Severance creating interest in possession?

Trusts Discussion
1

In a severance of the joint tenancy of a house dating back to 2005 made by a husband and wife, the following wording appears:

The Parties hereto hereby declare as follows:-

(1) that the purpose of the trust contained in the Conveyance is and always has been to provide a home for the Parties hereto and the survivor of them

(2) that in the event of a sale during the life of the survivor the proceeds shall at the survivor’s request be invested in another dwellinghouse selected by the survivor

(3) that henceforth the property known as [House] aforesaid more particularly described in and by the Conveyance shall be held on trust for the Parties hereto in equal shares as tenants in common and not as joint tenants.

A Will leaving an NRB legacy on discretionary trusts and residue to spouse absolutely is dated the same day in 2005. Husband has died, Wife is still living. The Husband’s half share of the house is the only asset in his estate (all else passes by survivorship) and the half share of the house will be worth less than £200k. Wife’s estate may be c. £250k, possibly up to £500k (there’s a potential claim which could be an asset).

My colleagues and I think the severance is worded so as to be a settlement giving an interest in possession as from signing in 2005. Do forum members agree?

It looks like a pre-2006 life interest. Does the position change at all on Husband’s death in 2016?

We think that when Husband died in 2016, his half share would be subject to the interest in possession trust in the severance in favour of the surviving Wife in priority to the terms of the late Husband’s Will. If Wife were to die, the Husband’s half share of the house would pass under the terms of the late Husband’s Will.

Any comments on the wording of the severance and anything else that springs to mind would be much appreciated.

2

I can’t see that the 2005 severance document creates a trust and the 2005 Will creates only an NRB DT. I think as the only asset in H’s estate was his half share that must, as residue, give priority to the DT as abated down to its 2016 value. Presumably W is a beneficiary of the DT or can be added. If not the outcome may not be what H intended.

I get that the wording of para (2) in the severance purports to deal with destination of the property after the death of the survivor but I do not consider it, read literally, to have created a present binding trust, QIIP or ROO, in the absence of extraneous evidence to the contrary.

It cannot be valid as testamentary unless it has been signed and witnessed as a Will needs to be. Presumably it is signed only by H or by H and W. From this distance it looks as if H was advised to sever precisely so that the Will would then cover his half share. Other jointly owned property passed by survivorship. H may not have realised that as a result his estate might not be sufficient to meet the full NRB legacy.

Jack Harper

3

Thank you Jack for your reply.

It’s whether the severance creates a trust which is the main concern so thanks for your views on that.

The severance is signed as a deed by husband and wife. The wife, children and remoter issue living at dod or born within the trust period are beneficiaries of the NRB DT in the Will.