Principles of Family Law - Essay Example

Alice, a widow, died on 1st July 2008 aged 80. She is survived by her son, Edward, aged 54. She drafted her will herself even though she had no legaltraining. It contains the following problematic dispositions: a. “I give £10,000 to my son Edward to buy a small memento of me for such of my relatives as have not received anything under the other provisions of this my said will; however, having done this he may keep what is left”; b. “I give 50 bottles of wine in my cellar to my son Edward, in the fullest trust and confidence that he will ensure that they will be divided equally between my old friends. His decision as to who are my old friends is to be final”; c. “I give £20,000 to my executors to hold on trust for a period of 21 years and to be distributed in their discretion among such of the first 300 people to have crossed the Victoria Bridge on 24th October 2008 (the date of my deceased husband’s birthday) as they consider most deserving.” At the date of Alice’s death, her wine cellar contains 80 bottles of wine, none of them distinguished in any way from the others. Alice’s will appointed Edward and Sandra, her carer, as her executors. Advise Edward and Sandra. In order to advise Edward and Sandra of their duties in relation to the above it is necessary to examine the contents of the will to determine which elements can be regarded as valid bequests. For an express private trust to be created certain formalities must be adhered to. An express trust requires the person making the bequest to have the necessary capacity as well as adhering to the formalities. This involves consideration of the three certainties since a bequest can only be valid if the three certainties are satisfied. To be regarded as fully constituted a trust must contain all the above elements. When considering capacity the court will refer to the Family Law Reform Act 1969 s1(1) which stipulates that the person making the will must be over 18 and must be of a sound mind. In this situation there is nothing to suggest that the testatrix was not of a sound mind which would mean that the capacity requirement would be fulfilled. In addressing the formalities the court will consider whether the trust has been created inter vivos or by the will. In this case the trust comes into affect upon execution of the will and therefore the will would be regarded as creating the trust. In determining whether statutory provisions apply the court will examine the way the trust was created as well as whether the property subject to the trust relates to land or other property and whether the interest is a legal or an equitable interest. In this case it is not necessary to discuss equitable interests since an equitable interest is created where the testator does not have absolute ownership. With all the above the testatrix had a legal interest in the items. As the trust has been created by the will the court will determine the validity of the trust by reference to the Wills Act 1837 s9 which was amended by Administration of Justice Act 1982 s. 17. There is nothing to suggest that the will was not made in the correct manner so therefore it will be assumed that the formal requirements of the statutory provisions have been met. Having determined the will to be valid it is necessary to consider whether the three certainties are present. The three certainties are certainty of intention, certainty of subject matter and certainty of objects. Intention can be determined from the words in the will. In order to determine that intention the wording should make it clear that the person holding the property is obliged to hold it for the benefit of another. The word trust need not be used in the will in order for the court to determine that a trust has been duly created as was the case in Re Kayford1. Problems tend to arise with the use of ‘precatory’ words where the words express a hope or desire that the trustee will act in a certain way. The courts have struggled with the use of precatory words and there is a tendency for trusts to be regarded as ineffective where precatory words have been used as was the case in Lamb v. Eames2 where the testator gave his estate to his widow “to be at her disposal in any way she may think best, for the benefit of herself and her family”. The use of the precatory words led to the finding that a trust had not been duly created and the property should be transferred to the widow absolutely. Similar decisions where reached in Re Hamilton3 and Re Adams and the Kensington Vestry4. In the latter case the testator included the wording ‘...in full confidence that she will do what is right as to the disposal thereof between my children, either in her lifetime or by will after her decease.” The court stated that taking the will has a whole the testator intended the widow to have absolute ownership of the property. In Comisky v. Bowring-Hanbury5 the court gave effect to the wishes of the testator despite the use of precatory words. In this case the testator had stated he was giving his wife “the whole of my real and personal estate...in full confidence that she will make such use of it as I should have made myself and that at her death she will devise it to such one or more or my nieces as she may think fit and in default of any disposition by her thereof by her will or testament I hereby direct that all my estate and property acquired by her under this my will shall at her death by equally divided among the surviving said nieces.” The court stated, in this case that it was obvious to the reader that the testator intended ‘to make a gift to his wife, with a gift over of the whole property at her death to such of the nieces as should survive her’ The use of the precatory words in relation to the bottles in the second bequest obligates Edward to distribute these according to the will. The use of the wording ‘in the fullest trust and confidence that’ has the effect of creating a trust6 situation but does not impose an obligation on the recipient. Precatory words only impugn a moral obligation on the recipient7. As a result Edward could dispose of the bottles without giving any to the intended beneficiaries. Having established the intention of the testator it is necessary to consider whether the subject matter is certain. Generally trusts will fail if the court cannot determine the certainty of the subject. The courts have held the trust not to satisfy the test where the wording includes words such as “the bulk of my estate” or “such parts of my...estate as she shall not have sold”. This was the case in Sprange v. Barnard8 where the court was unable to determine how much would be regarded as ‘the remainder of the property’. In such cases the court usually takes the view that all the property be transferred to the named beneficiary. Difficulties can arise if the property is only part of the total amount owned by the testator. This could arise in relation to the bottles, since the testatrix owned 90 and has asked for only 50 of these to be distributed. The court may decide, as in Re London Wines Co (Shippers) Limited9 that it is impossible to determine the specific property to be distributed. In Re Golay’s Will Trusts10 the court found the subject to be certain despite the fact that the items came from a larger amount then the amount to be distributed. In this case because the will allowed the executor to determine which items should be distributed the certainty of subject matter could be determined. In this case the testator owned several flats and had instructed the executors to allow the beneficiary the enjoyment of one of the flats ‘during her lifetime and to receive a reasonable income from my other properties.’ The court stated that as the executors had the power to select one the trust was entitled to succeed. The court also stated that the words ‘reasonable income’ allowed the court to quantify such an amount if the executors were unable to determine to. By contrast in Boyce v. Boyce11 the court were unable to determine the subject matter since the second beneficiary had failed to make an election before her death. As a result it was not possible for the courts to determine the interest of the first beneficiary. If the courts decide that the above bequests satisfy the certainty of intention and subject matter they will then consider whether the certainty of object criteria has been satisfied. When determining the certainty of objects the court needs to be able to identify ascertainable beneficiaries. Uncertainty of the beneficiary can cause the trust to fail as the court require clear identification of someone who has the locus standi to ensure the trust is adhered to12. Certainty of objects was considered in IRC v Broadway Cottages Trust13. Resulting from this case the courts have held that the objects must be fully ascertainable to prevent the trust from being declared void14. Trusts can be fixed or discretionary trusts. Discretionary trusts occur where the trustee is entitled to distribute the property as they deem to be fit15. Discretionary trusts are usual when the trust is to be distributed amongst the testator’s family16. Fixed trusts occur where the trustees have an obligation to distribute the trust property to named individuals or to members of a certain group. Sir William Grant MR in Morice v Bishop of Durham17 made the comment that Every trust must have a definite object. There must be someone in whose favour the court can decree specific performance. This was reaffirmed by Lord Parker of Waddington in Bowman v Secular Society18. In this case Lord Parker made the point that for a trust to be valid it must be for the benefit of individuals19. Problems can arise when the beneficiaries are only identifiable through their membership of a particular group. This could occur in relation to all of the above since none of the beneficiaries are specifically named. In the first bequest the instruction is to buy a memento for all of the relatives. The category could be regarded as endless and could include those related by marriage as well as blood relatives. With the second bequest Edward has been asked to determine the persons he considers to be ‘old friends’ of the testatrix. This places a subjective test on Edward and could prove problematic as he might not know of all the potential beneficiaries. With the third bequest the beneficiaries are only identifiable by their act of crossing the bridge. It would be impossible to monitor such a group without requiring someone to record the details of the 300 person’s crossing over the bridge. To assist in this the court developed the “list principle” in IRC v. Broadway Cottages Trust20. In this case the court held that a trust was void unless it was possible, at the time the trust came into operation, to make a list of all the beneficiaries. The court has enabled trusts to succeed by allowing the trustees to distribute to all known beneficiaries. Missing beneficiaries can be protected through a Benjamin order as established in Re Benjamin21. The courts will only do this where the class of beneficiary can be identified with sufficient precision. Where the courts are unable to identify the beneficiaries sufficiently the property will become the subject of a resulting trust on the estate. In a fixed trust the beneficiaries acquire an equitable interest from the point of being identified as a beneficiary. With a discretionary trust the beneficiaries only acquire an interest when they have been selected by the trustees. One of the drawbacks with a discretionary trust is that an intended beneficiary might not receive anything if the trustees determine they do not meet the stipulated criteria. In the above each of the bequests are exhaustive. An exhaustive trust is where the trustee has to distribute all of the property included in the trust22. Non-exhaustive trusts occur where the trustee is required to invest the trust property and instructed to use the profit from the investments to provide for the beneficiaries23. Beneficiaries under a discretionary trust lack the power to insist on the performance of the trust. Potential beneficiaries can insist on the full trust property being distributed but cannot insist on being one of the beneficiaries. McPhail v Doulton24 is accepted as an authority in relation to the validity of a trust where it is uncertain whether an individual can be regarded as a member of a designated class. It was stated by Lord Reid in this case that ‘if the trustees do not exercise a power, the court will do so in the manner best calculated to give effect to the settlor’s or the testator’s intentions.’ Re Baden’s Trust (No 2) 25 subsequently declared the trust to be valid and made it the responsibility of the beneficiaries to provide proof that they were members of a certain group. In reaching their decision the courts referred to Re Gulbenkian’s Settlement26, where it was held that a power was valid if it was possible to say of any particular individual that he was a member of the class to which the power related. The court stated that the trust should not fail just because it is impossible to identify every member. When deciding whether a narrowly defined trust can be enforceable the courts will determine whether there is conceptual certainty with regard to the intended beneficiaries. The courts have allowed trusts where the wording is in favour ‘of all my nephews and nieces’ but have disallowed trusts where the trust is ‘in favour of all my friends’ as the list of potential beneficiaries is not sufficiently easy to define. In some instances the court will consider that the trust is unworkable as in R. v. District Auditor, ex parte W. Yorks. Metropolitan County Council27, in which the trust was expressed “for the benefit of any or all or some of the inhabitants of the county of West Yorkshire”. In this case the court held that the certainty of beneficiary was satisfied by the classification of inhabitants, but that the trust should fail as the size of the class made administration unworkable. This could be applied with regard to the first and third bequest. In the first the number of applicable relatives might be a non-exhaustive list since it is unclear whether the term relatives applies only to blood relatives or also those related through marriage. In the third the court could deem the trust to be unworkable as it would require someone to monitor the first 300 people to cross the bridge to determine who the beneficiaries should be. The conclusion that can be drawn from the above is that all of the bequests might fail since each contains a degree of uncertainty. In the first the number of relatives is an indeterminate element and also there is no stipulation as to the exact subject as the trustee would be required to purchase a memento. In the second there is no direct specification as to which of the 90 bottles should be distributed. This could be circumvented through the fact that the trustee has been given the discretion to choose, however, there is also uncertainty in relation to the object as the trustee has to decide which beneficiaries should be regarded as ‘old friends’. In the third the court may decide that the trust is unworkable since the trustee would have to make a list of the potential beneficiaries and this could only be achieved by monitoring the first 300 people to cross the bridge. If the court decides that any or all of the above bequests will fail those elements will revert back to the estate and will become the property of whoever the estate has been vested in. In relation to the second bequest Edward and Sandra are only under a moral obligation and if they decide not to honour that obligation these would revert back to the estate. 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