life interest trust clauses phrasing

Trusts Discussion
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Hi everyone,

I would be interested to get thoughts on the wording of will life interest trust provisions. I have seen in multiple different places will precedents that contain life interest trusts that contain phrasing to the effect of: ‘my Trustees shall hold [the property] for the life of [the life tenant] and after the death of [the life tenant] my Trustees shall hold [the property] as an addition to the residue of my estate.

If, for example, a testator set up such a trust via their will naming their spouse as the life tenant they could very well also be naming their spouse to inherit their residue provided that the spouse outlives the testator.

My difficulty with this is that the surviving spouse would obtain a beneficial interest in the property for their life, but my interpretation is that they would also be the remainderman as no separate survivorship requirements are set up and the spouse did outlive the testator. As such, any replacement residuary beneficiaries would not be due anything and the remainderman would end up being the estate of the surviving spouse.

On the face of it, I am aware that this seems like a poor drafting issue and that the solution would be to simply add in extra provisions such as to bypass the surviving spouse when reading the residue, or alternatively just listing the remainderman separately from the residue. It seems to be pretty common, however, for no such steps to be taken and therefore I am curious whether there is something I am missing.

I wondered whether there is any case law or legislation that I have missed surrounding will interpretation on this? Whilst Cripps v Wolcott (1819) deals with interpretation of survivorship, it does not seem to apply fully with the above example given that there is no postponement of the gift of the residue and any delay is through the separate trust (although as an unreported case there is not a huge amount of information on it).

Has anybody else seen similar wording in their own precedents and what were your thoughts on this?

Thank you in advance for your thoughts!

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I have seen similar provisions on a number of occasions and agree that the life interest would appear to merge with the residuary gift, so that the spouse takes it all absolutely.

Invariably (?) the intention is that the residuary beneficiaries in default of the surviving spouse are to take and it may be the will-writer failing to understand the precedent they are using. It would therefore be a case of seeing the will writer’s file to identify the testator’s intention and, if appropriate, applying for rectification. In many instances, the situation can be resolved by way of a deed of variation, redirecting the gift over to the default beneficiaries (although that relies upon there being good relations between the parties).

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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Thanks for your thoughts Paul, that is good to know - I spent quite a while looking for case law that would suggest otherwise and there didn’t seem to be anything, so it is good to have that corroborated.

Like you said though, it seems to be worryingly common - Lexis have will drafting precedents/tools that I sometimes use as a starting point and this is a potential issue with the way their precedents are drafted. It is a little surprising that this isn’t something they highlight to avoid this being overlooked by will drafters.

I thankfully haven’t seen this as an issue that needs to be resolved (yet) but it sounds like it is a matter of time…

Rachel

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