The High Court has left open an application to change a family trust, giving the applicant’s legal advisers an opportunity to consider amending it. The court did not approve the proposed arrangement and did not refuse it at this stage.
The application was brought by W, acting as personal representative of C, under section 24 of the Land and Conveyancing Law Reform Act 2009. It concerned a life assurance policy held in trust. The policy’s death benefit is payable after the death of the surviving settlor, M, who has dementia and is unable to understand the proposed changes, according to medical evidence before the court.
The policy was funded equally by C and D while C was alive. After C’s death, W and D paid the premiums in equal shares. The trust named C and D as default beneficiaries, each entitled to half of the proceeds. But a separate clause said that if a beneficiary died before the relevant settlor, that beneficiary’s share would be held for the settlor’s personal representatives. The insurer’s position, based on external legal advice, was that C’s half would therefore pass to M’s estate.
W sought approval of changes that would add spouses of the settlors’ children to a class of potential beneficiaries, allow C’s and D’s shares to pass to their estates or personal representatives, and change wording in another clause. The court considered the proposal as filed and said the additional beneficiary class would achieve nothing because M lacked capacity to exercise the appointment power. It also found the proposed change to the default beneficiaries could conflict with the clause governing a beneficiary who predeceased a settlor. The court said a change to that latter clause would be needed to achieve the stated aim.
The judge also identified gaps in the evidence about who would inherit M’s estate. The court said it could not assess whose interests might be adversely affected by redirecting half of the policy proceeds, or determine whether an arrangement with the intended effect would benefit M under section 24. The summons also did not identify M as the relevant person whose benefit was relied on, as the law requires.
The judge said the court could not approve an arrangement subject to changes, though an applicant could seek permission to amend the application. No final determination was made. The judgment also noted that the summons needed clarification about the proposed replacement trustee and that evidence of the proposed trustee’s fitness should be filed.