Tuesday, June 15, 2021

Sometimes (always)** you need to ask these key questions concerning family trusts (part one)

As flagged in last week’s post, some of the key questions the court in Beeson v Spence took into account when deciding the assets of the trust were property of the marriage are set out below. 

1. Who is the trustee of the trust?

The trustees of the trust were the wife’s father and her solicitor. They had the discretion to administer the trust.

2. Does the trust deed restrict the range of beneficiaries who can receive income or capital distributions?

The specified beneficiaries were the children of the husband and wife, and the husband and wife were initially potential beneficiaries as parents of the specified beneficiaries. By the deed of variation (instigated by the wife) in 2003 the husband and wife were removed as potential beneficiaries. After the deed of variation the wife and husband were entitled to receive distributions, not as potential beneficiaries, but as ‘parents’ of the specified beneficiaries.

3. Does the trustee need consent/approval of any other person for distribution?

No. However, the trust deed gave the wife ultimate control of the distribution of income and capital by giving her power of appointment and removal of trustee, who in turn had the discretion to distribute to the wife and the husband to the exclusion of the children. This level of control pointed towards the trust being an alter ego of the wife, and the conclusion that the assets were property of the marriage, not the children.

4. Does the trustee effectively/practically control the trust in an unfettered way?

No. Up until her resignation under the deed of variation in 2003, the wife as appointor had complete control over the appointment and removal of the trustee. The consent of the appointor was required for the trustee to vary the terms of the trust deed. Nothing, including a request by the trustee, obliged the wife as appointor to relinquish control of the Trust.

5. Does the trustee exercise its powers independently or are they controlled or subject to approval by any other person or entity?

While the trustee had the discretion to make distributions, the power to vary the deed was subject to approval by the appointor and the appointor could remove the trustee at any time.

** for the trainspotters, ‘Sometimes Always’ is a song by the Jesus and Mary Chain. View hear (sic):