I’m looking for some group wisdom as to whether its best to appoint Will trustees from the beginning, or whether there is merit in appointing only those persons who take out the first Grant? This latter approach is seeming more and more appealing to me, but I’m wondering if anyone has come across pitfalls with this approach (other than requiring the Execs to appoint trustees if a Grant is not obtained)?
Alex Stanier
Allan Janes LLP
There may well be few issues from the national perspective, but you may find that, for example, were there to be a foreign beneficiary under the estate who would be caught by foreign anti-avoidance laws, the last thing you would want would be to put them in a position of receiving an immediate discretionary or other trust interest rather than a future interest in the estate once administration has finished, which could be treated as a separate legacy, rather than a trust interest.
I would keep the two issues, that of administration, and that of ensuing entitlement separate, at least from the foreign viewpoint.
Setting up a trust with a non-resident beneficiary is now a watershed event for compliance purposes. The idea of interfering with the administration of an estate per se is a taboo which has yet to be addressed at the compliance level by the OECD and the EU.
The executors can then have a degree of control over such issues as CRS, into which you will fall with a straight will trust, but not immediately with an estate in administration.
Peter Harris
Peter, the idea of keeping the administration of an estate separate from the administration of a trust is a very difficult one. If a Will leaves its residue into trust, there will certainly come a time when there are funds available which need to be invested for the trust beneficiaries, but the administration of the estate has not been completed. Even if there only estate accounts to be prepared, the costs of the professionals will not yet have been ascertained, so some money will have to be retained.
It would follow, from your suggestion, that the Trust should not be started until, in one act, the administration of the estate can be completed. I do not see this as practicable.
Julian Cohen, Solicitor
Thanks both. I think maybe my question could have been better phrased - I was not talking about whether or not to create trust or absolute beneficial interests, rather the scenario whereby a Will does create a trust so will need trustees come what may. In that instance, should those trustees be appointed immediately i.e. I appoint Dave and Steve as my trustees. Or should trustees be appointed contingently on obtaining the Grant i.e. I appoint whoever takes out the first Grant of probate in my estate as my trustees.
For the reasons you state, Julian, I think that the executors and trustees should, for the most part, be the same people as the administration of trust and estate are inextricably linked. However I am trying to avoid the situation where you have none proving executors (e.g. most of the partners of a law firm, or foreign resident family members) who do not take the grant, but who are nevertheless validly appointed trustees.
Alex Stanier
Allan Janes LLP
Julian,
I agree that it may not appear practicable, but the question addressed the consequences of an almost automatic will trust taking over the executorship ab initio… I was responding to that issue from an international perspective. The pitfalls lie in the consequences.
The point is to ensure that the constitution of the trust does not happen in an automatic manner without taking into account the impact.
I have had to advise in several cases where a simple will trust was the testator’s and the drafting solicitor’s aim, and then there appeared “legatees” in France. It was not practicable, given the French deeming provisions for the trusts be “constituted” immediately, as that would have blocked off the advantages of the Succession Duty Treaty.
Given the current migratory habits within Europe, UK included, and the singularity of the British executorship process, I suspect that this might not be the only issue requiring flexibility
It was not impracticable to postpone the vesting of the estate in Trustees in that case, as fortunately the powers of the trustees in the Will Trust were drafted so as to enable the Executors to use them as Executors, not as trustees, during the administration of the estate as part of the administration, but not as trustees.
Peter Harris
www.overseaschambers.com
Alex, your question was clear enough, I may have extended it beyond what was intended.
Peter Harris
www.overseaschambers.com
If you did go down the route of only appointing as Trustees those that take out the Grant, and, like the example you give, a Grant is not required (for whatever reason) - would the Executor have the power to appoint a Trustee? s36 TA1925 gives power to ‘Trustees’ to appoint new Trustees (except in the case of ss3 which applies to the PR of the last trustee). Just a thought.
Kamlesh Samji
KRS Estate Planning
Alright mate! Yeah I wondered about this. I think someone would either have to obtain a Grant purely for the sake of appointing trustees, or the Will itself would have to provide for an appointor in circumstances where a Grant is not required. In practice I think it will be rare that an estate requiring ongoing trust administration would not need a Grant.
Alex Stanier
Allan Janes LLP
Howdy bud,
You say that, but I have come across many banks now just sending closing balances after only the initial letters requesting date of death balances - the highest I’ve seen sent is about £40,000 and that is even without a closing form signed by anyone!! Risky on their part.
Kamlesh Samji
KRS Estate Planning
Shouldn’t the non-proving executors, when they renounce executorship also disclaim the trusts of the Will? Wouldn’t that answer your question or have I misunderstood the position?
Patrick Moroney
BWL
Hi Patrick - I was thinking more about executors who do nothing then have power reserved to them. Under those circumstances they haven’t renounced, so on the face of it are still trustees.
Alex Stanier
Allan Janes LLP
I am a bit late to the part here but this thread has prompted me to ask about the following related scenario.
If the will does not express that the trustees are only those executors who have taken out the grant, what happens in a situation when the partners in a firm are appointed and there is no need to get a grant. Do they have to get a grant anyway or do all the partners who are not going to be acting have to retire as trustees?
Lorna Sansom
Blandy & Blandy LLP
Non acting trustees will have to disclaim the trusteeship
Simon Northcott
My view is that they are all validly appointed as trustees and therefore all need to retire. The problem with that is that it forces a trusteeship on someone who may not be aware. I have a good friend who thinks that a trustee appointed under a Will can avoid liability in that role by simply never taking up their position. So if (say) 2 partners act as trustees to an ongoing Will trust and the others never appear on the trust paperwork, despite being appointed as trustees, then they have never taken up their role and are not trustees. I am not entirely convinced by that argument but it does get around the problem of having trustees who have no idea whats going on! In any event you can’t go wrong if you formally retire them off…
Alex Stanier
Allan Janes LLP
Dear Alex,
I have been following the above chit chat, but surely would it not be an idea to do what is common in the USA, namely create a separate Trust with its own trustees now, and then have the Will “pour over” certain assets into the Trust upon the death of the Testator?.
This then would achieve your desire of having Trustees of the Trust who are separate from the Executor/ Administrators. Obviously appropriate tax advice will be needed if there are foreign beneficiaries living outside the UK.
Peter Double / Probate Resealing Services
Hi Peter. I am not trying to achieve separate trustees to the executors. My initial suggestion was to appoint as trustees only those people who take the grant - i.e. exactly the same people. The problem arises in the UK when the Will appoints the same people as executors and trustees, but then only some of those people take the grant and end up administering the Will trusts. My suggestion was to avoid this as above, but I wondered whether anyone had found difficulties with this in practice.
You could also do as you describe, but unless there is an obvious tax or succession advantage (which, for many people, there isn’t), I would generally avoid that type of planning as it adds needless complexity to an estate plan. I find that most people want the same people who administer their estate to also be the trustees of any ongoing trusts within it.
Alex Stanier
Allan Janes LLP
8 Nov 2017.
Dear Alex,
Thanks for your e-mail. Being familiar with the Pour Over Will practice in the USA, I have found that there has not been a practical problem in fact, but that may well be because I have been used to such practice. It is just nice to have a separate Trust Deed which has all the powers etc set out and other administrative and distribution issues also covered in the one document, rather than struggle using the Will alone for creating the Trust. This likewise means that when asked for the Trust document, you have a separate Trust Deed that you can produce. We have certainly not had any problem in administration, but again that may simply be because we are used to such matters and separate administration, and this therefore it is not an issue.
I am not trying to criticise what you are familiar with, it is just that for many years I have been familiar with the USA practice, which in turn means the Will is usually a very short document, and the Trust is usually unfunded (other than an initial deposit of £10) until the death of the Testator.
Certainly if properly worded, there would seem no reason that I can see, why those taking out the Grant cannot also be those acting as the first Trustees of the Will Trust. Likewise, in a Pour over Will to separate Trust situation, you could also use similar wording for the appointment of new Trustees of the Trust Deed to take over following the death of the testator, if that is what the testator wants. It is just a question of wording if there are no assets in the trust (other than an initial deposit to create the Trust) until the assets are poured over into the Trust upon the death of the Testator.
I agree it could be a messy situation if you used a pour over Will and separate Trust Deed, if prior to the death of the testator, trust assets are in the name of the “prior to taking out the Grant Trustees” who are different from those taking out the Grant, but this might be something the Testator simply has to risk. I suppose one could therefore use a Trust Company / Limited Company for such purpose which would probably solve everything (both in the Will & Trust Creation situation, and in the Pour Over Will with separate Trust situation).
Anyway, if you can let me know which course you decide to take, I will be interested to know.
If you wish to bounce any further ideas off me, I will be pleased to help. I have enjoyed our little discussion.
Yours sincerely,
Peter Double
PROBATE RESEALING SERVICES LIMITED
Dear Alex,
Thank you.
I am not seeking to appoint different people either, it is a question of the different competences and attributions in the progression of the administration from probate through to executorship through to trusteeship.
I was merely concerned that the members of the forum not abandon a possibility of flexibility in the current international context where frankly a will trust will be transformed into an avoidance entity and a good deal of reconditioning done by an aggressive tax administration, where a trusteeship overtakes and overrides any direct entitlement.
The position which I was addressing was that which you describe in your last paragraph ,and in normal domestic circumstances would be exceptional.
Best regards
Peter Harris
Overseas Chambers
A Will is also a trust deed. It will (properly drafted) have all the powers, admin and operative provisions of a standalone trust. But the benefit is one document instead of 2 (or more). I am very familiar with Wills that distribute to pilot trusts but without a succession or tax advantage, one document is clearly better than many. There are also issues surrounding the anniversary charge for pilot trusts that receive estate funds, so you can give yourself more time to plan by creating the trust in your Will. Obviously there is no one size fits all solution - I don’t rule out ‘pour over’ Wills as you call them, but would only use them if there is a particular advantage over a single Will in which a trust is created.
Alex Stanier
Allan Janes LLP