I am acting for an estate in which the deceased has left 50% of their estate left equally to their daughter and her children “as shall survive [them] and attain the age of 25 years”.
The daughter has two children, one over 25 and one aged 23 so the share for the 23 year old would be held in trust currently. Estate is still in administration (1 year in) and there is query from the family whether it is really worth going through the hassle of registering/ managing the trust rather than distributing to everyone now.
Clause 5 of the Will states “My Trustees may raise any part or parts not exceeding in the whole a half of the Capital of my residuary estate to which any minor would if of full age be entitles in possession under the trusts hereinbefore declared and may pay and apply the same for his or her advancement as my Trustees shall think fit.”
No reference in the above clause to the age contingency itself, just an express provision to advance to minors. I am thinking/hoping there would not be be the contrary intention to dissaply s.32 TA 1925 here so we can advance all funds directly to the within the two year period but would be grateful for others opinion of this/ whether there are any other methods that we could advance the funds without the need to keep the trust running for another 2 years.
What is the position under the Will if the 23 year old does not survive? If the deceased’s share goes to the daughter and the 25 year old you could have a Saunders v Vautier situation. I agree that any s32 contrary intention seems to relate only to a minor beneficiary and would not oust s32 as regards an adult beneficiary.
On the general drafting, if the child does not reach 25 the whole 50% would be divided equally between daughter and son who has reached 25 as he has passed the contingency. Failing that the share is left solely for the deceased’s son absolutely.
If relevant , s.31 Trustee Act 1925 has not been extended to coincide with the age 25 contingency so we seem to have an accidental interest in possession here over the income at least.
My understanding of the Saunders v Vautier rule is that, where all beneficiaries are over 18, have capacity, and together absolutely entitled to the assets, they can request that the trust assets are distributed to them and the trust wound down. Would the fact that the interest is contingent be a bar to that rule applying (as the interest isn’t vested)?
Joseph, it seems to me that the entire equitable interest is owned between them by the daughter, the son and the 23 year old, despite the contingency, because of the gift over to the son. So I think S v V is in point and as all are adults they can terminate the trust if they agree. The executors could only prevent that if for any proper reason they need the assets destined for the trust to meet liabilities of the estate. Doing that would avoid the inconvenience of s31 applying for up to 2 years and TRS if done within 2 years of death (accepting, as I don’t, that a trust can arise during the admin period if it is still continuing). But s32 seems available, if the parties do not agree, and can be exercised during the admin period if the advanced assets are not needed: s69(1) TA 1925
If the testator died less than 2 years ago, I suggest a simpler route might be for the daughter and 2 sons to make a deed of variation in effect giving the share of the estate to them as to a half to the daughter and a quarter each to her sons without reference to the contingency.
A Jack indicates, the deceased’s son will only benefit if neither of the daughter’s sons has attained age 25 - as one of them has, the deceased’s son no longer has any potential interest, so that Saunders v. Vautier applies.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
If I understand you correctly, the 3 beneficiaries would, by virtue of the rule in Saunders v Vautier, be able to vary their entitlement by way of deed of variation to remove the age contingency, irrespective that the 23 year old’s share is not yet vested?
Would there be a tax implication of doing it this way? My understanding that s.142 IHTA 1984 can apply irrespective of their being an IPDI (unlike s.144 IHTA 1984) so, provided we actually redirect the interest (amending the shares to something along the lines of the 25%, 12.5% and 12.5% you have suggested above) this could be read back as part of the will for tax purposes.
Should not be any tax issues, provided the IHT and CGT declarations are included within the variation as the 23 year-old has a right to the income as it arises in any event.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals