitute the bequest of 50% of the Settled Share that R would have received, to his children L, D and T, and the bequest would take effect to vest in them as at the date of death of B, absolutely.

Many thanks indeed in advance.

Duncan Mayes
DRM


(Paul Saunders) #2

s.33 Wills Act 1837 applies only to the circumstances as at the date of the testator’s death. Accordingly, I do not believe it can apply in the situation referred to, where vesting is deferred.

Rather than s.33, though, I believe the main concern might be the wording of the clause in question:

“In trust as to both capital and income of the Settled Share for such of the children of my daughter B as are living at her death and attain the age of twenty one years and if more than one in equal shares absolutely AND of there shall be no such child of my daughter B then my trustees shall hold the Settled Share as an accretion to the shares of my other children [R and J] or their issue in my residuary estate”.

The gift on B’s death is to “the children of B as are living at her death”, with a substitutional gift over in lieu thereof to “the shares of my other children … or their issue”.

Whilst “children” and “issue” in many cases may carry the same meaning, when they are used in the same instrument “children” is generally construed in the narrower sense to exclude grandchildren and remoter issue (although this is subject to context). Where both words are used within the same clause (let alone the same sentence), that would appear to indicate they do not carry the same meaning.

I suggest that, if at all possible, the original instructions for the will be obtained to identify if the intention was that the beneficiaries of Settled Share were meant to be B’s issue, rather than just those of her children who survived her.

Even if the instructions support an intention that “children” should be interpreted as “issue”, I suggest it might be appropriate to obtain counsel’s opinion to support this and, perhaps, an application under s.48 Administration of Justice Act 1985 so as to safeguard the trustees’ position.

I note, though, that S might be the trustee, in which case it may be necessary to institute the pre-action protocols in order to obtain any necessary information from her to enable an analysis of the intention behind the wording of the clause in question.

Paul Saunders