I often deal with life interest will trusts on the first death. I would be interested to know how practitioners generally deal with advising the life tenant (both the client and executor in most cases) and if it is general practice to provide advice on the options available to the life tenant other than the administration steps of the trust continuing i.e. is advice provided on the options re disclaiming and/or capitalising and the resulting tax implications etc?
I have not dealt with this issue specifically. However, if one is instructed to advise a person in their capacity as an executor, I cannot see how one has any obligation to advise them in their capacity as a beneficiary of the estate. One would need to agree a separate retainer regarding any advice to the beneficiary in respect of the life tenancy. Acting for a beneficiary and executor would also usually give rise to a concern regarding conflicts of interest.
Yours the ever faithful Legal Beagle
I don’t agree with LB. Just as I can advise a beneficiary on a Deed of Variation, I can advise the life tenant, even when an Exor, of their options. If such matters become contentious then a different approach is required.
I have terminated many NRBDTs in the past (either in full or to create a Life Interest) LBs view suggests i, and many others, were wrong to do so.
Hi Carl, I take it that you agree when instructed by an executor you have no obligation to advise them about anything in their capacity as beneficiary? What you disagre about is whether or not there is a conflict in advising both ececutors and beneficiaries?
The scenario put by the OP is the LT is also an Exor. There is no conflict advising the LT of their options as LT, even though also an Exor.
If a benef contacts me (an estate I am administering) about a DoV, I would advise then possibly draw it up.
In the past with NRBDTs I’ve advised the Exors/Trustees, often also the spouse and children, of their options then assisted accordingly.
If there is a contentious issue, then I do not advise the beneficiary.
They are not the same set of circumstances, my view is you’ve taken the need to advise separately too literally
Hi Karl, I am open minded to the idea that there is no conflict. However, the OP’s question is what do advisers generally advise if a person A is an executor who we are advising and A is also a life tenant. In that situation, you are not yet instructed to advise A in his capacity as life tenant. Therefore, the answer to the question is don’t advise him in respect of anything until you have agreed a separate retainer. That separate retainer will then set out the scope of what one is advising on.
I understood that. But don’t agree. I’m advising on the administration of the estate, of which that is a part. The LT/Exor Will have legitimate questions, most likely at the initial meeting. To refuse to discuss such aspects would be an odd position to take.
I stand by my opinion, Karl. It may be an odd thing to tell someone that they need to instruct you in a separate capacity but advising someone in one capacity when you are not instructed to do so creates all kinds of risks as their is no express retainer in place setting out the terms of engagement. Of course, one may feel comfortable giving advice in that situation if the advice is straightforward and thus not likely to go wrong, but one should remain aware of the possible risks.
Thanks for the replies and your comments. It’s so interesting to hear other people’s thoughts and practices and can see there are also different perspectives on the approach taken. Food for thought! Thanks again for your input.