The trustees proposed establishing a new trust in respect of the share of an estate to which an infant beneficiary had a contingent entitlement. A portion of the trust fund would be allocated to the new trust.
Held: This was a lawful exercise of the statutory power of advancement. The new trusts must be read as if they had been created by the settlor of the existing settlement, at the time of the existing settlement, and, when tested against the rule against perpetuities in that situation, they failed. In the context of a power of advancement, it is no bar to an exercise of the power that the primary object neither requested nor consented to it, and the power was not limited to the conferring of benefit ‘personal to the person concerned in the sense of being related to his or her own real or personal needs’. Nevertheless, trusts created in remainder after the life interest of the settlor’s son were void for perpetuity. The phrase ‘advancement or benefit’ in setion 32 of the 1925 Act covered: ‘any use of the money which will improve the material situation of the beneficiary.’
A power of advancement was a special power and accordingly trusts called into existence by its exercise must be written into the instrument creating the power far the purposes of applying the perpetuity rule.
Viscount Radcliffe said: ‘I ought to note for the record (1) that the transaction envisaged does not actually involve the raising of money, since the trustees propose to appropriate a block of shares in the family’s private limited company as the trust investment, and (2) there will not be any actual transfer, since the trustees of the proposed settlement and the will trustees are the same persons. As I have already said, I do not attach any importance to these factors . . To transfer or appropriate outright is only to do by shortcut what could be done in a more roundabout way by selling the shares to a consenting party, paying the money over to the new settlement with appropriate instructions and arranging for it to be used in buying back the shares as the trust investment. It cannot make any difference to follow the course taken in In Re Collard’s Will Trusts and deal with the property direct. On the other point, so long as there are separate trusts, the property effectually passes out of the old settlement into the new one, and it is of no relevance that, at any rate for the time being, the persons administering the new trust are the same individuals.’
TC Trusts – Will settlement – Infant beneficiary with contingent interest – Statutory power of advancement – Whether exercisable by resettlement on new trusts – Rule against perpetuities – Whether new trusts to be treated as if contained in original settlement – Trustee Act, 1925 (15 and 16 Geo. V, c. 19), Section 32.
Viscount Radcliffe
[1964] AC 612, [1962] 3 All ER 622, [1962] 3 WLR 1051, 106 Sol Jo 834, 40 Tax Cas 433, [1962] UKHL TC – 40 – 416
Bailii
Trustee Act 1925 32
England and Wales
Citing:
Cited – Re Kershaw’s Trusts 1868
In the particular circumstances a provision made for the benefit of the husband was for the benefit of the wife. . .
At First Instance – In Re Pilkington’s Will Trusts; Pilkington v Inland Revenue Commissioners ChD 1959
Whether Trust was void for perpetuity . .
See Also – in Re Pilkington’s Will Trusts; Pilkington v Inland Revenue Commissioners CA 2-Jan-1961
. .
See Also – In Re Pilkington’s Will Trusts; Pilkington v Inland Revenue Commissioners CA 1961
. .
Cited – In Re Collard’s Will Trusts 1961
Buckley J said: ‘In the present case, the farm has recently been valued by qualified valuers at andpound;20,000, and an advance of andpound;20,000 would be within the financial limit of the power of the advancement which the trustees at present . .
Cited by:
Cited – AMP (UK) Plc and Another v Barker and Others ChD 8-Dec-2000
The claimants were interested under a pension scheme. Alterations had been made, which the said had been in error, and they sought rectification to remove a link between early leaver benefits and incapacity benefits. The defendant trustees agreed . .
Cited – In Re the Estate of Marjorie Langdon Cameron (Deceased); Peter David Phillips v Donald Cameron and Others ChD 24-Mar-1999
One of the testatrix’s children was thought to be profligate, and had failed to maintain his own son. Acting under an enduring power of attorney, the testatrix’s attorneys made a substantial gift in establishing an educational trust for that son’s . .
Cited – Trennery v West (Inspector of Taxes) HL 27-Jan-2005
The House considered the application of the section to ‘flip-flop trusts’. The section allocated liability to charge on gains within a settlement under certain circumstances onto the settlor, and at his rate of tax. Assets were allocated to two . .
Cited – X v A and others ChD 29-Nov-2005
The wife sought confirmation that the trustees of a discretionary marriage settlement created by her husband could release sums which she intended to pay out for charitable purposes.
Held: The trust required money to be released for the . .
Cited – Re Hastings-Bass; Hastings v Inland Revenue CA 14-Mar-1974
Trustees of a settlement had exercised their power of advancement under the section, in order to save estate duty by transferring investments to be held on the trusts of a later settlement. However the actual effect of the advancement was that the . .
Cited – Barclays Bank Trust Company Ltd v Revenue and Customs CA 14-Jul-2011
Parents had each left a share of their estate to the bank on trusts for their disabled son. The revenue said that the gifts were caught by and taxable by virtue of sections 5, 49 and 89 of the 1984 Act, the residuary estates of both parents forming . .
Cited – Futter and Another v Revenue and Customs; Pitt v Same SC 9-May-2013
Application of Hastings-Bass Rule
F had created two settlements. Distributions were made, but overlooking the effect of section 2(4) of the 2002 Act, creating a large tax liability. P had taken advice on the investment of the proceeds of a damages claim and created a discretionary . .
Lists of cited by and citing cases may be incomplete.
Equity, Trusts
Leading Case
Updated: 01 November 2021; Ref: scu.184588
