First, let me apologise for my uncharacteristically terse contribution, which was made on a 79C bus from Liverpool to Widnes and even has an error in it. That’ll teach me, as I usually only use my mobile for calls
i.e. as a telephone while outside my home. Other operations it can perform I leave to addicted Phone-nutters.
Tigger’s confirmation of the likely provenance of your documents is most helpful but it depends on what has been added into the blank spaces. Like Bish I should have been more cautious in caveating the need to see the documents. In this regard the alarming phrase is " noted his mum on two separate identical documents". It is absolutely vital that those documents should comprise every single one that is relevant. You have only told us about two: the trust document and one deed of appointment. Nor is it clear whether the latter effected an exhaustive appointment of the whole fund as apparently intended by the DoA; if he did then his power to make further appointments will have ended and the Default Beneficiaries thereafter would have no claim as such but only as appointees under the deed which was expressly irrevocable. Was the appointment to his mother valid? See below.
The insurer will pay out to the lawfully appointed trustees of the trust for the time being. This will be the original trustees unless there have been changes. They will almost certainly protect themselves by verifying who that is. If there were 2 original trustees and now only one they will want evidence, if they do not have it already, showing how that came about. That is their only legal obligation and they are not concerned with who is beneficially entitled to the policy proceeds even if the trust is in their standard form. A sole trustee can act alone save to the extent that the deed restricts or the general law does. Insurers’ standard forms are all very well and save costs but they are limited and the insurer will accept no liability for what is put in the blank spaces. No one can see around all future corners but a separate well-drafted trust based on a good precedent will foresee most. In particular incorporating the STEP admin powers is most useful but must be done in the initial trust instrument.
My error was to misread in the definition of PBs "d) Any Person (other than a Settlor) or charity nominated in writing by a
Settlor (and if there are two Settlors of full capacity then both Settlors) to the Trustees to be a Potential Beneficiary;". This power is usually given to the trustees but here it is given to the Settlor who is dead so the power cannot be exercised now. I was led astray precisely because this power is often intended to be and is exercised in favour of a person to whom the settlor was not married and whom he does not wish to initially name.
I note that there is a whiff of litigation in the air. That means the trustee must be scrupulous in following the law particularly if the policy proceeds are chunky in themselves or in proportion to the free estate and especially if the potential litigants are PBs or eligible claimants under the 1975 Act. The son is by s1(1)(d) and s25(1), any other children are, and the girlfriend might be under s1(1)(e). The Court cannot order provision out of the trust fund, only out of the “net estate”, but what it orders under s3 may reflect entitlement under the trust.
It would be prudent ideally for the sole trustee to appoint another to act with her but as the standard document section D1 does not allow her to do that, s36 TA 1925 is the only way to do so out of court: s1(1)(b). This means the PRs of the dead Settlor under his intestacy. But they may be hostile to what she wants to do.
She can act alone because the trust fund is pure personalty. She must do so carefully, considering all PBs, and leaving evidence that she has done so, to be disclosed if ever compellable in litigation but not for the asking. She must not follow the execrable modern fashion of granting herself a personal exemption from the law that others observe.
That takes us to the Deed of Appointment expressed to be exhaustive and irrevocable. The deceased’s mother is not a PB save as a person entitled under category (e) being one entitled on his intestacy. I believe that this Deed is valid in so far as it names his mother initially then if, in the events which happen, she becomes so entitled. Even if he was married at his death the estate would be shared under the rules between spouse, if any, and children living at his death. If he was not then married, the son and any other children, if living, would inherit all. If a child predeased him that child’s children would inherit. So mother inheriting is a remote contingency but not void as it will be determined within the perpetuity period. Now he has died the appointment to his mother is void as she does not take on his intestacy. Because she is only a PB conditionally she cannot take unless actually entitled. Category (e) says “who has an interest”. That must relate to the future as only a living settlor with full capacity can appoint and not even his PRs: it is a personal power. That is my reading of the definition of Appointor properly construed.
Was there a document nominating the mother as a PB within Category d) ? Or did the DoA itself do so? Then her gift under the DoA would be valid. I am afraid this is an essential. in theory the deed might be rectified but only by the Court on evidence of the requirements for an order.
Was the mother the only person entitled under the DoA? If anyone else was then the DoA governs to that extent provided they were also PBs. The mother’s share will now go to the Default Beneficiaries which include the son as a PB.The trustee has power to appoint at her discretion among the DBs so could appoint all to the son. How much will depend on whether the DoA made any valid appointments. The trustee is given wide powers under trust to appoint to him on trust and also to make a Pilkington advance on trust under s32 TA 1925. The appointment must be to the child not the mother but she can benefit incidentally from income paid to the child to maintain him and by living with him in accommodation which is purchased or rented for him using trust funds. It seems most unlikely that the trust could be set aside under s10 of the 1975 Act so if there are eligible claimants they may go after his intestacy rights and his entitlement under the trust can be relevant.
A deficiency of the intestacy rules, particularly as regards minors, are the statutory trusts in s 47(1) AEA 1925. If the minor dies under 18 his entitlement ceases and the intestacy rules are applied retrospectively as if he predeceased the intestate :s47(2). But s32 applies so an outright advance can be made to him. A minor cannot make a will so if he then dies under 18 an intestacy will result a his mother will be first in line if living. A Pilkington advance could cater for this eventuality by different engrafted trust provisions.
Jack Harper
| Tigs Tigger
21 March |
A quick google of the words you used for the definition of Potential Beneficiaries and the deed of appointment of beneficiaries suggests that these are Aviva documents. Here are some I found:
static.aviva.io
### al53003c.pdf
static.aviva.io
### gn05011c.pdf
Obviously your documents may be very different to these. However, if they are similar, it looks possible to exclude someone from being a beneficiary (clause 6) but I can’t see anything that allows someone to be added to the list of Potential Beneficiaries or to become a default beneficiary.
The notes for the deed of appointment of beneficiaries says:
Remember an appointment can only be made in favour of a person included in the class of potential beneficiaries described in the trust deed. An appointment in favour of anybody elese may be a breach of trust and each trustee could be personally liable.
What any of this means in your facts is beyond me.