I’ve searched high and low for the answer to this but have drawn a blank.
Standard flexi IPDI wills drawn up - two sons remaindermen, vested interest on death of survivor (or earlier agreement). So NO vested interest on death of first spouse.
What happens if one son /remainderman divorces after first death but before second. Does the fact that he doesn’t have a vested interest mean that he has no interest in the trust and it won’t be taken into account in divorce proceedings?
I’m not a divorce lawyer and the caselaw around nuptial settlements and s.24(1)(c) of the Matrimonial Causes Act 1973 is extensive.
My answer (to a client) is a court is able IMO to add the wife/husband/CP to the IPDI - based on s.24.
Daga v Bangur [2018] EWFC 91 does help (although its a DT) the court didn’t interfere where the settlor is not party to the marriage/cp i.e father/mother set up the trust with their assets. (No intention to pay income - covers an IPDI).
N.b we exclude any rights to income in our IPDI clauses for the beneficiaries.
Contrast Daga with a £1m trust set up by husband with marital funds. The courts may take a different view.
The divorce court has powers to vary a trust even though it is not a reviewable disposition under s37 MCA; or a sham, when it can just disregard it. But it has shown creativity in mucking about with trusts.
1 The first line of attack is simply to regard the interest of a beneficiary as a financial resource. In your case the interests are contingent. This does not deter the court, oh no! It analyses the nature of the interest and then values it. An actuary can value anything and their designatory letters FAI means “figures as instructed” so expert evidence is required if parties cannot agree. The life expectancy of both the life tenant and the remainderman are relevant factors. And then there is valuation of the assets themselves underpinning the share and its likely value (net of taxes) and liquidity when the remainder might fall in. The judges have decided only to do this where the falling in is within a “reasonably foreseeable” future period. Of course this asset is not readily realisable immediately in the absence of the agreement you mention, the probability of which will be considered! A procedural device is for a lump sum application to be made and then adjourned.
The court is very cute to decide that in fact the trust assets are held on a constructive trust for the settlor and that the assets of a corporate owned by the trustees are held on the trusts which in turn are held for the settlor (the Prest case). These will be trusts where their true role is found to be to benefit the settlor. A similar approach applies to any DT where the interest of the party is a mere spes. The history of actual distributions and the likelihood of more is examined. Allied to this are the procedural rules about joinder of trustees and disclosure (by trustees and parties). Court forms eliciting disclosure get all this into the open at an early stage.
2 The second line is to use their power to vary the settlement. It must be a “nuptial” settlement, either pre- or post. One made by either party is a sitting duck, as are parent settlements made for the benefit of one or both parties qua spouses. The judges award themselves a wide discretion in reaching this finding but the longer the the settlement pre-dates the marriage the more it is likely to escape. This remedy is one of the available “property adjustment orders” so covered by case law and the famous s25 factors. The creativity of the Court manifests itself here in “judicious encouragement”. That is: it will make an overall award which assumes that the trustees will stump up some part of it despite the fact that no such order can be made against the trustees directly. (A major factor in the Prest type of case). How much pressure the Court places of the realistic nature of the trustees’ co-operation is case-specfic. Again joinder and disclosure facilitate the examination of the trustees’ past conduct and future intentions.
The judges are realistic about whether offshore trusts are a proper indirect target for encouragement and the difficulties of cross-border enforcement of awards. They are likely to take the view that action will be more appropriately conducted in the jurisdiction of the proper law/situs of trust assets. Courts do not like to make orders that are most unlikely to be enforceable abroad. They take cognisance of the possibility that offshore trustees with no assets in the jurisdiction may successfully raise the time-honoured gesture of defiance, particularly in jurisdictions where asset protection is a tourist attraction.