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Even offering to have a vasectomy was not enough for a court to ascertain what children would survive a father.
Remainder reminder
Last week, I looked at the statutory trusts under the intestacy provisions. Where a trust incorporates a life interest for a surviving spouse/civil partner then, regardless of how the trust is created, it may sometimes be desirable, for various reasons, to capitalise the life interest and pay off the surviving spouse/civil partner. How this can be done differs considerably depending on whether the trust was created on intestacy or under a will.
Where a statutory trust is created on intestacy, section 47A of the Administration of Estates Act 1925 (as amended) provides a statutory right for the surviving spouse/civil partner to redeem his life interest in return for the capital value thereof.
The surviving spouse/civil partner must elect to have his life interest capitalised within 12 months from the date on which a grant of representation is first issued, although the 12-month limit may be extended by the court in certain circumstances.
The election is exercisable by the life tenant giving notice to the personal representatives in writing or, where the life tenant is the sole personal representative, notice to the senior registrar of the family division of the High Court.
In addition to a statutory right to capitalisation, there is also a statutory method of calculating the capital value to be given to the surviving spouse/civil partner in lieu of the income.
This is laid down in section 47A(2) of the Administration of Estates Act 1925 (as amended by section 28 of the Administration of Justice Act 1977) and the Intestates Succession (Interest and Capitalisation) Order 1977.
The value is found by multiplying the trust fund by a fraction given in the order, which fraction varies according to the age and gender of the surviving spouse/civil partner.
The result of the calculation will be that the capital sum taken by the life tenant will be less than the value of the trust fund in which the life interest subsisted. The balance of the trust fund continues to be held on statutory trust for the issue.
If a life interest is given under a trust created in a will, there is no automatic right to capitalise, as is the case on intestacy.
How then can a life interest be capitalised in such circumstances, assuming the trustees have no power to advance capital to the life tenant?
The first option is for the beneficiaries to unravel the trust following the principle established in the case of Saunders v Vautier (1841).
This is possible if the remaindermen are all ascertained, of full age, sound mind and all the beneficiaries are in agreement.
The trust was drafted in such as way that the remaindermen were defined as ’any of the life tenant’s children alive at his death’
Failing this, an application can be made to the court for a variation of the trust under the Variation of Trusts Act 1958. It should be remembered that, in the latter case, the agreement of all the ascertained and adult beneficiaries must first be sought as the court’s sanction is only given on behalf of beneficiaries who are minor or unascertained. So, in effect, if one of the adult beneficiaries does not agree to a variation, it will not be possible.
As can be seen, the situation with the will trust is not as straightforward and is certainly more complex than the capitalisation of a life interest under an intestacy.
Consider the following case which illustrates this point.
A 55-year-old man with two adult sons and no plans to have more children was a life tenant under a trust.
However, the trust was drafted in such as way that the remaindermen were defined as “any of the life tenant’s children alive at his death”.
Both the life tenant and his two adult sons wanted to access capital during their father’s lifetime but this was not apparently possible under the trust.
Because of the way in which “remaindermen” were defined (which included possible children yet unborn), the trustees of the trust (a firm of solicitors) rightly took the view that it was not possible to ascertain who the surviving children were going to be until the time of the death of the life tenant.
Although in the case of a woman, under English law, there is a presumption that she will not have children after the age of 55, there is no such presumption in the case of males.
Even the life tenant’s offer to have a vasectomy was apparently not good enough, as this procedure is reversible.
In that case, there was still an option for the individuals to make an application to the court for a variation of the trust but, as with all court procedures, this would involve time and money.
This case well illustrates the importance of using an appropriate wording in the trust clause which defines the beneficiaries.
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