Sophies Estate Planning - Essay Example

?Sophie’s E Planning Sophie’s disposition of the 20,000 shares in Sanderson Ltd., 180,000 pounds and the holiday cottage in Dorsett and the diamond bracelet are the contentious issues in her estate planning. The legal issues involve determining whether or not the disposition of the property listed above represents valid trusts. If the gifts fail to meet the formal requirements for the creation of a trust, the gifts may either become absolute gifts or devolve to Sophie’s estate which was left to her second husband Julian. Each of these gifts, the relevant legal issues and consequences are discussed. Holiday Cottage in Dorsett Sophie covenanted to transfer the cottage in Dorsett to her trustees to hold upon trust for her 20 year old disabled son Philip for life with remainder to his siblings Anna and Ben. Sophie promised to return to the office of her trustees on November 16th to complete the transfer of the cottage to them. However, before she could return, she died as a result of a traffic accident. Therefore the cottage itself was never formally transferred to the trust. This creates a problem since by virtue of the Law of Property Act 1925, the disposition of an equitable interest in land must be evidenced in writing.1 It would therefore appear that since the property was not formally transferred to the trustees, it does not meet the formal statutory requirements. However, the courts have “reduced” the “impact” of the Law of Property Act relative to the disposition of an equitable interest in land.2 The courts’ creative approach to the statutory requirements is confined to cases in which the property was transferred in writing, but the trust itself is not evidenced in writing.3 Unfortunately Sophie did not transfer the property to the trust, although she clearly intended to do so. Ordinarily, the mere fact that she orally declared a trust in the land and it is supported by a covenant to transfer the property to the trust will not be sufficient to overcome the statutory formality.4 However, it has been held that there are exceptions to the general rule in that once a contract for the sale of property is created and signed by the relevant parties, the equity in the land automatically passes.5 The general idea is that equity regards as done, that which ought to be done. Even so, it has been held more recently that a contract for the disposition of interest in land or property is not a disposition of the property itself.6 It would therefore appear that since the trust of the Dorsett cottage was the only gift intended for Philip he will not inherit any of his late mother’s property. The cottage will fail as a valid trust and devolve to Sophie’s estate which was left by will to her husband Julian. The only recourse for Philip is under the Inheritance (Provisions for Family and Dependents) Act 1975 which permits dependents who have essentially been disinherited to claim a share of the deceased person’s estate.7 Since Philip is 20 years old and disabled, it is entirely likely that he was either wholly or partially dependent on Sophie for meeting his financial needs and therefore falls within the scope of the 1975 Act. 20,000 shares in Sanderson Ltd. Sophie successfully transferred the 20,000 shares in Sanderson Ltd. to her trustees and orally instructed them to hold the same upon trust for Anna who is aged 14. The requirement that a disposition of an equitable interest in land must be evidenced in writing also applies to the disposition of an equitable interest in personal property.8 The question is therefore whether or not the oral instructions via the telephone are sufficient to prefect the gift in Anna’s favour. This is a case in which a resulting trust may be appropriate. A resulting trust arises in instances where property is transferred to the trustees and it is clear that the settlor never intended that the trustee take the gift absolutely or that the trustee is treating the property as if it is his or hers absolutely or in ways that are inconsistent with the settlor’s intentions.9 There is no doubt that Sophie intended to create a trust for Anna and never intended that the shares be held by the trustees absolutely. In this regard, the resulting trust which operates to transfer the property back to the settlor or the settlor’s estate is an equitable principle that seeks to do that which is fair, just and conscionable.10 At this point however, there is no evidence that Sophie’s trustees intend to hold the shares to Sanderson for themselves absolutely. Thus the trust in the shares in favour of Anna can be perfected by the trustees declaring that they are holding the shares upon trust for Anna since they hold the title to the shares and are fully aware of Sophie’s intention.11 Thus, if the trustees refuse to hold the shares upon trust for Anna, the gift to the trustees can be challenged so that a resulting trust is created. In the event a resulting trust is created, the shares will devolve to Sophie’s estate which was left to Julian. Anna, like Philip will likely be left disinherited. However, since she is 14 years old, she likely depended either partially or wholly on Sophie for financial support and thus can apply for a share of her mother’s estate.12 Cheque for 180,000 Pounds The cheque for 180,000 pounds also appears to be an imperfect gift. Although Sophie specifically informed her trustees that she would return on 16 November with a cheque for 180,000 pounds for them to place in the trust and to hold upon trust for Ben who is 12 years old, Sophie did not have the opportunity to keep her promise. On the facts of the case for discussion, Sophie died before she could return to the office of her trustees. However, she did in fact write the cheque as promised prior to her accident and hospitalization. Thus there was a clear intention to create a trust in favour of her child Ben. Sophie’s failure to deliver the cheque on the 16 November is not a result of reservations about transferring the funds to the trust to be held upon trust for Ben. In fact only hours before her death, Sophie told her sister Jane that she did in fact, make provisions for her children should anything happen to her. Based on the facts for discussion, the only provisions that Sophie made for her children are the trusts created and discussed with her trustees. With respect to the cheque for 180,000 pounds, Sophie had done all that she could do to perfect the gift in favour of Ben. The check was prepared and only needed to be delivered but death intervened before Sophie could deliver the check. It would therefore be unconscionable and unjust in the circumstances to hold that the gift fails simply because the settlor died before the cheque could be physically delivered when it is certain that Sophie fully intended to deliver the cheque.13 In general, equity will not perfect an imperfect gift.14The underlying principle is that equity will not “assist a volunteer” or will not perfect an imperfect gift where the donee of the gift did not give consideration and is therefore a volunteer.15 As Turner LJ stated in Milroy v Lord, a property settlement is only perfected once the property in question is transferred to the trustee.16 Even so, in Milroy it was held that that incomplete transfer of shares in favour of a beneficiary will be perfected where the evidence is such that it suggests that the donor intended to create a trust of the property incompletely transferred.17 It has been held that where the donor has done everything that is within his or her power to perfect a gift, the gift will be upheld because to ignore it in the circumstances would be entirely unconscionable.18 Sophie did everything that was within her power to perfect the gift in favour of Ben. Only her death intervened to prevent the actual physical delivery of the check. It can therefore be concluded that in all the circumstances of the case, the gift of the 180,000 pounds in favour of Ben will likely be upheld. If the gift fails for want of completeness, Ben remains in the same situation as his siblings, Philip and Anna in relation to his mother’s estate. In this regard, like Philip and Anna, Ben who was likely dependent on his mother for financial support can seek a share of his mother’s estate.19 The Diamond Bracelet The gift of the diamond bracelet to Jane falls under the concept of donatio mortis causa which is the “intervivos delivery of property by a person contemplating death” intending that the gift is effected after the death of the donor.20 Pursuant to the doctrine of donatio mortis causa is a gift that the donor intends the done to take once the donor dies and is therefore different from an outright inter vivos gift.21 A gift given pursuant to the doctrine of donatio moritis causa can be revoked by the donor in the event the donor does not die. However, the gift is required to be in contemplation of death as opposed to the feeling that everyone has to die eventually. The gift is required to be made in circumstances where the donor contemplates that death is pending.22 Where death is not contemplated as pending, the gift is regarded as inter vivos and will take effect only upon the death of the donor.23 On the facts of the case for discussion it appears that Sophie who has suffered an accident and is hospitalized contemplates that death is pending. She was injured in a car accident and rushed to the hospital. She speaks to her sister about making provisions for her children in the event anything happens to her and at the same time makes the gift to her sister. In fact within less than 24 hours she died. Thus it can be inferred that Sophie contemplated that death was pending. Even if the gift was not made in contemplation of death to take effect immediately, it takes effect as an inter vivos gift conditional upon death. Conclusion Based on the authorities discussed it would appear that Ben, Anna and Philip have a fair chance of having their respective trusts upheld as valid trusts. However, even if their trusts fail, the siblings have statutory recourse against the estate based on the fact that they were Sophie’s dependents. Jane’s gift appears to be the only certain gift and she will take the diamond bracelet as an absolute gift. Bibliography Textbooks Hudson, A. Equity and Trusts. (Oxon, UK: Routledge-Cavendish, 2010). McFarlane, B. Hopkins, N. and Nield, S. Land Law: Text, Cases, and Materials. (Oxford, UK: Oxford University Press, 2005). Ramjohn, M. Cases and Materials on Equity and Trusts. (Oxon, UK: Routledge, 2008). Journal Articles Youdan, T. G. ‘Formalities for Trusts of Land, and the Doctrine in Rochefoucauld v Boustead,’ (November 1984) 43(2) The Cambridge Law Journal, 306-336. Cases Carreras Rothmans Ltd. v. Freeman Matthews Treasure Ltd. [1985] Ch. 207. Milroy v Lord [1862] 4 De GF & J 264. Neville v Wilson [1997] Ch. 144. Oughtred v IRC [1970] AC 206. Re Beaumont [1902] 1 Ch 889. Re Craven’s Estate (No. 1) [1937] 1 Ch. 423. Re Rose [1952] Ch. 499. T Choithram International SA v Pagarani and Others [2001] 2 All ER 49. Vandervell v IRC [1967] 2 AC 291. Walsh v Lonsdale [1882] 21 ChD 9. Statutes Inheritance (Provisions for Family and Dependents) Act 1975. Law of Property Act 1925. Read More