Trusts: ‘Pre-Print' In Haste… Repent At Leisure?

The recent decision in the case of X and Y demonstrates starkly that care must be taken with 'pre-printed' trust deeds.

What happened in X and Y?

The background to the case is a claim by an unmarried cohabitant following the death of their partner. The claim of a cohabitant on death relates to the assets personally held by the deceased partner. Assets held in trust would be outwith the direct assets in question in such a claim (although they could have a bearing on what the cohabitant is awarded by the court from the assets personally owned by the deceased).

The deceased in X and Y had attempted to place certain insurance policies into trust. The deceased was the sole trustee and in order to obtain control of those policies following their death, parties applied to the court to be appointed as trustees to replace the deceased. The argument from the surviving cohabitant was that the trust deed paperwork had not be completed correctly and accordingly there was in fact no valid trust relationship and the policies remained in the personal estate of the deceased ... and available to be part of the pot for the cohabitant on death claim. The cohabitant's argument was successful. As the trust deed paperwork had not been completed correctly there was no trust. And it is beyond a dead parrot situation... there never was a parrot (or trust).

Why was there no trust in X and Y?

There was no trust as there is a rule that the settlor (person setting it up) of a trust cannot also be the sole trustee where they do not take steps to intimate the existence of the trust relationship to at least one beneficiary (the knowledge of the insurer has been determined in previous case law to be insufficient). Intending there to be a trust relationship is not enough - go beyond Jedi mind trick, one must.

There needs to be another trustee or intimation to at least one beneficiary. As well as a trust deed you need these elements. You need all the steps... see Leicester City and the transfer of Adrien Silva on this point.

This rule is designed partly to strike at attempts to defraud creditors by an individual claiming (without any notice to anyone) that assets are in fact held in trust and outwith the reaches of a creditor ("an important safeguard against manipulation of the trust mechanism in insolvency" as the sheriff neatly put it in X and Y).

The failure to appreciate this rule when completing the trust deed was fatal to the trust's validity, fatal to the policies...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT