Vesting date, assignment of remainder interest & deprivation


(justinwallace) #1

A Will provides for Trustees to hold property on trust for X for life and thereafter to Y but if Y fails to obtain a vested interest then to their issue. The Will is silent as to whether Y needs to survive the testator or X to acquire a vested interest.

Q1. Do forum members agree that in the absence of express wording or contrary intention in the Will, Y acquires a vested interest on the death of the Testator?

Q2. If yes to Q1 and whilst X is still alive, Y wishes to assign their remainder (vested) interest, will this be deprivation of capital (notwithstanding that the interest is excluded property for IHT purposes)?

Justin Wallace
Brewer Harding & Rowe


(Paul Saunders) #2

If the will provides for the gift over to Y’s issue to occur “if Y fails to obtain a vested interest”, to my mind it would suggest that there is another requirement than merely surviving the testator. It could be as straightforward as there being a stipulation that any beneficiary must survive the testator by 30 days, buried somewhere in the administrative provisions.

The answer as to when Y’s interest in remainder vests absolutely will depend upon the precise wording of the will.

It may be worthwhile looking at the original will instructions (if they are still available) as, following the Supreme Court decision in Marley v. Rawlings, my understanding is that the intention is paramount regardless of the wording of the will.

With regard to deprivation, I believe a gift of any interest in remainder to which Y is entitled would be classified as “deprivation”. The question is probably whether the relevant authority would recognise it as such.

I believe there is still a market for reversionary interests, and it may be that any deprivation would be valued by reference to the potential sale value of the interest, rather than the value of the trust fund as at the date of gift. However, if Y might not be expected to survive X, there could be an argument that the interest in reversion has no value to Y during their lifetime and therefore a nil value should be ascribed to the gift for deprivation purposes.

Paul Saunders


(justinwallace) #3

Thanks for the response Paul.

My only issue really is that if the remainder beneficiary has to survive the life tenant, then his interest is contingent and I wouldn’t be concerned about the deprivation of capital point. If the remainder beneficiary has a vested interest on surviving the testator, then I am concerned about deprivation of capital and agree that it would be the capital value of that remainder interest.

What is confusing me is the wording of the Will as I am not 100% clear that the remainder beneficiary has a vested interest.

Justin Wallace
Brewer Harding & Rowe