I have a situation where a NRB Trust was created by deed of variation in 2006. The trustees are considering advancing capital, but I have noticed that due to an error in the drafting of the DOV, the widow of a beneficiary who died in 2022 appears to have inadvertently been excluded as beneficiary now of the trust.
The DOV includes as beneficiaries ‘anyone who is at any time during the Trust Period the spouse widow or widower of any beneficiary who is already dead or who dies before me’. We are assuming that this should have read ‘or who dies after me’.
The DOV does not include any specific provision to appoint new beneficiaries.
Can anyone give me any pointers as to how to rectify this situation to enable advancement of capital to the widow of the beneficiary now and ensure she is entitled on winding up of the trust?
The only route is to seek rectification. The obvious error is probably so much so that it could be ignored but you will need evidence to show what was intended as to the omission. This may be a tall order so much later. A DT will usually be so drafted that it will be impossible to obtain consent to a new variation (without reading back for tax of course) or even an indemnity from all requisite beneficiaries. Similar evidence will be necessary to pursue an action against the drafter. It may simply be that nobody thought about it at the time so there is no evidence. The drafter’s omission, while derogating from what was arguably common, even best, practice, is not actionable.
Distributing to a non-beneficiary is not just breach of trust, which might not faze lay trustees with the conscience of a well-trained hippopotamus. It will be void so HMRC can and will take the point. They will not give in without a court order for rectification.
Is it feasible to distribute to one or more eligible beneficiaries who could then make PETs or CLTs within their own NRB? Trustees should avoid participating themselves because of “fraud on a power” but there must exist a safe harbour from that where an eligible beneficiary receives an untrammelled outright distribution and is entirely free to do with the funds as he wishes, even to benefit someone who was not an eligible beneficiary.