Interest in possession trusts are a common estate planning tool, but their rigid structure can sometimes become outdated or unsuitable over time. Circumstances change, beneficiaries’ needs evolve, and the original intentions of the settlor may no longer be appropriate. This article will explore the legal avenues for changing the terms of an interest in possession trust, focusing on the key considerations and practical steps involved.
Please click here to find out more about our Wills, Trusts and Lasting Power of Attorney Services.
Free Initial Telephone Discussion
For a free initial discussion on how we can help you deal with the legal implications of creating a Trust, get in touch with us today. We are also experienced in dealing with all aspects of Wills and Probate and we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
Why Change the Terms of a Trust?
There are various reasons why it may become necessary or desirable to change the terms of an interest in possession trust, including:
- Changing Beneficiary Needs: The income generated by the trust may no longer be sufficient to meet the income beneficiary’s needs, especially in times of inflation or changing living costs.
- Changing Family Circumstances: Significant life events such as marriage, divorce, the birth of children, or the death of beneficiaries can impact the appropriateness of the existing trust structure.
- Tax Planning: Changes in tax legislation may render the existing trust structure inefficient or even disadvantageous from a tax perspective.
- Modernisation: The terms of the trust may be outdated or no longer reflect the settlor’s wishes. For example, the trust may contain outdated investment restrictions or provisions that are no longer relevant in the modern world.
- Resolving Disputes: Disputes between beneficiaries or between beneficiaries and trustees can sometimes be resolved by amending the trust to address the underlying concerns.
Methods for Changing the Terms of a Trust
- Variation of Trusts Act 1958: This Act provides a statutory mechanism for varying the terms of a trust in certain circumstances. The court has the power to vary the terms of a trust if it is satisfied that it is “expedient to do so” having regard to the interests of all beneficiaries.
– Key Considerations: The court will carefully consider the intentions of the settlor and whether the proposed variation is in the best interests of all beneficiaries, both present and future.
– Factors the Court May Consider:
The age, health, and financial circumstances of the beneficiaries.
The nature of the trust assets.
The reasons for seeking the variation.
The potential tax implications of the variation.
- Trust Deed Provisions: Some trust deeds may contain provisions that allow for amendments to the trust under certain circumstances. These provisions may outline specific procedures for making amendments, such as requiring the consent of all beneficiaries or obtaining court approval.
The Variation of Trusts Act 1958: A Closer Look
The Variation of Trusts Act 1958 is a powerful tool for amending trusts, but it is important to understand its limitations:
- “Expediency” Test: The court will only approve a variation if it is satisfied that it is “expedient” to do so. This requires a careful assessment of the circumstances and the potential benefits and drawbacks of the proposed changes.
- Best Interests of All Beneficiaries: The court must be convinced that the proposed variation is in the best interests of all beneficiaries, both present and future. This includes considering the interests of any unborn or unascertained beneficiaries.
- Court Approval: Obtaining court approval for a trust variation can be a complex and time-consuming process. It may involve detailed legal arguments, expert evidence, and potentially lengthy court hearings.
Practical Steps for Changing the Terms of a Trust
- Obtain Legal Advice: Seeking legal advice from experienced trust and estate lawyers is crucial at every stage of the process.
- Identify All Beneficiaries: It is essential to identify all beneficiaries of the trust, both present and future. This may involve conducting thorough research and obtaining necessary consents.
- Draft a Variation Application: If seeking to vary the trust under the Variation of Trusts Act 1958, a detailed application must be prepared for submission to the court.
- Consider Tax Implications: Careful consideration must be given to the potential tax implications of any proposed amendments.
- Communicate with Beneficiaries: Maintaining open and transparent communication with all beneficiaries throughout the process is crucial.
How we can help
We have a proven track-record of helping clients create Trusts. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Wills and Probate Solicitors
It is important for you to be well informed about the issues and possible implications of creating a Trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.
To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
Comments are closed.
