Discretionary Trust created by a will

Kupo1975

Wonder if anyone had any thoughts on, where a will creates a discretionary trust upon death but where the trust beneficiary does not want the assets held in trust. Do you have to enact the trust by law?

Nearlyold

Who is the "you" in your question the trustees or the beneficiaries.

Kupo1975

You as in the executor, which is me in this case

Kupo1975

I am also the trustee, and the beneficiary of the trust is my brother, and we are the only named beneficiaries on the will. Hope this helps

poseidon1

If your brother is the primary beneficary of this testamentary discretionary trust, is the reason behind this arrangement because your brother suffers from some kind of disability or vulnerability ( eg, mentally disabled , drug abuse, bankrupt etc), which would affect his ability to manage his inheritance effectively/responsibility?

There is usually a good reason for a parent imposing a trust on inheritance for a specific child, and the terms of the will may well have been made iron clad on this point, so no one can answer your question without more background information on the circumstances, and the wording of the trust clauses in question.

However, I do sympathise on your behalf having this onerous responsiblilty thrust on you by your parent if you can see no valid reason for this and if the trust fund is very modest in size. Being your brother's financial keeper for his life would be unappealing for most people, especially if you had no advanced warning your parent was planning this.

Kupo1975

The will states, and i quote:

My trustees shall hold the remaining one share of my residual estate (the trust fund) as follows:

as to the capital and income for my son [name] in their absolute discretion and subject to that my trustees shall pay any resulting trust fund to [me] absolutely.

It does go on to "Trustees discretionary powers" and in particular it states "i hope my trustees will exercise their discretion and or powers in this will in accordance with my wishes".

I wonder if the use of terminology "i hope" would give some wiggle room on the trust.

The beneficiary of thevtrust is ASD in terms of social communication skills, but good with money, functions as normal etc. Plus you can do a lot online these days!

Look forward to your take on my situation

poseidon1

It's as I thought, your parent seemed to be of the view that your brother's ASD would be an impediment preventing him from managing his own affairs effectively.

Evidently you and your brother disagree.

Since the two of you are the only beneficiaries of this arrangement it appears you both ( if he is deemed legally competent to do so) are able to set aside the trust via doctrines espoused in the legal case of Saunders v Vautier ( 1841).

However a Saunders v Vautier application does seem to be a sledgehammer to crack a nut in your case.

Therefore I do wonder that since you are the default beneficiary of the trust if it does not take effect, whether a carefully crafted deed of variation executed by you giving up your beneficial rights in default under the trust, and as trustee therefore declaring the trust otiose, might achieve the same effect.

Alternatively, since you appear to have been granted unfettered trustee discretion in the matter, you could simply bring the trust to an end within two years of the parent's death, by way of a simple Deed of Capital Appointment.

Either way if you have a solicitor in the background with appropriate trust competencies ( preferably STEP qualified), it should be a relatively straight forward matter to address.

However, and in passing does your brother live independently and pays his own living costs or is he in receipt of means tested benefits, and how much is the inheritance on his behalf we are talking about?

If in receipt of means tested benefits, one of the purposes of the trust could have been to preserve them.

Kupo1975

Thanks for your reply, makes perfect sense. You are correct in that the inheritance would affect my brothers benefits. He is fully competent when it comes to financial so understands the impact. I am under the impression that he wants it changed to do right by me. I will take advisement under a solicitor for a deed of variation. Thanks for all your help guys. Wish me luck!

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82016865#Comment_82016865

Your brother's concern for you is laudable.

However if he is in receipt of universal credit with a substantial housing benefit component, his inheritance would have to be very appreciable in size together with his ability to derive a meaningful long term investment income therefrom, to replace what may effectively be free housing and personal living costs on his behalf.

Perhaps first do the calculations to determine what he would be losing in respect of UC, and compare this to what could reasonably be generated from the Inheritance to replace the benefits.

It be would ashame if his inheritance were to evaporate in the years to come, if the alternative of retaining the trust would permit him access to the trust income stream without adversely impacting his benefits entitlements.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82016943#Comment_82016943

Although the brother may be one of those people who think it is unfair still getting benefits, when they 'come into money'.

Whatever the reasoning the brothers should at least get the calculator out in this respect as you say, before making any decisions.