I am dealing with the estate of someone who was divorced, after making his will.
The ex-wife is still very much alive.
There is a Nil Rate Band Discretionary Trust worded as follows:
“If my said wife survives me for a period of one calendar month I GIVE to my trustees for them to hold upon the following trusts such sum etc”
Under section 18A of the Wills act, “any property which, or an interest in which, is devised or bequeathed to the former spouse shall pass as if the former spouse had died on that date [ie the date of divorce].
My question is whether the NRBDT fails on the basis that we should treat the wife as having predeceased, or whether the gift to the NRBDT still operates on a strict construction of the wording of Section 18A?
If it still operates, can the (now ex-)wife continue to be a beneficiary of that trust?
This situation does not appear to be addressed by s.18A.
Looking at the last point first, even if the NRB trust has survived I believe the ex-wife is excluded from the class of beneficiaries. If she were not excluded, she would have an interest in property (being the corpus of the trust fund) contrary to the provisions of s.18A(2).
Turning to the principle of whether the NRB trust arises, does the will include provisions for the wife having pre-deceased? Often, the NRB gift only arises if residue passes to the surviving spouse.
If the will includes no specific provision (which seems to be the case), I think you must fall back upon the definition of the amount of the NRB gift. If, for example, IHT is payable in the estate, the NRB sum will often be reduced to nil (which will resolve the question in any event).
If no IHT is payable, or if IHT is payable but this does not reduce the NRB Sum to nil, I suggest the executors might be best advised to seek an opinion from Chancery counsel in view of the unusual nature of the situation.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
However, assuming the NRBDT survives I see no reason why the former wife cannot be included as a discretionary beneficiary under s18A.
S18A does not provide that the former spouse is deemed to have predeceased the testator for all purposes.
The section only provides that the former spouse can no longer act as executor/trustee and cannot be the beneficiary of any property devised/bequeathed to him/her; any such bequest/devise would lapse. Is it not the case that as a trust discretionary beneficiary, the former wife is not devised/bequeathed any estate property? She is merely a trust discretionary beneficiary and thus does not have a vested beneficial interest in such property and, as such, s18A is not in point.
I take Malcolm’s point as regard to the ex-wife perhaps remaining within the objects that could benefit from the NRB trust under the trustee’s discretion.
The commentary on s.18A generally refers to the former spouse being excluded from benefit (other than via a claim under the Inheritance (Provision for Family and Dependents) Act 1975, which is specifically preserved).
If this is the understanding of the parliamentary drafter’s intention and, consequently, the intention of Parliament, it would appear the wording of s.18A falls short, yet again.
I suggest this only serves to reinforce the need to make a new will when getting divorced, rather than rely upon the statutory provisions purporting to exclude the former spouse from benefit.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
The House of Lords in Gartside [1968] AC 553 held that a discretionary object did not have an “interest” at all, let alone an interest in possession, for estate duty. This was a tax statute and Lord Reid accepted that “interest” where not defined must take its meaning from the context (anticipating the now fashionable purposive or contextual rule of construction). It was however, he also said, an ordinary English word.
“No doubt in a certain sense a beneficiary under a discretionary trust has
an " interest”: the nature of it may, sufficiently for the purpose, be spelt out
by saying that he has a right to be considered as a potential recipient of benefit
by the trustees and a right to have his interest protected by a Court of
Equity. Certainly that is so, and when it is said that he has a right to have
the trustees exercise their discretion " fairly " or " reasonably " or " properly "
that indicates clearly enough that some objective consideration (not stated
explicitly in declaring the discretionary trust, but latent in it) must be applied
by the trustees and that the right is more than a mere spes. But that does
not mean that he has an interest which is capable of being taxed by reference
to its extent in the trust fund’s income: it may be a right, with some degree
of concreteness or solidity, one which attracts the protection of a Court of
Equity, yet it may still lack the necessary quality of definable extent which
must exist before it can be taxed"
And Lord Wilberforce: "As is well illustrated by the judgments in the Courts below, it is exceedingly difficult to fit the rights of the discretionary beneficiaries either into the category of " interests in possession " or into its statutory counterpart " interests in expectancy ": to say that as it is not oneit must be the other is not a very satisfactory solution (the categories though mutually exclusive need not be exhaustive) especially if this technique can be used—as it has been used by the Courts below—either way. Rather the difficulty of giving either answer endorses the conclusion that this is not an " interest “, within the meaning of this section at all.”
Sections 1 and 3 of the Wills Act far from supplying a definition treat an interest as something in real or personal estate.
In a property statute I would not accept that a beneficiary of an NRBDT had an “interest” in “property” and so not for s18A (1)(b)
I think no conclusion can be reached without careful consideration of the wording of the Will as a whole. In this context it could well be a court would come to the view that the testator only intended his then wife to be a beneficiary if he was still married at his death.