The interpretation of a testamentary or will trust is more defined than that of an inter vivos or family trust. The wording of an inter vivos trust deed is often broader allowing the trustees far more discretion as to their investment powers and as to the disposal of funds. In a testamentary trust, the terms are always more precise and unless the intention of the testator has been clearly understood by the will drafter, the implications could be vastly different to those intended.
For example, it is not unusual for a parent wishing to leave an inheritance to a minor child, realising that the child cannot manage the inheritance, to stipulate that the award be held in trust until the child attains his majority, presently 18 years of age. A simple insertion to the will “Should my child be a minor at the time of my death, his award shall be retained upon trust under the administration of my trustee until he attains his majority” would be sufficient. However, if the child were to die before attaining his majority, the award would then devolve in terms of his will and failing a will upon his intestate heirs.
The parent might believe that 18 years of age is still too young to manage the award and could then broaden the simple insertion to the will with “Should my child be under the age of 25 years at the time of my death, his award shall be retained upon trust under the administration of my trustee until he attains that age.” Once again, should the child fail to attain that age the award would devolve upon his heirs, either testamentary or intestate. However, in this scenario, once the child has attained his majority, he could seek to set aside the provisions of the trust, arguing that the trust was established to look after his interests whilst he was a minor, but now coming of age he is competent to manage his affairs without the assistance of a trustee.
In both the above examples, the wishes of the testator might well have been thwarted in that upon the earlier death of the child, unintended persons may have benefitted from the award and the intended post majority trust administration period has also been lost. In addition, had the child been declared insolvent at any time before the award was paid over, this would have been available for his creditors. This sad state of affairs has come about because the award was vested in the child immediately upon the death of the parent but the right of enjoyment had been postponed until that later date.
The situation could have been addressed by the drafter postponing vesting by inserting a clause not bequeathing the award to the child but similar to“ I bequeath XXXXX to my trustee upon trust subject to the following terms and conditions :-“ Included in the terms and conditions would be when vesting is to occur, that is when the trust is to terminate and to whom the trust should be paid if the child has failed to survive that date. The parent has now ensured that his wishes will be carried out.
It is clear that a will needs to be carefully drafted only once the testator’s clear instructions have been received. Words such as “may” or “shall” have different implications, one where the executor or trustee has discretion whilst the other forces performance. The pure meaning attached to a word and not the colloquial every day understanding is how a will is interpreted. When one is about to give instructions for a will to be prepared, it is always better to consult with a skilled will drafter, who will ask the correct questions to avoid unintended consequences. A clear, concise unambiguous will can ensure that your wishes are carried out without confusion.
David Knott
Private Client Trust
03-02-2016.