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Variation of will trusts

Will trusts can be varied in accordance with s 64 and 64A of the Trustee Act 1956.  While each case will be determined on its own facts the relevant law in relation to s64A (where the court can give consent on behalf of  a beneficiary who is unable to)  is helpfully summarised in Clarkson v Brady where Kos J helpfully summarises the relevant authorities as follows:

“[20] As Tipping J put it in Re Greenwood:

The purpose of s 64A is in my view to put the court into the shoes of a beneficiary who is, by reason of infancy or other incapacity, incapable of assenting to the variation, revocation or enlargement of powers proposed. Similarly the Court is put in the shoes of unborn and unknown persons. The Court, as one part of its consideration of the application, should ask itself whether, if the person on whose behalf it is acting had been alive and of full capacity and properly advised, that person would have been likely to have approved the arrangement on his or her own behalf and with or without conditions or amendment to the scheme.

[21] The principles expounded in that decision and in others such as Re Byrne and Ewington v Schultz have been collected usefully by French J in McKnight v Craig in these terms:

The following principles may be distilled from the authorities …

(i) The power to approve a variation is discretionary.

(ii) The court may consider any proposal which varies or revokes any, or all, of the trusts or a proposal which enlarges the powers of the trustees in managing or administering the property subject to the trust.

(iii) The discretion is exercised in the interests of the person on whose behalf the court is asked to approve the variation and from their point of view. The court should therefore ask itself whether the person would have given approval if that person were alive, of full capacity and properly advised.

(iv) The court can approve a scheme which conflicts with the intentions of the settlor but should not do so light.

(v) The court considers the trust provisions afresh if circumstances have arisen which were not foreseen or may not have been foreseeable at the time the trust was established.

(vi) The court cannot approve an arrangement to the detriment of any person on whose behalf the court is giving consent.

(vii) But the court is to take a wide approach to benefits and detriments in arrangements and must consider the arrangements as a whole in a practical and business-like way. Indirect and intangible benefits and detriments are relevant including the welfare and honour of the family.

(viii) Difficulties may be met by amendments to the proposal or covenants by persons benefitting to make good losses to the disadvantage of other beneficiaries.

(ix) An order approving a proposed variation may be conditional.”

(Footnotes omitted)

In Haszard v Estate of Burnside the court has to decide whether to vary a will trust due to the fact that the life interest has lost mental capacity and is provided for sufficiently elsewhere.  On the first hearing of the matter the court was not satisfied that her interests were adequately provided for.  However, after further evidence was filed the court was satisfied that the variation put before it was in order noting amongst other things at [27]that:

” … (b) The circumstances that have arisen (namely Mrs Burnside’s ongoing incapacity) were, in all probability, not foreseen at the time Mr Burnside’s will was drafted;

(c) Although the point is a little paradoxical, it seems likely that Mrs Burnside would have given her approval to the arrangement had she been of full capacity;

(d) The proposed arrangement is in the overall best interests of the beneficiaries when they are viewed as a class;

(e) The proposed arrangement is not to Mrs Burnside’s detriment because:

(i) Mrs Burnside’s present need for funds is being met entirely by the EBFT and that is likely to continue;

(ii) Her present and permanent incapacity is such that she will not have future needs of an order that cannot and will not be met from sources other than the trusts arising under the Will; and

(iii) An indirect benefit to her will accrue in consequence of the arrangement, namely an increase in the welfare of the members of her immediate family.”

 

References:

  • Haszard v Estate of Burnside [2015] NZHC 1296
  • Clarkson v Brady [2013] NZHC 437

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