Hi,
I am hoping to get some thoughts on what sort of trust has arisen as a result of the testators Will.
The will is quite simply but it says that after paying the debts and costs the executors/trustees are:
“to hold the residue together with any income arising therefrom (residuary Estate) as follows:
i) to my wife for life and on her death
ii) for my children in equal shares absolutely” (points i) & ii) are paraphrased)
STEP std provisions (first edition) apply.
As the income and capital are held on the trust for the wife for life do we have an IIP/IPDI with discretion over the capital?
Once the surviving spouse dies it passes to the children absolutely and the trust ends.
The trustees are receiving advice that there is no discretion for the surviving spouse to receive capital but as the trustees hold the “residue and income” for her for life I was not sure if there is scope?
As they hold all of the capital and income for her without other instructions in the Will I would have thought Section 31 Trustees Act 1925 applies to the income to give the IPDI (as she was over 18 on death) and then Section 32 Trustees Act 1925 gives the ability to appoint Capital on a discretionary basis?
Dangerous to comment without sight of the whole document. But seems to me the wife has an IPDI and the children have vested remainders. No power to pay capital to the wife unless there is an express power. s32 TA 1925 inapplicable as wife not a person entitled to the capital or a share therein.
As the children are all over 18 it would seem that either the will could be varied to add a power (not in itself a taxable event and its exercise in her favour later would be IHT-free) or that Sanders v Vautier applies, so the trust could be terminated and the trust fund divided between life tenant and remaindermen with a PET by her of whatever goes to them. (if they all agree). The remaindermen would have to weigh up whether getting something smaller now rather than more later was beneficial and the IHT implications if she did not survive 7 years (gift insurance?) and any CGT on the deemed disposal (no hold over relief on a PET except for business assets).
i have similar query where life tenant is daughter, going to grandchildren absloute on her death. but clauses to loan any or all assets to daughter if trustees see fit for any purpose. To put life tenant before any other part of will. can the life tenant get a loan on terms trustees see fit to see out dying wishes not written down possible changing trust to safeguard children better? will seems contraditory
I note that you have advised the steps are paraphrased, but, as previous poster has stated, this appears contradictory - left to wife in life & on death and also to children as vested remaindermen?
Which therefore takes precedence? I would suggest considering Counsel’s Opinion, thereafter a one-off ATE policy to cover against this being successfully challenged?
I take it instructing client is not conflicted here?