Will Trust - Life tenant

silverflora

I am a life tenant of a will trust set up by my mother. This is for cash only, no property.

The trustees have invested it but have split it 60%  income (for me) and 40% growth (for the remaindermen). I think this is unfair as I am 18 just going to Uni, and I think an 80:20 split would be fairer as I need the money now - and given I have perhaps a 70 year life expectancy from now, that would make the growth bit excessive!  Surely they have to just ensure the capital stays as it is (adjusted for inflation of course) but no more? 

So, my question is, what is the normal split and does anyone have any law cases where this was discussed?

Also, I googled and saw that it could be possible to sell my life interest in the trust, and receive some cash now. Does anyone know if this is possible? Do the trustees have to agree it? Who would be interested in buying it? And any advice regarding the actuarial process and valuation would be great.

Thanks in advance - v confused.

poseidon1

silverflora said:

I am a life tenant of a will trust set up by my mother. This is for cash only, no property.

The trustees have invested it but have split it 60%  income (for me) and 40% growth (for the remaindermen). I think this is unfair as I am 18 just going to Uni, and I think an 80:20 split would be fairer as I need the money now - and given I have perhaps a 70 year life expectancy from now, that would make the growth bit excessive!  Surely they have to just ensure the capital stays as it is (adjusted for inflation of course) but no more? 

So, my question is, what is the normal split and does anyone have any law cases where this was discussed?

Also, I googled and saw that it could be possible to sell my life interest in the trust, and receive some cash now. Does anyone know if this is possible? Do the trustees have to agree it? Who would be interested in buying it? And any advice regarding the actuarial process and valuation would be great.

Thanks in advance - v confused.

If you are the original OP from back in 2009 are we to understand you started posting on MSE forums at age 2?

Bit more clarity on who you are in relation to the user name before I take your query seriously.

silverflora

Sorry - I am trying to be anonymous in case any of the trustees reads this but it is on behalf of another party who is 18 and who I am trying to help. I guess I should have been clearer but am a bit paranoid that they see this.
I could have easily used a different account had I actually wanted to be dishonest.

Keep_pedalling

How this  should work is that the beneficiary receives all the income and the remaindermen get the capital at the end of the trust.

If the capital is invested in equities the remaindermen get all the growth in those equities. 

poseidon1

silverflora said:

Sorry - I am trying to be anonymous in case any of the trustees reads this but it is on behalf of another party who is 18 and who I am trying to help. I guess I should have been clearer but am a bit paranoid that they see this.
I could have easily used a different account had I actually wanted to be dishonest.

The article below  ( from Farrer & co ) is a useful guide to trustees with regard to duties and obligations in managing trusts funds and balancing the needs of different beneficial classes.


https://share.google/q7IMppVPYBSF7yGI1

As indicated by KP above the traditional approach would be for the trustees to invest in a mixed portfolio of  equities and bonds with a view to achieving a balance of growing income and capital growth on behalf of the life interest beneficiary and remainderman.

 As regards income yield to the life interest beneficiary, this is not set in stone but between 3.5% to 4% was traditionally  considered fair, especially where the yield kept pace with rising capital values. Therefore this might periodically require the trustees to rebalance the portfolio where income yield falls in relation to capital values.

You have not indicated how much money in total is in question and  whether the income generating investment has little or no ability to grow the income in years to come, but any kind of static growth only investment from which the income beneficiary can never access an income sounds inappropriate, having regard to Farrer  & Co's guidance. 

Can I suggest the beneficiary obtain a copy of  the Trustee Investment policy statement, the trustees should have completed in favour of the investment adviser, per the template below with specific reference to part D of the statement -

https://library.standardlife.co.uk/iht18.pdf

If no such statement has been completed, and the trustees have no coherent 'roadmap' for the equitable management of trust monies for potentially the next 70 to 80 years, I would consider this the start of a material breach of their duties.

As to whether the life interest can be commercially sold, there are businesses that purchase life interests but only where the underlying trust asset is residential property. Even then such a purchase would require remainderman approval.

Finally I find it distinctly odd that unless a child suffers from a mental defect preventing them from managing their own affairs, a parent would think it appropriate to consign the inheritance to a  lifetime trust and bar the child from ever accessing the  underlying capital.  There seems to be more to this trust than perhaps meets the eye, especially if it was set up during the mother's lifetime rather than on her death.

Smudgeismydog

The trustees need to treat both sets of beneficiaries equally, this means income for the life tenant and capital growth for the remaindermen. It is not the case that the capital stays as it is (adjusted for inflation) for the remaindermen.