Deed of variation of life interest Will trust – necessary parties?

Trusts Discussion
1

I would be grateful for views on who needs to be party to a deed of variation in the following circumstances.

The testator’s Will divides residue into two equal shares. One half passes outright to A and A’s spouse, subject to certain conditions. The other half (“the Trust Fund”) is held on the following terms:

  1. The trustees are to pay the income of the Trust Fund to B for life.
  2. During B’s lifetime, the trustees have power, being at least two in number or a trust corporation, to pay or transfer the whole or any part of the Trust Fund to or for the benefit of B as they think fit.
  3. Subject to B’s life interest and the trustees’ capital advancement power, the Trust Fund passes to A if A is living at the vesting date, being the date of death of the survivor of B and the testator.
  4. If A is not alive at the vesting date, the Trust Fund passes instead to such of the testator’s grandchildren as were living at the testator’s death, and if more than one in equal shares absolutely.

The proposal being considered is for a deed of variation, within two years of death, to vary the trusts of the Trust Fund so that the whole of that half share passes outright to B’s children in equal shares absolutely. The intention would be for the variation to include the usual statement under section 142 Inheritance Tax Act 1984, and, if appropriate, the CGT statement under section 62(6) TCGA 1992.

My tentative view is that the cleaner route is a direct variation of the Will trust, rather than the trustees appointing the whole fund to B under the advancement power and B then entering into a variation. The direct variation would avoid the intervening trustee appointment and any proper purpose/fiduciary questions arising from using B as a conduit.

On necessary parties, B clearly needs to join as life tenant and potential recipient of capital. A also appears to need to join as the primary remainderman. My query is whether all of the testator’s grandchildren living at death should also be parties, given their substitutional remainder interest if A is not alive at the vesting date.

Thank you.

2

I think that the precise drafting may well have made the proposed variation feasible. The final trust limitation at point 4 enables the grandchildren contingently entitled to be exhaustively identified—-because the relevant time is the death of the testator and not the death of B or even A.
So the parties to the variation would be B, A and each qualifying grandchild.

The contingency applicable to the grandchildren’s ultimate remainder is A’s not surviving B. The other contingency, their surviving the testator, is now capable of being determined, either as having been fulfilled or not.

The remaining practical problems may be:

  1. A qualifying grandchild is a minor at the time of the variation.
    This does not prevent their being a party but is attended by the risks of invalidity inherent in any minor making a gift. The alternative is to make the variation one which binds only the other grandchildren; unattractive and definitively so if there is only that one grandchild.

  2. There are no qualifying grandchildren or one or more of such grandchildren have since died. The ultimate remainder is only contingent on A’s not surviving B. Thus the remainder is otherwise absolute; so these factual events would involve as theoretical necessary parties the persons entitled to the partially intestate estate of the deceased (if no such grandchildren) or to the testate or intestate estate of any already deceased qualifying grandchild (their PRs could not give away the contingent interest however speculative its value).

We are not told about the grandchildren but the necessary parties include them (or their estate beneficiaries, if deceased). If there are none there is a theoretical partial intestacy of the testator. The relevant facts would have simplified the answer.

Jack Harper

3

Thanks for commenting @jack.

The grandchildren are all 18 or over, for the record.