Wills and Trusts

REASONS TO MAKE A WILL

It is important for you to make a will whether or not you think you have many possessions or much money.

It is important to make a will because:

  • if you die without a will, there are certain rules which will decide how your money, property or possessions should be allocated. This may not be the way that you would have wished your money and possessions to be distributed

  • unmarried partners and partners who have not registered a civil partnership cannot inherit from each other unless there is a will, so the death of one partner may create serious financial problems for the remaining partner

  • if you have children, you will need to make a will so that arrangements for the children can be made if either one or both parents die

  • it may be possible to reduce the amount of tax that has to be paid on the inheritance if advice is taken in advance and a will is made

If your circumstances have changed, it is important that you make a will to ensure that your money and possessions are distributed according to your wishes.

IMPACT OF CHANGES IN THE RELATIONSHIP STATUS ON THE WILL

If you were living with your partner and had included them in your Will, but you have since broken up, you may want to change your Will to prevent them from inheriting upon your death.

If you get married or enter into a registered civil partnership, any previous will you have made will no longer be valid unless your will shows that, at the time you made the Will, you were expecting to marry or form the civil partnership with that person and you intended it to remain the same.

It is a good idea to use a solicitor to help write your Will, or to have a solicitor check one you have drawn up. This will make sure it will have the effect you want. It is easy to make mistakes and, if mistakes are found, this can cause problems after your death.

Sorting out misunderstandings and disputes after your death may result in high legal costs, which will reduce the amount of money in the estate.

PLACING ASSETS IN TRUST

You may wish to place assets in trust either as a means of protecting your wealth for

future generations or as part of your overall inheritance planning.
However, you need to be aware that placing assets in trust does not necessarily mean

that they will be protected if you get divorced.
There are two main ways that a trust can be affected by divorce proceedings:

  • the English Court has power to vary a 'nuptial settlement'; and

  • a trust can be regarded as a resource available to one of the parties, and so an order can be made that party may rely on the provision of assets from the trust, that is, they could use them to pay for certain expenses.

 

You should therefore take advice at the outset to ensure that the arrangements made do not fall within either of these categories.

There is no single definition of a nuptial settlement. The word ‘nuptial’ refers to marriage and so any nuptial settlement must involve a marriage. However, the question of whether a trust has a nuptial element is fact-specific and will be decided on a case- by-case basis. The courts have adopted a broad definition to give the statutory provisions the broadest effect possible.

It has been put as follows:

  • "any arrangement which makes some form of continuing provision for both or either of the parties to a marriage."

So, a trust can be said to be nuptial if it was created, or changed at some point to include a spouse during or before a marriage. However, there are many other ways that a trust could be proven to be nuptial.

A court’s ‘discretion to vary’ is its right to make decisions on an issue according to their opinion, within the general guidelines of the law.

In the case of nuptial trusts, the Court must weigh up all the specific circumstances of the case. Their goal will be a result which is fair to both sides.

A beneficial interest in a trust (including a discretionary trust) can be regarded as a resource available to one of the parties by the judge, and so an order can be made that requires that party to rely on assets provided by the trustees (those that hold the assets in the trust, for example the other spouse).

The question the court will consider is whether, if the spouse in question were to request the trustee to advance the whole (or part) of the capital of the trust to him, would the trustee be likely to do so? The court will look at the history of the situation. Where trustees have regularly granted requests for money in the past, the court is likely to view the assets of the trust as assets available to that spouse. If similar requests have been refused in the past that will also be considered.

This will be taken into account on divorce. When this occurs, a spouse may find that the English court makes orders against him or her that he is unable to meet without the assistance of the trustees.

By making an order that the spouse can only comply with the help of the trustees, the court 'judiciously encourages' the trustees to assist.

OFFSHORE TRUSTS

Where the trust in question is based offshore, the question of enforcement, and whether or not the English order would be recognised or given effect to by the local court is a different issue.

Many jurisdictions have introduced firewall legislation, to try and restrict the enforcement of judgements of foreign courts in relation to their trusts. This is a complex area of law and we recommend you seeing a lawyer.

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