The High Court has expanded the Power of Trustees for Inheritance Tax Planning under expediency provisions illustrated in Section 57 (1) of the Trustee ACT 1925. It is the first time that the court has passed an order where it had granted additional powers to the trustees.
The court is allowed to step in where it adjudges that trustees would be convenient to deal with assets in a certain way but a trust deed bars them from practicing so due to the absence of the powers. In such cases, the court will step in to give such additional powers to the trustees.
The EWHC (England and Wales Hight Court) was moved by the trustees of the Allendale 1949 Settlement whereas Lord Allendale and his son, being beneficiaries, were defendants in the case.
The sole purpose of the application was to secure powers deemed necessary to move assets more conveniently within sub-trusts of the family. The applicants also moved the court to acquire additional powers for enhancing the administration and management of the trust’s property; the trust been formed back then 1940s lacked provisions that later trusts enjoy as standard.
As stated above, though Section 57 of the trust sanctions court to give extra administration and management’s powers to trustees if the court deems it expedient, there existed a disagreement concerning the scope of these “additional powers” with one party with a point of view that court can only exercise such authority where the trustee wants to make a certain transaction while the other party claiming that Section 57 is not that stringent.
In this case, the trustee did not have any specific or certain transaction under consideration. The application stated that the applicants were seeking extra powers for the sole purpose to ensure the smooth run of the trust in the future.
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The trustees gave arguments in the court that additional power concerning re-appropriate assets was imperative to restructure assets for holding them in a way that is more tax-efficient. Likewise, additional powers were also sought to possess the flexibility to move assets easily within funds.
- The settlement comprises of 4 sub-funds. Viscount Allendale owned life-interest in W-Fund whereas his son owned life-interest in I-Fund and another fund.
- The defendants wanted to transfer assets to “I-Fund” from “W-Fund” at the expense of asset that was of the same value, however, they were barred from doing so due to the lack of authority/powers.
- When the applicants asked the court to give them additional powers deemed necessary for such transactions, both trustees had actually requested for as many as 8 extra powers that were not related to that specific transaction.
EWHC, after careful deliberations, reached the conclusion that it was actually in the legal interests of the trustees to move assets between “I-Fund” and “W-Fund” and therefore, gave the beneficiaries powers deemed necessary for such transactions.
- When it came to “self-dealing power’, the court linked it with the appointment of the independent trustee [a trustee who does not have personal interests in such transactions].
- The court dismissed the request regarding “general power to delegate” as the trustees were unsuccessful in persuading the court that granting them such power was “expedient” for trustees.
- The other additional powers that were granted to the trustees by the court under Section 57 (1) included the power to establish entities, the power to give assets to the minors, the power to elect investments advisors, and the power to pay corporate trustees despite there not being any such trustees.
The decision of EWHC to award additional powers to the trustees to transfer funds is termed as “unsurprising” by the analysts as the trust deed was well over 70 years old. However, this verdict may set a precedent where other trustees of the old deeds might do the same.
