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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25494
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I was one of two executors for estate of deceased friend.

Resolved Question:

I was one of two executors for estate of deceased friend. He passed away 2009. There was a declaration of Trust concerning his mother`s property which passed to him on her death (Nov 2013) and he left 50% of value in trust for person on attaining 25 yrs ie 6 years 3 months from now, should she not survive the money goes to someone else. would this be a Fixed or Discretionary Trust?
My co trustee and I have the money currently in joint named account paying interest net of tax. and I have submitted 41G to HMRC 3/2/14 to register Trust. We understand that Tax Return is needed and I will deal with that. We were seeking a better return than bank offer but find we cannot invest as will trust funds without a financial adviser. The sum involved is £50k and financial adviser fees seem to wipe out any benefit Is it essential to take financial advice etc for bond investment... We have consent of other beneficiary that should we invest in 3 year fixed bond for example she would await its maturity for payment if it could not be cashed in interim.
Submitted: 3 years ago.
Category: Law
Expert:  Joshua replied 3 years ago.

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

May I clarify please for the avoidance of doubt that this trust you refer to was established by your friend rather than by his mother - I believe this is the case from what you say? If so was it contained in his will or was this a trust established during his life - i.e. not in his will?

Joshua :

From what you say the terms provide that 50% of the property are to pass to person X on their reaching 25 years of age. Is this correct?

Joshua :

Finally what happens to the other 50% - does that go to someone else? Has the house been or being sold now?

Customer:

His Will left 50% share of his mothers house to the minor and 50% to someone else. But at purchase of mothers house prior to his will there was a declaration of trust giving mother life interest etc. before devolving to him. she survived him by 4.5 years. prior to her death house sold she in care and income bonds with proceeds of sale to provide her with income. we had nothingto do with that as other side of the country and her solrs had poa registered. His will left for benefit of his mother was void as hers was done first......and then as above 50 / 50 t two people half been paid to the adult and we now have the 50% problem for the lass who is just 18 but does not inherit for 6+ years if she survives if she pre decease it goes to the other 50% person. This is his Will Trust now mother passed away.

Joshua :

Thanks. I am just reviewing the above.

Joshua :

Thank you for the above. Do you know if the life interest trust that was created in relation to mothers property contained a substitution provision in the event of your friend whose estate you are administering (may we call him T) pre deceasing his mother - i.e. on trust for mother for life and then on trust for T absolutely subject that should T pass away before mother property is held on trust for Y absolutely?

Customer:

No. It seems to me that her solicitors never considered this possibility so upon her death it reverted to his will provisions. He was only early 50s so perhaps not expected.

Joshua :

thank you. Finally in relation to the terms of the will, does the will specifically provide for a legacy of the property or does it provide for the gift you refer to as part of the residue. i.e. I give my interest in the property known as [address] as to 50% to X and Y or does it make this gift out of the residue of the estate?

Customer:

Hi In his will he set up long description of "life interest in property" concerning mother`s house, provisions for her to move sell etc but keep capital intact so that It went to mother as beneficiary but on her death on trust for the two persons as summarised above. Mother`s declaration of Trust over-rode his provision for her but did not deal with any subsequent situation therefore on her death the value in house reverted to the two ladies.

Customer:

His residual estate meaning the house where he resided, pension savings etc fell into residuary estate divided between 3 other people and all that has been realised, and administered in 2009.

Joshua :

Thanks. The reason for my question was that I wanted to ensure the gift in the will did not adeem (fail) because he did not have an interest in the property at the time of his death. However I will proceed on the basis that this was not the case based on what you say and you are satisfied that the gift in the will of the property does succeed.

Joshua :

the 50% share that he leaves in his will to the individual on reaching 25 years of age is a contingent trust that is, the trust that creates a contingent interest for that individual to inherit absolutely upon satisfying the contingency, in this case reaching 25 years of age

Customer:

oh yes, there were horrendous complications over interpretation and we took senior counsel`s advice on interpretation at the time. sorry my background does not include proper wording on trust issues but the solicitor who drew friend`s will gave two different interpretations of how to administer, hence counsel advice............

Joshua :

as trustees, you have a number of options available to you in relation to that trust. You can either hold the entitlement investing the same for the benefit of the individual until they reach the contingent age at which time they will become entitled to it absolutely and the trust converts to a bare trust at that point until such time as you hand over legal control of the asset to the beneficiary. If you elect this approach, you can exercise your statutory rights of advancement of up to 50% of the trust fund to the individual for the purposes of maintenance and advancement under section 31 and 32 of the trustee act 1925. If the will contains the relevant powers or reference to the step provisions, it may be that your power of advancement is extended to 100% of the trust fund.

Customer:

Do not think have any discretion over payment of advancement to Lou. She is only entitled if she attains age 25 years should she not, her 50% reverts to the other beneficiary tiz clearly stated so.

Joshua :

alternatively, if you prefer not to be responsible for the trust fund you can consider suggesting to the beneficiary that he seeks a court order ordering use trustees to turnover the entire trust fund to the beneficiary before he reaches the contingent age. You may have come across the case of Saunders v Vortier where the court decided that where a trust provides for a contingency age, the beneficiary can apply to the court for an order that the trust funds are released to the beneficiary at any point after they reach the age of 18. Many people were surprised at the decision but that is what the decision was and it still stands

Joshua :

regarding your last post, sections 31 of 32 of the trustee act give you a power of advancement of up to 50% of the trust fund. Unless the will specifically excludes sections 31 of 32 of the trustee act which would be rare indeed, then as trustees, you have statutory powers of advancement as above

Joshua :

your final option in respect of the trust fund that occurs to me if none of the above is of assistance and you were desperate to avoid any responsibility for the trust fund, which I do not think is the case from what you say, but I mention it for the sake of completeness, is that as trustees, you could elect to pay the trust fund into court and a court officer can give you proper receipt as trustees to discharge or liability and the court will then hold the funds for the beneficiary until they reach age or they make an earlier court application for the funds under Saunders Vortier as above.

Customer:

the young beneficiary is the daughter of my co trustee. My friend was explicit that if Lou not reach 25 he wanted the other person to have the funds....... I guess I ought to advise co trustee of this but we are talking of £50k the costs surely of asking the court to vary would eat into that substantially AND I believe co trustee is happy daughter not receive until she is older........

Customer:

my problem is how to invest it as seems to me we MUST have financial adviser as it is a Trust fund and their costs will likewise eat into capital significantly.

Joshua :

notwithstanding the above, as trustees you have as you will be aware responsibility to preserve the trust fund. Your responsibilities and liabilities do not extend to achieving significant gains or growth of the trust fund and therefore you do not need to invest in highly profitable and risky investment vehicles. In order to fulfil your obligations as trustee, a safe investment with a low risk profile would satisfy your responsibilities and given the amount involved, formal financial advice should not be required because the fees involved would be disproportionate to the figure involved.

Joshua :

May I clarify one point with you. In the will does it say if beneficiary does not reach 25 someone else gets the asset or was this just a verbal wish expressed to you?

Customer:

The moment we tell banks etc it is a Will Trust Fund they back off and the paperwork required IPA involvement my view was to leave it in the bank deposit account. paid net of interest and complete tax return but my co trustee wants to earn a better return although accepts must be no risk. in answer to your question it is specific in his will I merely reported his verbal wishes to you as a version against possibility of lou being encouraged to seek court order to vary which you mentioned above.

Joshua :

Thanks. On that basis the position remains as set out above. you are quite correct that banks can be very difficult with regards XXXXX XXXXX Barclays and certain building societies are generally more helpful with regards XXXXX XXXXX than some other banks though policy seems to shift like sand. there is a relatively simple way around banks intransigence with regards XXXXX XXXXX funds which is that you simply open a joint account together without mentioning the word trustees to the bank. This is not altogether proper but it is not unlawful and nor is it a breach of any form of fiduciary duties on your part as trustees. in this way you can submit maintain the asset in a joint accounts and invest as appropriate. the only one point of caution would be that you should ensure that any account you open in this way should be set up a joint signatories as opposed to joint and several signatories so both of your signatures are required to authorise payments on the account. banks will typically set up account on the joint and several mandate and so this needs to be specifically requested.

Joshua :

Is there anything above I can clarify for you?

Customer:

Please the type of Trust title?

Joshua :

It is a contingent interest trust

Customer:

thank you I have gone round in circles with titles of Fixed, Discretionary etc............I am certainly

Customer:

I have to say I am seriously considering amending my own will in which I have left funds "in Trust" had not appreciated what a nightmare it was to sort.

Customer:

Thank you so much.

Joshua :

A pleasure. If I can assist any further as the situation develops please do not hesitate to revert to me

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