I have been asked to comment upon whether or not it is possible to add additional beneficiaries to the class of Discretionary Beneficiaries in a Discretionary Trust (created by a Deed of Variation). The Principal Beneficiary’s children and remoter issue are included within the class, however he is unlikely to ever have children. The Principal Beneficiary’s brother is included in the class of beneficiaries, but not his own children or remoter issue. The Principal Beneficiary’s brother is the beneficiary named in the ultimate default trusts but doesn’t wish to inherit and instead wishes his own children to inherit, who are not mentioned in the trust deed at all. There is no express power for the Trustees to add beneficiaries to the Trust, but there is an express power for the Trustees to ‘amend or add to the administrative provisions of the Will.’
Can the Trustees include a power of add to the class of beneficiaries by deed given the inclusion of the above power to add/amend administrative provisions or would an application need to be made to Court to vary the trust as the Principal Beneficiary lacks mental capacity and the only other identifiable beneficiary is the Principal Beneficiary’s brother.
If I have correctly understood the situation, I suggest it might be sufficient for the Principal’s brother, as the default beneficiary, merely to assign the interest in default to his children. This should be exempt for IHT purpose under s.48 IHTA 1984.
I do not believe the power to amend the administrative provisions allows trustees to introduce a power to add beneficiaries as such a power is not admistrative.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
If the DT has been created there can be no basis for amending it to include the type of clause you refer to, which can be and often is contained in a trust instrument before execution. The Court has no jurisdiction to add such a clearly dispositive power to a trust under s57 TA 1925 or VTA 1958 or its inherent jurisdiction.
The rule in Saunders v Vautier which applies here it would seem would allow termination of the trust and to authorise the trustees (but not compel them) to depart from the terms of the trust but adding a beneficiary would surely be a departure too far. The incapacity of one beneficiary would be a procedural obstacle but must be likely that the COP could and would authorise a SvV termination/ permissible “departure” that favoured him for certain over being a mere object
The better strategy is for the trustees to devise a distribution plan. DTs usually have the widest powers for this. A Pilkington advance can be made to the brother on trusts which include his children and remoter issue. A distribution on trust for the other beneficiary for life with power to advance capital, remainder to any children he may have and in default remainder to the brother and his family seems lawful and appropriate. Appointments on trust can defer CGT until someone becomes absolutely entitled under either appointed trust. How the funds should be divided between the two funds should be arrived at by a careful consideration of the needs and separate resources of each brother but strictly does not require the consent of either. An alternative would be to just retain a fund in the original DT broadly earmarked for the incapacitated brother but the two concurrent appointments on trust have a neatness and settle the full distribution of the DT as of now. The appointed trusts can have different trustees to those of the DT either at once or later.