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Supreme Court – Mr Pinney’s trust powers not property for purposes of PRA

January 31, 2025

Supreme Court Cooper v Pinney – Clayton distinguished – Mr Pinney’s trust powers not property for purposes of PRA

The Supreme Court’s decision in Cooper v Pinney[1] (Pinney) is an important clarification of the application of the principles established by Clayton v Clayton [Vaughan Road Property Trust][2] (Clayton) that a bundle of rights and powers held by an individual under a discretionary family trust can be so extensive as to amount to “property” under the Property (Relationships) Act 1976 (PRA), and the effect of the Trusts Act 2019 (2019 Act) on trust powers and rights.

The judgment is a compelling and well-reasoned analysis of the principles in Clayton and the importance of fiduciary obligations as constraints on trust powers. The Court’s careful analysis leads to the clear conclusion that the trust deed in Pinney and the trust deed in Clayton “are not alike” and that Mr Pinney’s bundle of trust powers do not amount to property for the purposes of the PRA[3]. The emphasis on the requirement of unanimous decisions by a minimum of two trustees, the fiduciary nature of trust powers and judicial oversight provides valuable guidance for both trust and relationship property practitioners.

This analysis will begin by showing how the definitions of “property” and “owner” under the PRA have been expanded to encompass rights and powers under a trust deed. It will then provide an overview of the Clayton decision, followed by a summary of the Supreme Court’s decision in Pinney. Finally, the analysis will conclude with a discussion on the application of the mandatory and default duties in the Trusts Act 2019.

Relevant PRA definitions

The starting point is the definition of “property” and “owner” in section 2 of the PRA. The definition of “property” includes “any other right or interest”, and the definition of “owner” includes “the person who, …is the beneficial owner of the property under any enactment or rule of common law or equity”, together these definitions tie into the meaning of “relationship property” at section 8(1) PRA.

That a discretionary beneficiary does not have a beneficial interest in the income or capital of a discretionary trust is well supported by a long-standing line of authorities.[4] The principle applied in the PRA context provides that discretionary beneficiaries do not have a beneficial interest amounting to property under the PRA, even where there is evidence of a long-standing intention by the trustees to exercise their discretion to favour a particular beneficiary.[5]

However, case law has broadened the definitions of property and ownership to apply to trust rights and powers through application of the purpose and principles of the PRA, it’s statutory context and the social context in which legislation such as the PRA is interpreted. This “substance-over-form” approach was endorsed by the Supreme Court in Pinney.[6]

Clayton and the Vaughan Road Property Trust (Clayton Deed)

The Supreme Court agreed with the Court of Appeal[7] that a general power of appointment was tantamount to ownership[8]. Defining a general power of appointment as “a power to appoint property to anyone including themselves without considering the interests of anyone else”[9].

Clayton considered whether the bundle of rights comprised of powers and entitlements vested in Mr Clayton by the Clayton Deed gave him effective control, to such an extent that the bundle of rights was appropriately classified as property under the PRA. Such an analysis must also consider restrictions on the exercise of powers, including how the rights of remaining beneficiaries can exert practical limitations on the exercise of trust powers.[10]

The relevant provisions of the Clayton Deed meant that Mr Clayton could:[11]

apply all of the capital and income of the trust to himself as a discretionary beneficiary;
bring forward the vesting day and appoint all trust capital to himself as a discretionary beneficiary; and
resettle the trust capital on another trust of which he was a beneficiary.

The Supreme Court in Pinney clarified its findings in Clayton as:

… not whether powers or rights conferred by a trust deed actually amount to a general power of appointment. That status does not necessarily define those powers constituting donee property. Nor is that status definitive as to whether a power is property for the purposes of the RPA: in Clayton this Court did not find the trust deed actually created a general power of appointment, but rather recognised something analogous to one (which the Court said was property for the purposes of the PRA).[12]

Central to this finding was the “suite of provisions”[13] modifying or removing fiduciary duties. The Supreme Court found that there was no effective constraint on Mr Clayton’s exercise of powers in favour of himself.[14]

Pinney and the MRW Pinney Family Trust (Pinney Deed)

In Pinney the Supreme Court was asked to apply the principle in Clayton that a bundle of trust rights and powers such as those vested in Mr Clayton and unrestrained by fiduciary obligations, are together so extensive as to amount, in effect, to a general power of appointment, and therefore fall within the definition of property for the purposes of the PRA.[15]

Although the Supreme Court states that a finding that goes as far as saying that trust powers actually amount to a general power of appointment is not determinative of those powers being property for the purposes of the PRA. It also goes on to say:

But a finding that one is dealing with powers amounting in effect to a general power of appointment may offer a short-cut: it tends to be conclusive as to effective ownership by the donee, and an inference can then be drawn that the power concerned is property for PRA purposes.[16][emphasis added]

Dealing with the law applying before the 2019 Act, the Supreme Court found that judicial oversight of trusts is a constraint that can be inconsistent with a finding that trust powers amount to effective ownership by the donee. Noting that the more intrusive the scope for judicial oversight, the less likely that power is the property of the donee.[17]

Contrasting the terms of the Clayton Deed with those of the Pinney Deed, the Supreme Court found there were several significant differences that were sufficiently material to distinguish the Pinney Deed from the Clayton Deed. That the power to appoint and remove trustees does not allow Mr Pinney to take sole control of the trust was found to be sufficient on its own to distinguish the Pinney Deed from the Clayton Deed. The Supreme Court went on to state that even if unilateral control were possible, the powers to dispose of trust assets in Pinney were still constrained by fiduciary obligations.[18]

The Supreme Court framed its analysis under the following headings:[19]

The deeds distinguished: The main similarity between the Clayton and Pinney deeds are the almost identically framed broad discretionary powers to distribute income and capital to discretionary beneficiaries. But noting four significant differences:
1. Appointment and removal of trustees: Both deeds confer a power to appoint and remove trustees, including to self appoint. However, the power contained in the Pinney Deed is subject to the requirement for a minimum of two trustees. By contrast, the power contained in the Clayton Deed allows Mr Clayton to appoint himself sole trustee.[20]
2. Unanimity: The Pinney Deed requirement for all trustee decisions to be unanimous, combined with the minimum of two trustees, meant that every decision “must be the product of a meeting of the minds of more than one trustee”. Whereas the Clayton Deed allowed a sole trustee to act freely, only requiring unanimity where there is more than one trustee appointed.[21]
3. Exclusion of fiduciary constraints: Both deeds have general clauses purporting to allow trustees to make decisions in their “absolute and uncontrolled discretion”. The Pinney Deed went no further. However, the Clayton Deed went on to expressly exclude obligations, such as the core obligation of a trustee to consider the interests of the beneficiaries.[22]
4. Removal of beneficiaries: The Clayton Deed allowed Mr Clayton to remove all discretionary beneficiaries leaving himself the sole discretionary beneficiary, and to appoint all of the trust assets to himself before the vesting day, leaving nothing for the final beneficiaries. There are no equivalent powers in the Pinney Deed.[23]
The trustee appointment power remains fiduciary and constrained: Counsel for Ms Cooper argued that Mr Pinney could appoint himself and another trustee who would act on his direction, or a corporate trustee controlled by Mr Pinney, to then appoint all the trust assets to Mr Pinney.

The Supreme Court did not accept that argument. Finding that exercise of the power of appointment with the intention of taking sole control of the trust would be a breach of the proper purpose rule and inconsistent with the fiduciary nature of the power of appointment and removal of trustees.[24] By finding that the power as expressed in the Pinney Deed is fiduciary in nature, it follows that it must be exercised in good faith and in the interests of the beneficiaries, and not for any improper purpose.[25]

The Supreme Court felt that was sufficient to dispose of the case, but for completeness, went on to address the powers to dispose of trust capital and income.

The remaining trustee powers likewise are fiduciary and constrained: Counsel for Ms Cooper also relied on provisions of the Pinney Deed allowing Mr Pinney to direct that the trustees appoint all trust assets to himself as a discretionary beneficiary to the exclusion of all others.[26]

In considering the argument for completeness, the Supreme Court noted the substantive difficulty with that argument is that the trust ownership arrangement is still subject to an “irreducible core” of duties owed by a trustee which are a fundamental trust concept: the duty to perform the trust honestly and in good faith for the benefit of the beneficiaries.[27]

Mr Pinney’s powers are not his property for PRA purposes: The Supreme Court said it best, and I for one cannot do better. So here it is in the words of Winkelmann CJ and Kόs J:[28]

[125] It will be clear by now that we consider the combination of powers reserved to Mr Pinney under the MRWT deed to be significantly different to those powers reserved to Mr Clayton in Clayton v Clayton. A power analogous to a general power of appointment is not created. Rather, the core power in cl 15 to appoint and remove trustees remains limited by the proper purpose rule and bound by the fiduciary obligations that it be exercised in good faith and in the interests of the beneficiaries. So too are the dispositive powers in cls 4, 6 and 7 – powers which are moreover constrained by the two-trustee requirement and the requirement of unanimity. The general discretion provision in cl 13 does not alter this analysis, and nor does the limited variation power in cl 12. The distinctions between the VRPT deed in Clayton and the MRWT deed are therefore sufficiently material to warrant different classification in terms of the PRA definition of “property”. The two cases are not alike.

[126] It follows that we do not consider Mr Pinney enjoys a personal property right in respect of the bundle of powers vested in him by the MRWT deed.

Application of the Trusts Act 2019

Although the 2019 Act came into force on 30 January 2021 and applies to all express trusts whether created before or after commencement, it was accepted that the 2019 Act did not directly apply to Pinney. Because Pinney was commenced prior to the 2019 Act coming into force the proceedings were governed by the 1956 Act, due to the effect of sch 1 cl 8 of the 2019 Act and s 18 of the Interpretation Act 1999.

Despite this the Supreme Court highlights the intention of the 2019 Act to “restate and reform” the law of trusts in New Zealand by “setting out the core principles of the law relating to express trusts”[29]. Further emphasising that the mandatory duties – to know, and to act in accordance with, the terms of the trust; to act honestly and in good faith; to act for the benefit of the beneficiaries; and to exercise powers for a proper purpose – were “intended to restate and summarise the current legal position”[30].

The fiduciary obligations imposed on trustees and implied in all trust deeds by the mandatory and default duties contained in the 2019 Act, are likely to have a significant effect on the status of a bundle of trust rights and powers for the purposes of the definition of property under the PRA.

It seems that trusts will continue to provide some limited protection for beneficiaries in PRA proceedings, at least where the fiduciary obligations in the mandatory duties are combined with relevant default duties and a requirement for two-trustee unanimous decision making.

Will we ever see the like of Clayton again? One certainly hopes not.

[1] Cooper v Pinney [2024] NZSC 181

[2] Clayton v Clayton [Vaughan Road Property Trust] [2016] NZSC 29, [2016] 1 NZLR 551.

[3] Cooper vi Pinney, above n 1 at [125]-[126].

[4] Cooper v Pinney, above n 1 at [90], citing Gartside v Inland Revenue Commissioners [1968] AC 553 (HL) at 607 per Lord Reid, Lord Morris of Broth-y-Gest and Lord Guest and 617-618 per Lord Hodson and Lord Wilberforce concurring.

[5] Cooper v Pinney, above n 1 at [91].

[6] Cooper v Pinney, above n 1, at [34]-[36].

[7] Clayton v Clayton [2015] NZCA 30 at [99] and [111].

[8] Clayton v Clayton, above n 2 at [60]-[61].

[9] Cooper v Pinney, above n 1 at [38].

[10] Clayton v Clayton, above n 2 at [50]; Cooper v Pinney, above n 1 at [40].

[11] Clayton v Clayton, above n 2 at [52]-[55]; Cooper v Pinney, above n 1 at [41].

[12] Cooper v Pinney, above n 1 at [93].

[13] Cooper v Pinney, above n 1 at [42].

[14] Clayton v Clayton, above n 2 at [67]; Cooper v Cooper, above n 1 at [42].

[15] Cooper v Pinney, above n 1 at [1] and [92].

[16] Cooper v Pinney, above n 1 at [94]; See Australian Securities and Investments Commission v Carey (No 6) [2006] FCA 814, (2006) 153 FCR 509 at [19].

[17] Cooper v Pinney, above n 1 at [98].

[18] At [100].

[19] At [101]-[102].

[20] At [102(a)].

[21] At [102(b)].

[22] At [102(c)].

[23] At [102(d)].

[24] At [104]-

[25] At [115].

[26] At [116].

[27] At [116]-[118].

[28] At [125]-[126].

[29] Cooper v Pinney, above n 1 at [67]; Trusts Act 2019, s 3(a). Among other maters: see paras (b)-(d).

[30] Cooper v Pinney, above n 1 at [67]; Trusts Act 2019, ss 23, 24, 25, 26 and 27; and Law Commission Te Aka Matua o te Ture Review of the Law of Trusts: A Trusts Act for New Zealand (NZLC R130, 2013) at 107.

Do I still need a trust?

May 27, 2024

Amanda Leahy

Commercial, Estate, House, Property, Retirement, Rural, Trusts, Your Own Business

Thousands of Kiwis have, over the years, established family trusts for a variety of reasons. However, it’s well worth considering whether those reasons are still relevant today and evaluating whether your trust may have outlived its usefulness.

You may have established your family trust for:

Avoiding estate duty: before 1992 it was common for high value assets (such as farms) to be transferred to a trust so your personal estate would not have to pay estate duty
Eligibility for the residential care subsidy: trusts were often settled to increase the likelihood of being eligible for the residential care subsidy; the Ministry of Social Development (MSD) only considered assets you owned personally when considering eligibility for the subsidy
Minimising tax: Fluctuating tax rates over the years have sometimes provided a lower tax rate for trusts than the highest rate of personal tax
Creditor protection: Transferring your personal assets to trust ownership means that your personal creditors may have more difficulty accessing those assets to recover personal debts you owe
Estate planning: Children may make claims against their parents’ estates where they believe their parents have made no, or inadequate, provision for them. Transferring assets to a trust during one’s lifetime leaves little or nothing for children to claim against on your death. Trusts also allow assets to be ring-fenced to help with the care of differently abled children
Relationship property: settling a trust, either before your relationship is ‘in contemplation’ or afterwards (provided a contracting out agreement is also signed), is one way to help remove assets from the potential pool of relationship property that would be available for division if your relationship ends.

Things have changed

These days, however, estate (and gift) duty is no more, the top personal tax rates will soon be realigned with trust tax rates, and MSD takes a closer look at trusts when considering residential care subsidy applications. There has also been increasing court action on trusts where it is believed they may have been used to avoid creditors, claims by children and relationship property claims.

In addition, there are further consequences in settling trusts in New Zealand if you are an American citizen, from the UK (even though you may be tax resident in New Zealand), or if you are tax resident in Australia.

Notwithstanding the above, trusts are still very useful vehicles, particularly for creditor protection, estate planning and relationship property purposes.

Trust deeds, however, should be carefully drafted and have the correct documentation in place around them. Excellent legal, accounting and tax advice is needed to ensure that your trust will do the job you want it to.

If you have a family trust that may no longer be fit for purpose, or you think you need an asset protection plan, please talk with us about the options available to you.

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022. Editor: Adrienne Olsen. E-mail: [email protected]. Ph: 029 286 3650

Decision in ‘Alphabet case’ could change succession landscape

September 11, 2023

Amanda Leahy

Kids, Property, Relationships, Trusts

Significant issues raised

In June 2023, the Supreme Court heard the ‘Alphabet case.’ To understand the significance of what is at stake in this case, it is worth considering the facts that gave rise to the litigation and the High Court’s decision.

Abuse of A, B and C by Mr Z

Mr Z and Ms J married in 1958 and separated in 1981. They had four children: G (1960-2015), A (b 1961), B (b 1963) and C (b 1971).

Mr Z severely abused Ms J and the children physically, psychologically and sexually. A was repeatedly raped between the ages of seven and 13, but she did not disclose the abuse to anyone until 1983. She did not tell her mother until 1991. A was unable to face taking action against Mr Z.

Mr Z died in 2016 leaving an estate valued at $46,839. He had, however, settled a trust two years previously for the express purpose of preventing his family from “chasing” his assets, to which he had gifted his home and investments worth $700,000. The children were not beneficiaries of Mr Z’s estate or the trust; rather, the trust’s beneficiaries were the children of Mr Z’s former partner.

Children’s claims

That should have been the end of the matter because the Family Protection Act 1955 (FPA), that allows children to challenge their parents’ wills, only applies to assets a deceased owned in their personal names; it doesn’t apply to trust assets.

However, the children argued that their father owed them a fiduciary duty and, that because of the abuse, he continued to have obligations to them even after they became adults. They said that Mr Z had breached that duty when he gifted his home and shares to the trust in order to prevent his children from claiming against those assets under the FPA.

In the High Court

In the High Court,^[1] Justice Gwyn agreed with the children and said they could bring claims under the FPA against the assets that had been transferred to the trust.

The trustees of Mr Z’s estate and trust appealed to the Court of Appeal.

Court of Appeal divided over case

The Court of Appeal^[2] accepted that Mr Z owed a fiduciary duty to his children and that he breached that duty when he abused them. The issue was whether Mr Z continued to owe those fiduciary duties to his adult children at the time he gifted his assets to the trust.

The majority of the Court of Appeal judges disagreed; they said that the appropriate remedy for the breach of fiduciary duty was equitable compensation (and the children had run out of time to make that claim).

However, one judge said that in some circumstances the inherently fiduciary relationship between a parent and a child may continue after a child becomes an adult (for example, in the case of a severely disabled child).

The judge (who was in the minority, so their views don’t affect the final outcome) decided that A’s position, owing to the abuse she suffered, was analogous to that of a disabled child. Mr Z therefore had a continuing duty to take steps to remedy, as best he could, the enormous harm he inflicted on A, not only when she was living in his care, but also during her adult life. This meant he was required to protect her interests when considering gifting his principal assets to the trust, and failed to do so.

Decision awaited

The Supreme Court will tell us whether Mr Z owed a continuing fiduciary duty to A into her adult life because of the abuse he perpetrated on her. Many commentators believe that it is stretching the concept of a child/parent fiduciary duty too far.

If legal principles cannot evolve, however, a situation may emerge where extraordinarily meritorious claimants are left with no effective relief, simply because too much time has passed, and/or because their parent transferred their assets into a trust to prevent claims after they have died.

That raises two questions:

Should time count against people such as A, who have been so seriously abused by a parent?
Should parents be allowed to transfer their assets into a trust in order to prevent their children making claims after their death?

^[1] [2021] NZHC 2997.

^[2] [2022] NZCA 430.

DISCLAIMER: All the information published in Trust eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Trust eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022. Editor: Adrienne Olsen. E-mail: [email protected]. Ph: 029 286 3650

Who really wants to be a trustee?

June 1, 2023

Amanda Leahy

Trusts

A trustee has many obligations

Are you a trustee of a family trust, or considering becoming one? If so, you need to be familiar with the obligations you are taking on when agreeing to act as a trustee. You should also have a clear understanding of the risks that you are exposed to when you agree to act as a trustee.

Before the Trust Act 2019

In its Review of the Law of Trusts in 2013, the Law Commission found that despite the large number of trusts in New Zealand and the number of people acting as trustees, the majority of non-professional trustees had little appreciation of the extent of their obligations.

The commission recommended an overhaul of the Trustee Act 1956 and, in 2019, new legislation was passed. It sets out the obligations of trustees, so that it is clear to both trustees and beneficiaries about trustees’ obligations and what beneficiaries can do if trustees do not fulfil those obligations.

Trustees’ obligations

The main obligations for trustees, as set out in the Trust Act 2019, are to:

Know the terms of the trust
Act in accordance with the terms of the trust
Act honestly and in good faith
Act for the benefit of the beneficiaries
Exercise their powers for a proper purpose
Exercise the care and skill that is reasonable in the circumstances (particularly where that person acts in their capacity as a professional, such as a lawyer or accountant)
Invest prudently
Be impartial as between beneficiaries
Not exercise powers for their own benefit
Act without reward (except where otherwise permitted by the terms of the trust), and
Hold trust documentation.

The obligations on trustees are wide-ranging and there are significant risks for trustees who do not meet their obligations.

Why become a trustee?

In taking on a trusteeship, an individual or company is agreeing to act in the interests of the beneficiaries of the trust, and generally to do so without any expectation of reward for their services. Trustees are also often involved in court proceedings when family relationships break down.

So why would anyone take on a trusteeship?

The settlor/s, who are the people establishing the trust and contributing its initial assets, may wish to take on the trusteeship themselves in order to retain a high degree of control and oversight over the trust’s assets. This arrangement is often attractive to settlor trustees as not only does it allow more control, but it also means that the trust is not incurring the costs associated with instructing a professional to act as an independent trustee. There are, however, risks associated with this arrangement – particularly if a marriage or relationship breaks down and the trust owns property or there is a bankruptcy.

Ask a friend or relative?

A close friend or relative of the settlor/s may also be prepared to take on a trustee role – most commonly in conjunction with the settlor/s. This arrangement can appeal as there is usually a high degree of trust between the settlors and the ‘independent’ trustee. It does, however, run the risk of placing the ‘independent’ person in a difficult position if the settlors have a relationship breakdown or if different groups of beneficiaries take issue with decisions being made affecting their interests in the trust.

It can also be difficult if there are court proceedings relating to the trust; that ‘independent’ professional trustee may be in the firing line, despite having tried their best and not having received a benefit for acting as trustee.

Have an independent trustee?

Independent professional trustees – whether individuals or trust companies – may be prepared to act as trustees, either by consent or by court appointment. Independent professional trustees expect to be paid for their services and the trust funds will need to be sufficient to justify those expenses being incurred. Sometimes these trustees charge an annual fee to account for the risks involved in being a trustee, such as being involved in litigation, as well as fees for their time spent on trust activities. The trust deed will also need to allow remuneration. If the trust funds are sufficient to justify this cost, it can be worthwhile and will help protect trust assets in the event of a relationship breakdown or bankruptcy.

If you are asked

If you are considering taking on a trusteeship, we are happy to discuss with you any potential risks. This can also be a good opportunity for the trustees to consider a review and update of trust structures which are no longer fit for purpose, particularly before new trustees are brought on board.

Trusts Act 2019 also affects executors and administrators of wills

August 29, 2022

Amanda Leahy

Estate, Trusts

Mandatory and default duties explained

When the Trusts Act 2019 came into force on 30 January 2021 the changes it brought were well publicised. However, not everyone is aware that the some of the provisions in this legislation also apply to wills and the administration of estates by executors. We outline executors’ mandatory and default duties as well as briefly discussing some interpretations of the latter.

The changes in trust law that came into effect on 30 January 2021 have been incorporated into estate administration law by s4B of the Administration Act 1969. It confirms that trustees’ mandatory and default duties set out in the Trusts Act also apply to executors or administrators of estates. This is an important set of protections for beneficiaries of estates who may have concerns about the way an executor is administering estate assets.

Mandatory duties for executors

Executors or administrators are now subject to mandatory duties; these cannot be modified or excluded by the terms of a will. These include the duties to:

Know the terms of the will
Act in accordance with the terms of the will
Act honestly and in good faith
Act for the benefit of the beneficiaries, and
Exercise powers under the will for a proper purpose.

All executors and administrators must be familiar with the terms of the will and follow it; they cannot do something contrary to the terms of the will unless all of the beneficiaries agree or the court has authorised the action.

They must act for the benefit of the beneficiaries. This can become difficult in some situations where executors or administrators have a close relationship with one beneficiary, and want to act in that beneficiary’s interests, rather than for the benefit of all beneficiaries.

Default duties

The default duties outlined in the Trusts Act 2019 also apply to executors and administrators of wills (unless the will expressly excludes them). Some of the most relevant default duties include the general duty of care, as well as duties to:

Invest prudently
Not to exercise powers for the executor or administrator’s own benefit
Avoid conflicts of interest
Not to profit
Act for no reward, and to
Act unanimously.

Modifying the default duties

In some circumstances, these default duties are not always appropriate to a will-maker’s circumstances. For example, often a lawyer or other professional is appointed as executor of a will, and many wills provide that professional executors can charge their usual fees, modifying the duty to act for no reward. Most professionals will not take on an executorship without being paid!

In some cases, it may be desirable for executors or administrators to invest in an asset that doesn’t seem, by ordinary standards, to be a prudent investment. Such an investment may benefit the beneficiaries (or one beneficiary), such as owning a home for a beneficiary to live in; the investment may not lead to capital growth and may not earn much (or any) income but will fulfil a social need.

Investments such as the above may bring complaints from other beneficiaries who feel an executor is favouring one beneficiary’s interests over their own.

Another example is where a will-maker leaves their spouse or partner a right to live in their joint home, and that home (an asset of the estate) does not increase in value. Such an arrangement, however, may be permitted by the will.

It might also be desirable for an executor who is also a beneficiary, to purchase an estate property in a personal capacity. It means that the executor’s personal interest – to buy the property at the lowest price – conflict with the interests of the other beneficiaries, that is to have the property sold for the highest price. The will may allow such a purchase, although to help minimise arguments, it might require a registered valuation to guide the sale price.

Lawyers’ obligations

When you’re signing your will, we will explain all the modifications of, or exclusions to, the default duties that are included in the will. We will often include executor/administrator powers that will over-ride some of the default duties, such as those we’ve explained in the paragraphs on page two.

We will also take reasonable steps to ensure that you understand the meaning and effect of any clause in your new will that modifies, or excludes, those default duties.

This is an additional safeguard to ensure that when you sign your will you understand the implications of the terms of your will. It also means that if beneficiaries have any concerns about the terms of your will, such as in one of the situations we set out on page two, they should have confidence that you intended to word your will in that way and you understood the consequences.

If you have any concerns about your own will, or of a will of which you are acting as a trustee or administrator, please don’t hesitate to contact us.