Sisters allowed to correct error to benefit from family trust

By Claire Wilson Associate Solicitor

Two sisters have been allowed to correct an error in a family trust that would have prevented them from benefiting in the way intended when the document was drawn up.

The sisters were aged 58 and 56. When their mother died in 2005, they had inherited equally her 50% share of the house that she and their father owned.

For tax reasons, they created a lifetime trust. Under the trust deed, their inheritance formed a fund held on trust for their father during his lifetime, after which, under clause 4.2, each sister’s share would be held on trust for their respective spouse, if any, for life before reverting to the sisters themselves.

Clause 5 allowed the claimants to appoint any part of the fund for the benefit of themselves, their spouses or their children.

Clause 6 provided for a gift over to charity in the event of the failure or determination of the trust.

After their father died in 2015, the sisters discovered that their interests and power under clauses 4.2 and 5 were contradicted by clause 13, which prevented any part of the fund becoming payable to or applicable for the benefit of the sisters or their spouses.

The sisters asked the court to rule that the trust deed should be construed to disregard clause 13.

The judge granted the application. He said it was clear that clause 4.2 and clause 13 deed could not stand together. The only sensible meaning to attach to the deed was to give effect to the interests reserved under clause 4.2 and ignore clause 13.

For more information on the issues raised in this article please contact Claire on 01228 514077 or click here to email her direct.