Authors: Jared Ormsby, Israel Vaealiki
Published: 30 November 2023
Pages: 28

Introduction

The Trusts Act 2019 has created a need for advisers to review their clients’ trust structures to ensure they are fit for purpose under the new statutory regime. One of the issues that has arisen in these reviews is whether the beneficiaries listed in the trust deed are the beneficiaries that are intended or likely to benefit from the trust. If not, the question often then arises as to whether those beneficiaries should be removed.

In some cases this issue has arisen because the original class of beneficiaries was wide and included persons that were only likely to benefit in remote circumstances. In older trust deeds, it was not unusual to see remoter relatives of the settlor and future spouses and partners of children and grandchildren being included as beneficiaries without much thought given to whether those persons were likely to benefit or even intended to benefit. A wide list of beneficiaries could also include the trustees of any other trust that had common beneficiaries, companies of which beneficiaries were shareholders and any organisation that is a charity and not for profit.

In other cases, the same issue has arisen because of a change in circumstances of the family. There may have been a break down in relations between family members, the assets in the trust may have changed and become more suited to devolve down to certain family members or the value of the overall family wealth may have changed in a way that required a different vision for the family’s succession plan. For instance, the family wealth may have become large enough that the family members felt they had a significant moral obligation to give back to society through philanthropy or other community driven projects.

Whatever the situation, the question that advisers often have to answer for their clients is whether one or more beneficiaries can be removed as beneficiaries using a power in the trust deed.

Content outline

• General principles of construction
• Nature of powers of removal of beneficiaries
• Fraud on a power, the proper purpose rule and the substratum rule
• Relevance of beneficiary interests
• Powers enabling the addition or removal of beneficiaries
• Powers of variation
• Specific powers to add and remove beneficiaries
• Powers of appointment
• Assessing the context
• Drafting powers of appointment and removal of beneficiaries