Discretionary trust dispute successfully resolved by making an Inheritance Act claim
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Mrs W died in July 2011 leaving a will dated 30th November 2004. Mr W, her son, was one of 3 children. He had a sister (M) and a brother (R). Mrs W had fallen out with R so she executed the will (with the help of M’s husband, A) giving £20,000 to M and the remainder of her estate was written into trust with M and A as the executors and trustees with absolute discretion as to who should receive an inheritance from her estate.
While Mr W was named as one of the possible beneficiaries of the trust, there were a number of other beneficiaries, including 14 grandchildren/great grandchildren of the deceased – one of whom was not yet conceived during the course of the litigation. This is because of the way in which the trust was drafted. It didn’t only include those people living at the time of Mrs W’s death but also future descendants of her children. Clearly, this was a confused and uncertain trust under which Mr W had no means of ensuring that he would receive his share of his mother’s estate.
Although initial conversations between Mr W and M suggested that she would give him an equal share of the residue so long as their mother’s wishes for R not to benefit were observed, it soon became apparent that M and A sought to rely on their power not to make any provision for Mr W. He therefore sought legal advice from ourselves as specialist solicitors with experience of dealing with discretionary trust disputes.
A Grant of Probate was issued to A and M stating a net estate of £512,893.83. We made a claim against Mrs W’s estate on his behalf under the Inheritance Act. He relied upon the following factors in support of his claim:-
- his financial need for provision (particularly his need for housing as he had sold his home in England with a view to using the inheritance he had been promised from his mother to renovate a run-down property in France. Without an inheritance he would remain living in a caravan);
- the remaining beneficiaries’ lesser need for provision; in particular the fact that M and A were reasonably well of in their own right and that the remaining beneficiaries had no actual right to an inheritance from the trust, only a right to be considered and so their need could not be as great;
- the estate was of a sufficient size to make provision for Mr W;
- the deceased’s conduct in promising Mr W an inheritance which he relied upon when selling his English property and buying a run-down property in France, giving rise to an obligation to provide for Mr W with a defined inheritance on her death.
It was necessary to commence court proceedings due to an impending limitation date but the parties agreed to a stay of proceedings to enable negotiations to be entered in to. This was difficult with seventeen defendants, some of whom were minors and others who didn’t respond to correspondence. Attempts were made to arrange for all parties to attend a mediation, but in the end it became simpler to negotiate with the executors.
Terms of settlement were reached with the executors’ solicitors whereby Mr W received £85,000 plus his legal costs. However, it was not possible to get all of the defendants to respond to the invitation to agree these terms and so because of this (as well as the fact that the Court needed to approve the terms of settlement as it involved money potentially being taken from minor beneficiaries) an application had to be made for the court to approve the settlement and give permission for Mr W to accept the offer. That application was successful and, following negotiations on the level of costs to be paid on top by the estate, Mr W received his inheritance and has been able to follow his planned dream of renovating his property in France.
This is a scenario which can sometimes arise where testators try to leave the decision making to their executors/trustees instead of deciding who to leave their estate to in their will. You will often find discretionary trusts in wills which have been prepared in that way for tax saving reasons. In reality, these trusts can cause beneficiaries real problems in getting their inheritance because while the trustees have obligations to exercise their duties fairly they can, if they make the decision in the right way, withhold an inheritance from a beneficiary who they don’t want to benefit. This is where the Inheritance Act can help and this case is a good example of how such claims can be resolved by way of an “out-of-court” settlement without the necessity of court proceedings.