A, B, C, D and E were friends of the testator and are beneficiaries under Clause 4 to his NRB divided equally among them, after the deduction of IHT-liable LTGs. A, B, and C are also the three remaining Executors after a fourth non-beneficiary executor, F, renounced without intermeddling. STEP Standard and Special Provisions 2nd ed. apply under Clause 6.
All three remaining Executors have made a DMC claim for 30k gold coins which an email now shows the testator intended, like his furniture, to be taken in lieu of the same value of their Clause 4 gift, i.e. not a Donatio Mortis Causa (DMC) or Lifetime Gift (LTG). A, B, and C have also made a claim for variation of Clause 4 on the grounds that there was a misunderstanding between the testator and will writer. They claim their gifts should be an immaculate 1/5 share of the NRB to each of them, i.e. without the diminution of IHT-liable LTGs. This seems unlikely as there is an immaculate NRB gift of the testator’s deceased wife’s transferred NRB to his adopted son which clearly has very different wording. A, B and C have claimed that Council’s opinion on the two issues would be a legitimate estate expense. According to A, B and C, the two non-Executor Clasue-4 beneficiaries, D and E, have expressed no interest in the coins or the variation claims.
My understanding is that these are conflicts of interest/ self-dealing, and that without an independent Executor and without all the Executors originally appointed:
a) under SP2 Provision 9.2.1 A, B and C as Executors cannot instruct a solicitor at Estate expense because they would be entering a transaction a person subject to fiduciary duties under the Will Trust. Under the Will Trust any solicitor would have fiduciary duties to the three Executors.)
b) under SP2 Provision 9.4 A, B and C cannot have any solicitor explain their two claims to the residuary beneficiaries at Estate expense.
c) under SP2 Provision 12.4.3 A, B and C cannot seek Council’s opinion regarding their two claims as a legitimate Estate expense.
Is my understanding correct. Is it really that resticting?
Provision 9 is restricting and it is intended to be. I always used to vary 9.4.2 to include replacement trustees from the family. It is a safeguard and allows non-professional executors/trustees to be appointed, avoiding the do-nothing costs of professionals, exacerbated by their tendency, lawyered up to the gunwales, to run to advisers or the court for cover at the drop of a hat. Professionals of their own choosing can then be instructed when required. Exceptionally I felt an original appointment of professionals was advisable when a family row about the Will was almost certain, to draw the flak so the family might gang up on them and not, or less, on each other. Provision 12.4.3 is in a similar vein. In some ways Provision 9 is an alternative to reserving consent to a third party or appointing a Protector. The ideal candidate may not be readily apparent, especially if the trust is expected to last for a long time so that successor machinery is desirable.
A B and C are still in the driving seat for nearly all purposes. They may not be able to act as a majority (not a Standard Provision so would need to be in the Will) which means you would need to convince all of them to take or not to take any given decision or action. Ultimately this is in the hands of D and E and whoever are the residuary beneficiaries who have the right to compel due administration by litigation if need be. A shot across the bows warning A B and C about that possibility might concentrate their minds particular if there is a racing certainty that if they lose an action to prevent or compensate for breach of trust their costs are unlikely to be a charge on the estate in the way that a consensual seeking of directions/interpretation probably would.
Thank you, Jack, interesting.
So, because there is no independant, A, B and C would not be able to instruct a solicitor at Estate expense without first dropping any self-dealing conflicts of interest?
That is the effect of 12.3 as modified by 12.4. The idea of 12.3 is to provide a “safe harbour” but it does not prevent a trustee relying on any other right he may have as a trustee or beneficiary. The issue here seems to involve interpretation of a Will and a claim for rectification. The background engages two basic rules: that a court will generally not allow its jurisdiction to be ousted and that it cannot clothe itself with jurisdiction it does not have.
1 12.3 and 12.4 do not seek to oust jurisdiction even indirectly. The above issues are undoubtedly matters on which executors, even if personally interested in the outcome, are entitled to take Counsel’s advice and that may result in litigation if the advice is contested. But they can’t rely on 12.3 if any of 12.4 applies. So the key point is who must pay the costs in such circumstances, as regards the advice and if need be any ultimate litigation. I am not a costs expert but it is the duty of PRs to administer the estate in accordance with the provisions of the Will and its correct interpretation, if a doubt is raised by someone with standing, must be ascertained at the cost of the estate not of the PRs. Exceptionally, not if they act unreasonably or vexatiously, which might stem from a personal interest.
2 If some beneficiaries just do not like what the Will clearly says, or may be established to say by Counsel’s advice or the court, the court’s jurisdiction to vary as opposed to rectify it is very limited (s57TA1925, VTA 1958, I(FP)A 1975). I think it likely, if that is in fact the substance of the executors’ claim, a thinly disguised attempt to advance their own interests as actual or potential beneficiaries, any costs should not be charged to the estate.
If all the Will beneficiaries are adults and together absolutely entitled they could agree to a legally binding variation so presumably that route is blocked by actual or potential unborn or minor beneficiaries, or lack of agreement, or unattractive tax consequences. Clearly the costs of the parties to such an agreement could be borne as they also agree (unless “consideration” needs to be avoided for tax reasons).