Tentatively, I would expect that any disclosure obligation lies with Y (or her attorneys) rather than the trustees. However, I have never checked the point.
There is a body of case law on the question of benefiting third parties where the trustees consider this to be an indirect way of benefiting the named beneficiary. However, I have only seen this in the context of appointments of capital rather than allowing third parties to enjoy assets held on life interest. E.g. Pilkington v IRC [1964] AC 612, Re Pauling’s Settlement Trusts [1964] Ch. 303, Re Clore 's Settlement Trusts [1966] 1 WLR 955, Re Hampden’s Settlement Trusts [1977] TR 177 and X v A [2006] 1 All ER 952.
I would usually take counsel’s opinion in this scenario but, generally speaking, the question is usually whether this exercise of the power, viewed objectively, will be for the benefit of Y, and do the trustees subjectively believe it to be for Y’s benefit?
If Z is the sole beneficiary of Y’s estate under her Will, that would help reduce the possibility of challenge.
Tobias Gleed-Owen
Hewitsons LLP