Tuesday, June 22, 2021

Sometimes**, some of the other key questions concerning family trusts (part two)

Following recent posts, some of the additional questions considered by the court in Beeson v Spence in deciding the assets of a trust were property of the marriage are set out below. 

1. Can beneficiaries be removed or added, and if so by whom?

The beneficiaries could be removed or added by the trustees, only with the consent of the appointor.

2. Is there any risk that the trustee may be seen as simply the ‘alter ego’ of some other person?

The Court found that the trust was created with the wife in control of the appointment of those with the duty of administering it and it was never created to benefit the children alone. The assets of what was essentially a 'standard' discretionary trust were controlled by a party to property proceedings who ultimately had the power to legitimately determine at any point to whom income and/or capital was to be distributed, including herself.

3. Does someone (e.g. an appointor, guardian, principal) have the power to unilaterally change the trustee?

Yes. The appointor was the wife initially. Whilst she subsequently relinquished control and appointed her sister as replacement appointor in 2003, the steps taken via the deed of variation were seen as having been taken at the wife’s direction. This conclusion pointed towards the trust being the alter ego of the wife, and thus the property of the marriage and not the property of the children.

4. If the appointor ceases to act, do their powers pass to anyone else, and if so, who?

The deed provided for the appointor powers to pass to Mr Beeson, the wife’s father and trustee of the trust, upon her death. The deed also allowed for the wife as the original appointor to name a successor appointor (which she did, namely her sister).

5. For an existing trust, has there been a pattern of income or capital distributions?

Distributions were made from income in both 2002 and 2003 to the specified beneficiaries being the children. Distributions were also made to the wife in this period, which she applied, among other things, to payment of her legal costs. Whilst the wife argued the legal costs incurred showed the fund was used for the children’s benefit, it was held that the legal costs should be seen as being incurred on her own account. This supported the conclusion that the trust was not the sole benefit of the children.

Further, there was nothing improper about the trustees distributing funds in the wife’s favour, as she was a potential beneficiary up until the variation in 2003, and continued to be entitled to receive distributions as a ‘parent’ of the specified beneficiaries after the variation.

** for the trainspotters, ‘Sometimes’ is a song by the Brand New Heavies. View hear (sic):