Author: Terry Gorry

Categories
Administration of Estates-Probate

Grants of Probate in Ireland-What You Need to Know

grant of probate

This piece will look at what is a grant of probate, who can apply for a grant, what documents are needed for probate, is it always necessary to extract a grand of representation, and more.

There are different types of grants of representation possible in Ireland, depending on whether the deceased made a will or not including

Extracting a grant of representation allows the administration of the estate of the deceased.

Is it Necessary to Extract a Grant?

There are certain circumstances where it may not be necessary to extract a grant of representation at all.

For example:

  1. Joint tenancies of property where the property passes to the surviving owner by survivorship
  2. Small estates-if the cash assets in an estate are less than €31,750, many financial institutions will release the monies without a grant provided the beneficiaries are clearly identified.

However, there are certain situations where extracting a grant to administer the estate is necessary. These cases include

  • Freehold land-where the deceased owned ‘realty’ in his sole name, it will always be necessary to extract a grant.

The general rule is that if the deceased had significant assets in the State, it will be necessary to extract a Grant.

Inland Revenue Affidavit (Form CA 24)

The first step in extracting a grant of representation is to fill out an Inland Revenue Affidavit (CA 24)

This is a sworn statement by the personal representative of the deceased of all the assets, debts, liabilities etc. of the deceased.

It is a long, detailed form which itemizes

  • Property in the State
  • Shares
  • Debts due to deceased
  • Debts owing by the deceased
  • Funeral expenses
  • Property outside the state
  • Financial assets
  • Beneficiaries
  • And more.

A ‘personal representative’ includes both executors (testate situation) and administrators (intestacy).

What is a Grant of Probate?

A grant of probate is a grant which issues from the probate office to the executor appointed in a will which ‘proves the will’ and registers it. This then allows the executor to administer the estate.

An executor does not have to act and can renounce his/her office. However, once an executor agrees to act and applies for the grant of probate, he/she cannot renounce without the consent of the High Court.

If an executor renounces, the order of priority of who can apply to extract a grant is set out in Order 79, rule 5(6) of the Superior Courts.

Rule 5(6) states:

(6) Where the deceased died on or after the 1st day of January, 1967, domiciled in Ireland, leaving a will appointing no executor, or appointing an executor or executors who have been cleared off by death, renunciation, citation, or otherwise, the person, or persons entitled to a grant of administration with will annexed shall be determined in accordance with the following order of priority, namely:

(a) any residuary legatee or devisee holding in trust for any other person;

(b) any residuary legatee or devisee for life;

(c) any other residuary legatee or devisee or, subject to sub-rule (9) (b) hereof, which provides that live interests be preferred to dead interests, the personal representative of any such residuary legatee or devisee;

(d) any residuary legatee or devisee for life jointly with any ultimate residuary legatee or devisee on the renunciation or consent of the remaining residuary legatees or devisees for life;

(e) where the residue is not in terms wholly disposed of, the Probate Officer may, if he is of opinion that the testator has nevertheless disposed of the whole or substantially the whole of the estate as ascertained at the time of the application for a grant, allow a grant to be made to any legatee or devisee entitled to, or to share in, the estate so disposed of, without regard to the person entitled to share in any residue not disposed of by the will;

(f) where the residue is not wholly disposed of by the will, any person (other than a creditor) entitled to a grant in the event of a total intestacy according to the order of priority set out in sub-rules (1) to (5);

(g) any legatee or devisee or any creditor or, subject to sub-rule (9) (b), the personal representative of any such person.

Rule 5(1) deals with the order of priority as to who can apply in an intestate situation:

5. (1) In determining to whom letters of administration of the estate of a person who died on or after the 1st of January, 1967, wholly intestate and domiciled in Ireland shall be granted, the persons having a beneficial interest in the estate of the deceased shall be entitled to a grant of administration in the following order of priority, namely:

(a) the surviving spouse;

(b) the surviving spouse jointly with a child of the deceased nominated by the said spouse;

(c) the child or children of the deceased (including any person entitled by virtue of the Legitimacy Act, 1931, to succeed to the estate of the deceased);

(d) the issue of any child who has died during the lifetime of the deceased;

(e) the father or mother of the deceased or, in the case of an illegitimate person who died without having been legitimated, the mother;

(f) brothers and sisters of the deceased (whether of the whole or half-blood);

(g) where any brother or sister survived the deceased, the children of a predeceased brother or sister;

(h) nephews and nieces of the deceased (whether of the whole or half-blood);

(i) grandparents;

(j) uncles and aunts (whether of the whole or half-blood);

(k) great grandparents;

(l) other next-of-kin of nearest degree (whether of the whole or half-blood) preferring collateral’s to direct lineal ancestors;

(m) the nominee of the State;

Who Can Apply for a Grant of Probate?

Persons who are executors, either by appointment in the will or by tenor due to the functions that are assigned to them in the will, can apply for a grant of probate.

Documents Needed to Apply for a Grant of Probate

At a minimum, the documents needed to apply for a grant of probate are:

  • The original will
  • A certified copy of the will
  • The oath of executor and a copy
  • The Inland Revenue Affidavit (CA24)
  • The Revenue Certificate for the High Court
  • The death certificate
  • The Probate Office fees.

Other documents may be required depending on the circumstances, eg affidavit of due execution or testamentary capacity.
By Terry Gorry Google+

Categories
Administration of Estates-Probate

What’s a Grant of Administration with Will Annexed and When Do You Need It?

The grant of administration with will annexed is one of many different grants of representation possible in administering the estates of deceased persons.

administration-of-estates-and-probate-ireland

This grant is required where

  • The appointed executor renounces
  • There is no executor appointed in the will
  • The executor appointed does not renounce and refuses to apply for a grant of probate
  • Executors have been appointed but die either before the deceased of before they prove the will
  • The executor is under a disability eg a minor or a person of unsound mind
  • The appointment of the executor is void due to uncertainty
  • The executor is living abroad.

Who is Entitled to Extract the Grant of Administration with Will Annexed?

The entitlement to extract this grant is set out in Order 79, rule 5(6)

(6) Where the deceased died on or after the 1st day of January, 1967, domiciled in Ireland, leaving a will appointing no executor, or appointing an executor or executors who have been cleared off by death, renunciation, citation, or otherwise, the person, or persons entitled to a grant of administration with will annexed shall be determined in accordance with the following order of priority, namely:

(a) any residuary legatee or devisee holding in trust for any other person;

(b) any residuary legatee or devisee for life;

(c) any other residuary legatee or devisee or, subject to sub-rule (9) (b) hereof, which provides that live interests be preferred to dead interests, the personal representative of any such residuary legatee or devisee;

(d) any residuary legatee or devisee for life jointly with any ultimate residuary legatee or devisee on the renunciation or consent of the remaining residuary legatees or devisees for life;

(e) where the residue is not in terms wholly disposed of, the Probate Officer may, if he is of opinion that the testator has nevertheless disposed of the whole or substantially the whole of the estate as ascertained at the time of the application for a grant, allow a grant to be made to any legatee or devisee entitled to, or to share in, the estate so disposed of, without regard to the person entitled to share in any residue not disposed of by the will;

(f) where the residue is not wholly disposed of by the will, any person (other than a creditor) entitled to a grant in the event of a total intestacy according to the order of priority set out in sub-rules (1) to (5);

(g) any legatee or devisee or any creditor or, subject to sub-rule (9) (b), the personal representative of any such person.

Put simply, this means that the person who is entitled to the residue of the estate is the first person after the executor to prove the will.

If he/she predeceased the deceased or if no provision was made for the residue, the next of kin extracts the grant.

If the person who inherited the residue dies after the deceased but then dies, his legal personal representative extracts the grant.

Administration Bond

An Administration Bond is an additional document required for this type of grant and a Grant of Administration Intestate. It does not arise in extracting a Grant of Probate and is not required.

Section 34, Succession Act, 1965 deals with administration bonds:

34.—(1) Every person to whom a grant of administration is made shall give a bond (in this section referred to as an administration bond) to the President of the High Court to inure for the benefit of the President of the High Court for the time being and, if the High Court, the Probate Officer or (in the case of a grant from a district probate registry) the district probate registrar so requires, with one or more surety or sureties conditioned for duly collecting, getting in, and administering the estate of the deceased.

The Administration Bond is a type of insurance policy or guarantee which gives security to beneficiaries and/or creditors in the event that the estate is not administered properly.

It must cover double the gross Irish assets including the current market value rates of any land.
By Terry Gorry Google+

Categories
Administration of Estates-Probate

What Happens When You Don’t Make a Will? Intestacy Simplified

intestate-estate

When a person dies having failed to make a will, he/she is said to have died intestate.

This means that his estate will be distributed in accordance with the Succession Act, 1965, part VI (sections 67-75).

This sets out the rules for distribution on intestacy, the shares of surviving spouses and issue, the shares of parents, brothers, sisters, and other matters.

The rules concerning who can take out the grant of administration intestate are set out in the Rules of the Superior Courts 1986, Order 79, rule 5:

Rule 5(1) deals with the order of priority as to who can apply in an intestate situation:

5. (1) In determining to whom letters of administration of the estate of a person who died on or after the 1st of January, 1967, wholly intestate and domiciled in Ireland shall be granted, the persons having a beneficial interest in the estate of the deceased shall be entitled to a grant of administration in the following order of priority, namely:

(a) the surviving spouse;

(b) the surviving spouse jointly with a child of the deceased nominated by the said spouse;

(c) the child or children of the deceased (including any person entitled by virtue of the Legitimacy Act, 1931, to succeed to the estate of the deceased);

(d) the issue of any child who has died during the lifetime of the deceased;

(e) the father or mother of the deceased or, in the case of an illegitimate person who died without having been legitimated, the mother;

(f) brothers and sisters of the deceased (whether of the whole or half-blood);

(g) where any brother or sister survived the deceased, the children of a predeceased brother or sister;

(h) nephews and nieces of the deceased (whether of the whole or half-blood);

(i) grandparents;

(j) uncles and aunts (whether of the whole or half-blood);

(k) great grandparents;

(l) other next-of-kin of nearest degree (whether of the whole or half-blood) preferring collateral’s to direct lineal ancestors;

(m) the nominee of the State;

The entitlement to extract the grant of administration intestate is determined at the date of death of the deceased as section 71 of the Succession Act, 1965  provides:

71.—(1) Subject to the rights of representation mentioned in subsection (2) of section 70, the person or persons who, at the date of the death of the intestate, stand nearest in blood relationship to him shall be taken to be his next-of-kin.

It is worth noting therefore that if a person is not a next of kin at the date of death of the deceased, he cannot become one-even if all the deceased’s other relatives are dead. (‘Next of kin’ are blood relations)

Section 70 of Succession Act, 1965 states:

70.—(1) If an intestate dies leaving neither spouse nor issue nor parent nor brother nor sister nor children of any deceased brother or sister, his estate shall, subject to the succeeding provisions of this Part, be distributed in equal shares among his next-of-kin.

 “Next of kin” means a blood relation so step brothers/sisters, and step-relations generally have no right to extract the grant or to succeed.

No grant will be made to more than 3 persons jointly unless the Probate Officer directs it.

Shares of Surviving Spouse and Issue

Section 67 of the Succession Act states:

67.—(1) If an intestate dies leaving a spouse and no issue, the spouse shall take the whole estate.

(2) If an intestate dies leaving a spouse and issue—

(a) the spouse shall take two-thirds of the estate, and

(b) the remainder shall be distributed among the issue in accordance with subsection (4).

(3) If an intestate dies leaving issue and no spouse, his estate shall be distributed among the issue in accordance with subsection (4).

(4) If all the issue are in equal degree of relationship to the deceased the distribution shall be in equal shares among them; if they are not, it shall be per stirpes.

Documents Required to Extract a Grant of Administration Intestate

  • Death certificate
  • Oath for administrator intestate
  • Typed notice of application or copy of oath
  • Affidavit of current market value of land
  • Inland revenue affidavit (CA 24)
  • Administration bond.

The Oath of Administrator Intestate

This sworn document sets out the history of entitlement of the applicant to extract the grant of administration. It will also “clear off” all persons having a prior right to the grant and establishes the right of the applicant to extract the grant.

The Administration Bond

An administration bond is always required when a grant of letters of administration is sought.

The administration bond binds the “principal” to compensate the President of the High Court if he fails to administer the estate in accordance with the law. This cover must cover double the gross assets of the estate.

The administration bond is a guarantee for the beneficiaries and creditors of the estate in respect of the administration not being carried out properly. It is never required when seeking a grant of probate as an executor is never required to execute a bond.

The Per Stirpes Rule

The Per Stirpes rule only applies on intestacy. It is an exception to the general intestate rule that to inherit on intestacy you must be next of kin entitled at the date of death.

It allows kin to inherit the share of their parent, which would otherwise have lapsed due to the death of the parent prior to the death of the deceased, while others of their parent’s next of kin entitled (eg children/brothers of the deceased) survived the deceased.

Relatives of Half -blood and step relatives

Section 72 of the Succession Act, 1965 states:

72.—Relatives of the half-blood shall be treated as, and shall succeed equally with, relatives of the whole blood in the same degree

Kinship is based on blood so if there is no common blood with another person there are no succession rights to that person’s estate.

Disclaiming on Intestacy

Any proposed beneficiary can disclaim his inheritance. However you cannot disclaim in favour of someone else.

Where a person disclaims the property will automatically pass to the person next entitled under the rules of intestacy.

If a spouse disclaims her entitlement to 2/3rds of the estate his issue would inherit the whole estate.
By Terry Gorry

Categories
Capital Acquisitions Tax

Capital Acquisitions Tax (CAT)-What You Ought to Know

capital acquisitions tax ireland

Are you happy to pay tax to the Revenue Commissioners?

I thought not 🙂

This piece looks at capital acquisitions tax (CAT) and the main reliefs available to reduce the inheritance (or gift) tax payable.

Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances and comprises two taxes: gift tax and inheritance tax.

The calculation of the tax payable is based on

  • The value of the benefit
  • The relationship between donor and donee
  • Any prior benefits received by the donee.

Taxable Value of Property

The taxable value of the property is calculated as follows:

Market value less liabilities, costs and expenses less any consideration paid is the taxable value.

Once the taxable value is ascertained, the tax payable will be determined by the relationship between the disponer (donor/testator/intestate) and the beneficiary (done/successor).

There are 3 groups of relationship for CAT purposes; with their CAT thresholds are as follows:

Group Relationship to Disponer Group Threshold from 6/12/2012
A Son/Daughter €310,000
B Parent*/Brother/Sister/
Niece/Nephew/Grandchild		 €32,500
C Relationship other than Group A or B €16,250

*In certain circumstances a parent taking an inheritance from a child can qualify for Group A threshold.

Note: these are the thresholds from 12th October, 2016.

Group A includes where the beneficiary is a child, minor child of a deceased child or where a parent inherits from a child.

Group B is where the beneficiary is a lineal ancestor (parent, grandparent, great grandparent etc.) , lineal descendant other than a child or minor child of a deceased child (grandchildren, great grandchildren etc.), brother or sister or child of a brother or sister.

Group C is anyone else.

Rate of Tax

The current rate of tax is:

Benefits taken on or after 6 December 2012

Threshold amount                    Nil

Balance                                          33%

Pay and File

The Finance Act 2012 amended the Pay and File date for CAT from 30 September to 31 October. Therefore all gifts and inheritances with a valuation date in the 12 month period ending on the previous 31 August will be included in the return to be filed by 31 October 2012.

This means where the valuation date arises between 1 January 2012 and 31 August 2012, the Pay & File deadline is 31 October 2012. Where the valuation date arises between 1 September 2012 and 31 December 2012, the Pay & File deadline would be 31 October 2013.

Valuation of Private Company Shares

Section 27 of the Capital Acquisitions Tax Consolidation Act 2003 sets out how shares in private trading companies are to be valued.

CAT Reliefs and Exemptions

There is a wide range of reliefs and exemptions from CAT.

These include a small gift exemption, spousal relief (no CAT on gifts/inheritances between spouses), dwelling house exemption, favourite grandchild relief, surviving spouse relief, etc.

Agricultural Relief

Agricultural relief, if applicable, can provide relief of up to 90% on gifts or inheritance so agricultural land and property.

The beneficiary must be a farmer as defined by the Capital Acquisitions Tax Consolidation Act 2003 which is not the normal definition of a farmer. A farmer for CAT purposes is not necessarily an individual who has worked as a farmer; it is a financial test.

So, for CAT purposes a farmer is an individual whose assets comprise 80% agricultural property and the property to which the “farmer” is entitled is included in this calculation. It is possible to become a “farmer” on the valuation date by disposing of some non-agricultural assets.

Business Relief

Business relief is aimed at a working business and the transfer of that business to beneficiaries who will continue to run that business.

The relief will amount to a reduction of 90% in respect of the value attributable to relevant business property taken by the beneficiary.

Certain types of business are excluded:

  • businesses dealing in currencies, securities, stocks or shares, land or buildings, or
  • making or holding investments.

The relief applies to the business of a sole trader or a partnership and where the business is run by a limited company the shares of that company.

Only relevant business property will qualify for the relief. “Relevant business property” is defined as:

“the business or an interest in the business in the case of a business carried on by a sole trader or by a partnership. “Business” is defined as one which is carried on for gain and it includes the exercise of a profession or location as well as a trade.”

Individual assets of a business, if transferred without the business, will not qualify.

To qualify for business relief, the disponer must have been the owner for

  • 2 years prior to the death of the disponer on an inheritance
  • 5  years prior to the granting of a gift.

Business relief can be clawed back

  • If there is a change of use ie the property ceases to be relevant business property and
  • If the relevant business property is sold or compulsorily acquired.

Favourite Nephews/Nieces

If the nephew or niece worked full time with the disponer on the farm or in the business for a period of 5 years prior to the death then he/she may be entitled to the same tax free threshold as a son/daughter.

Dwelling House Exemption

If a house is left to a beneficiary who has occupied the house for 3 years prior to the death of the disposer, and continues to occupy it for 6 years after the death, then he/she may be exempt from tax.

Minor Child of a Deceased Child

Property left to the minor child of a deceased child will see that child having the same tax free threshold as a child of the deceased.

Surviving Spouse/Civil Partner Relief

A spouse or civil partner will be entitled to the same relief that a deceased family member would have been entitled to.

Charitable Bequests

Charitable bequests may be exempt from taxation.

The above reliefs are the main ones available in Ireland. However, changes can occur with new Finance Acts so always obtain professional advice if any of these reliefs are important to you.

Please take legal and/or taxation advice before taking any decisions in this area as there are significant taxation consequences for the donor and done/beneficiary.

See also the Revenue Commissioners’ website-CAT section.

Categories
Will Trusts

How to Create a Will Trust in Ireland

How to set up a trust

What appears to be one of the most boring topics imaginable has been the subject of closer scrutiny by those looking to put assets beyond the reach of creditors.

If you have significant debt problems and are looking to put assets out of reach of creditors, a trust can be useful.

But it is not foolproof and can be attacked and unraveled by creditors.

On the other hand you may have assets, no debt problems, but the person(s) who you would like to give those assets to may have debt issues.

And you are, understandably, afraid that those hard earned assets of yours will eventually end up in a great big pot for distribution to the creditors of your loved one.

This is the type of circumstance where a trust may be more usefully deployed, provided it is drafted correctly.

Trusts are also valuable when there are minor children who will be beneficiaries in a will, where you want to make arrangments for someone with a disability, perhaps for an elderly person. You might also set up a trust for taxation reasons.

Will Trusts

Trusts that can be used in drafting wills include:

  • a discretionary trust
  • a trust for sale
  • a Settled Land act trust
  • an interest in possession/fixed trust.

Discretionary Trusts

A discretionary trust fund is one where the only interest that potential beneficiaries have is the right to be considered for an appointment of property. The beneficiaries do not have an absolute right to the trust fund so do not have an interest in possession.

A discretionary trust is useful where

  • There are young children
  • The testator wishes to postpone mainstream capital acquisitions tax
  • The testator wants to adopt a “wait and see” approach to see how potential beneficiaries will turn out.

The trust fund, the beneficiaries, and the trustees must be set out in the will.

Here is an example:

In my Will where the context so admits

1. The beneficiaries shall mean and include:

a) My children

b) My grandchildren born within the trust period hereinafter defined.

2. The trust fund shall mean

a) The sum of €25,000 or the whole of my estate after the payment of my debts, funeral, testamentary, administration expenses and legacies and

b) All money, investments or other property accepted by the trustees as additions.

c) All accumulations (if any) of income directed to be held as an accretion to capital and

d) The money, investments and property from time to time representing the above.

The definition of the trust fund can be as narrow or as wide as the testator chooses. It can be a specific sum of money, a property, or the residue of the estate.

The trustees need to be defined also.

Here is an example:

I appoint Jim and Mary to be trustees (my trustees) of my Will and I appoint them trustees for all the purposes of the Settled Land Acts 1882 to 1890, the Conveyancing Act 1881, the Land and Conveyancing Law Reform Act 2009 and sections 57 and 58 of the Succession Act 1965.

Once the trustees, trust fund, and beneficiaries are defined the substantive trust must be created.

Here is an example of a substantive trust:

I give devise and bequeath the trust fund to my trustees upon trust either to retain or sell it on the following trusts:

Until the vesting day to pay the capital and any income arising from it to any one or more of the beneficiaries in such shares and at such times as my trustees in their discretion think fit without obligation to make payments to or for the benefit of all the beneficiaries or to require equality among those to whom payments are made and on the vesting day to divide what remains of the capital and accrued income equally among the beneficiaries then living without regard to payments already made to them.

Trusts for Sale

This trust is where the trustees are under an obligation to sell, invest the proceeds and hold the proceeds on the terms of the original trust.

This type of trust puts the trustees in control of the timing of any sale of trust property and they cannot be forced to sell, even if a beneficiary wants them to do so.

To incorporate such a trust in a will you need to first decide:

  1. Who are the trustees and
  2. What is the trust property.

Here is an example of a trust to sell:

I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever situate unto my trustees upon trust to sell the same and to hold the proceeds of such sale or my residuary estate for so long as the same shall remain unsold upon trust for my daughters Michaela Smith and Susan Sarandon in equal shares.

There is no power to postpone a sale in the wording above. If such as power is to be given then this will give that power:

I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever situate unto my trustees upon trust to sell the same with power in their absolute discretion to postpone the said sale and to hold the proceeds of such sale or my residuary estate for so long as the same shall remain unsold upon trust for my daughters Michaela Smith and Susan Sarandon in equal shares.

If a property is not held upon trust for sale then a power of sale must be given to the trustees in the will.

An ultimate default trust will also be needed to cover the situation where Michaela and Susan referred to above predecease the settlor/testator or the trust fails for want of a beneficiary. If this default trust is not inserted the danger is that the property will pass on intestacy.

Settled Land Act Trusts

The Settled Land Act, 1882 defines a “settlement” of land. A “settlement” is where real property is held by a succession of interests or where a minor has an interest in property.

Settled Land Act Trusts are very useful for the protection of a life tenant who has the power of sale under the Settled Land Acts.

An example of a settlement would be

To my wife for life and thereafter to my son Sheamus.

One of the benefits of this type of settlement is to fix the time at which an interest will vest in the remainderman (Sheamus above) and to postpone the payment of tax to sometime int eh future.

Fixed Trusts/Interest in Possession Trusts

A fixed trust is one in which the interests of various beneficiaries are fixed at the time of the creation of the trust.

They can be very useful to

  • Create an immediate interest in possession eg a life interest
  • Provide clarity as to who will get the trust property at a fixed time in the future
  • Allow a testator to postpone the vesting of an interest until a beneficiary reaches a certain age
  • Avoid discretionary trust tax provisions.

It is worth noting the distinction between a benefit vested in possession and a benefit vested in interest.

Eg of a benefit vested in possession:

I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever located to my daughter Emily.

Eg of a benefit vested in interest:

I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever located to my daughter Emily and on her death to my son John.

John has a benefit vested in interest.

Trusts and Taxation

You would be well advised to obtain taxation advice about using a trust because deemed disposals of property are said to have taken place for capital gains tax purposes at different times, depending on the wording of the trust instrument/will.

The Land and Conveyancing Law Reform Act 2009

The Land and Conveyancing Law Reform Act 2009 has made significant changes to trust law in Ireland eg the Rule Against Perpetuities which may have affected a trust has been abolished.

The Land and Conveyancing Law Reform Act 2009 introduced a simpler way of dealing with trust land which up to then had been governed by the Settled Land Acts, 1882-1890. The 2009 Act covers all trusts of land ,whether created by will or otherwise.

The Land and Conveyancing Law Reform Act 2009 also sets out the powers of trustees of land, procedures for resolution of disputes, jurisdiction of the Courts to vary and make other orders in relation to trusts, and offers protection for purchasers of trust land.

Will Trusts-Some Other Facts You Should Know

Trusts are incredibly useful legal devices which are typically used to

  • Ensure property is enjoyed by individuals in succession
  • Provide for beneficiaries whose identity may not yet be known.

Trusts can be broadly categorised into

  1. Inter vivos (during the lifetime) trusts and
  2. Will trusts.

What is a Trust?

A trust is an equitable obligation, binding a person (who is called a trustee) to deal with the property over which he has control (which is called trust property) either for the benefit of persons (who are called beneficiaries) of whom he himself may be one, and any one of whom may enforce the obligation, or for a charitable purpose…, or for some other purpose permitted by law..(Source: Underhill)

The 3 Certainties

In order for a trust to be legally constituted it must have 3 certainties:

  1. The subject matter of the trust must be certain (this imposes 2 obligations: the trust property must be certain and the interest to be taken by the beneficiaries must be certain)
  2. The objects (beneficiaries) must be certain
  3. The words used by the testator must have been imperative to show his (her) intention to create an obligation.

No particular form of words is required to create a valid trust but words like “wish”, “hope”, “desire” may cause a trust to fail as they are not sufficiently imperative.

However precatory words like those above may be sufficient to create a trust if the wishes and intention of the settlor/testator is clear from the circumstances.

If any of these certainties are “uncertain” or unclear, the trust will almost certainly fail.

Other Trust Requirements

Where the trust property is land/real property, the trust must be evidenced in writing.

If the trust is a will trust, the will must be valid and comply with the Succession Act, 1965.

There are also categories of trust which are void because they are contrary to public policy and further trusts which are voidable by the Courts on the grounds of fraud, mistake, undue influence, duress, misrepresentation.

Different Types of Trust

Before going on to look at will trusts in more detail it is worthwhile to take a brief look at some different types of trust:

1. Trusts which arise by operation of law

These types of trust are either resulting or implied trusts-where the law presumes that the owner of property intended that it should be held in trust-or constructive trusts-where the Courts will impose a trust to satisfy the demands of justice in particular circumstances eg where a person in a fiduciary position makes a personal profit.

2. Statutory Trusts

The Family Law Act, 1995 and Family Law (Divorce) Act, 1996 allows Courts to order that property held by one spouse should be placed in settlement/trust for the other spouse and/or children.

  1. Charitable Trusts
  2. Trusts Created for Purposes
  3. Discretionary Trusts

A discretionary trust is one which is set up to gives the trust property to trustees with the power to the trustees to give the property as they see fit to members of a particular class of person.

3. Trusts for Sale

This occurs where trustees are given property on trust with the power to sell it or postpone a sale as they see fit.

4. Protective Trusts

This type of trust is usually for the benefit of family members and will have a restriction or condition attached eg “the income to Mick for life while he keeps out of betting shops.”

5. Revocable Trusts

A trust cannot generally be revoked but an exception is a trust for paying the settlor’s debts. This type of trust cannot be used to defeat the settlor’s creditors though.

The Parties to a Trust

There are usually 3 parties to a trust or settlement:

  1. The testator/settlor (if the trust is created by a will he/she is referred to as the testator)
  2. The trustee(s)
  3. The beneficiaries.

A trust which takes effect on death is a will trust.

A settlor/testator can himself be a trustee and/or beneficiary and creates the trust by deed, will, or by act. (However if he is a testator he clearly cannot be a beneficiary or trustee!)

The Trustees

The trustees are the legal owners of trust property and carry out the terms of the trust. The trustees have legal title to the property while the beneficiaries have equitable title.(Although strictly speaking it is probably more accurate to describe the trustees as the nominal owners. Because a beneficiary under a settlement could also make a settlement of his interest where the legal ownership remains with the original trustees).

Anyone who is not under a handicap can be appointed a trustee, including a beneficiary (but a conflict of interest may clearly arise).

Trust property is held by the trustees as joint tenants with the right of survivorhip arising on the death of a trustee. A completely constituted trust is one where a trust has been validly declared and the title to trust property has been transferred to the trustees.

You can have as many or as few trustees as you wish but the more trustees the more difficult it might be to manage the trust’s affairs.

Generally it is a good idea to have at least 2 trustees although one can perform all necessary duties.

Trustees are appointed by the settlor/testator in the first instance. Trustees can also be appointed by the original trustees, those who have statutory powers, and beneficiaries in some circumstances.

In a will trust the trustees and executors will usually be the same persons.

If trustees named in a will are unable to act or have disclaimed or if the settlor failed to appoint trustees then the Courts have the power to appoint trustees.

Both the Trustee Act, 1893 and the Succession Act provide for the appointment of trustees as circumstances dictate eg the predeceasing of the settlor by a trustee.

Trustees of a Minor/Infant Trust-Under Age Children

If a child inherits from a will, and there is no receipt clause in the will, or on intestacy there is nobody in whom the LPR (legal personal representative) can vest the asset or obtain a receipt.

However section 57 of the Succession Act, 1965 comes to the rescue:

57.—(1) Where an infant is entitled to any share in the estate of a deceased person and there are no trustees of such share able and willing to act, the personal representatives of the deceased may appoint a trust corporation or any two or more persons (who may include the personal representatives or any of them or a trust corporation) to be trustees of such share for the infant and may execute such assurance or take such other action as may be necessary for vesting the share in the trustee so appointed. In default of appointment the personal representatives shall be trustees for the purposes of this section.
(2) On such appointment the personal representatives, as such, shall be discharged from all further liability in respect of the property vested in the trustees so appointed.

This means that where minors inherit and no trustees have been appointed the LPR (legal personal representative) can appoint trustees for the purposes of section 57 and a trip to Court can be avoided. If the LPR does not appoint trustees he/she shall be a trustee for the purposes of this section of the Succession Act, 1965.

However it should be noted that this only applies to the share of a minor. Anybody else who is a beneficiary and is under a disability and cannot give a receipt to the legal personal representative will necessitate a trip to Court.

The powers of trustees appointed under section 57 of the Succession Act are set out in section 58 of the Act.

Section 58 also provides for a situation where a minor inherits land on intestacy ie there is no will:

Section 58 (2) Where an infant becomes entitled to any estate or interest in land on intestacy and consequently there is no instrument under which the estate or interest of the infant arises or is acquired, that estate or interest shall be deemed to be the subject of a settlement for the purposes of the Settled Land Acts, 1882 to 1890, and the persons who are trustees under section 57 shall be deemed to be the trustees of that settlement.

The Constitution of Trusts

A trust is completely constituted where the trust property has been vested in the trustees for the benefit of the beneficiaries. This is critically important because the law will not enforce an incompletely constituted trust in favour of a beneficiary.

So an express trust may be completely constituted either by the transfer of property-this must be an effective transfer of the property to be included, not just an intention- to trustees to be held on certain trusts or by a settlor declaring himself to be a trustee for the benefit of specified trustees.

For a trust to be completely constituted whatever formalities are required for the method of constitution must be complied with eg for a trust to be completely constituted by will the relevant statutory formalities must be complied with as set out in the Succession Act, 1965. For an inter vivos transfer of property the formalities applicable to the transfer of that type of property must be carried out eg the transfer of land will required the execution of a deed or transfer.

Declaration of trust by settlor

A settlor can completely constitute a trust where he declares himself a trustee of the property for the benefit of third parties. There must be clear evidence of the settlor’s intention to create a trust. Where the trust property is real property, the declaration of trust must be evidenced in writing.

In summary, a completely constituted trust can be enforced by a beneficiary, even if he is a volunteer. If the trust is incompletely constituted then it will be of vital importance to establish whether the beneficiaries are volunteers or have provided consideration.

Duties and Powers of Trustees

Trustees have both statutory and non statutory powers and duties. Non statutory powers will be granted by the trust deed itself.

Powers and duties usually given to trustees include

  • The power and duty to collect and preserve the assets
  • The power to invest
  • The duty not to make a profit from the trust eg to buy trust property
  • To be impartial between beneficiaries
  • To account for and distribute the assets and keep proper accounts.

Trustees’ statutory powers derive from

  • The Settled Land Acts 1882-90
  • The Succession Act 1965
  • The Land and Conveyancing Law Reform Act, 2009
  • The Trustees Act, 1893.

Additional non statutory powers should be given to trustees such as, depending on the circumstances,

  • the power of sale
  • the power to invest
  • the power to run a business
  • the power to lend money and borrow money
  • the power to delegate
  • the power to insure property
  • the power to advance capital
  • the power to pay professional fees
  • the power to compromise action in claims.

A trustee who is appointed does not have to act-he can disclaim from the outset- but in a will trust if a person is appointed as executor and trustee and accepts the executorship he will be presumed to have accepted the trusteeship.

Once he accepts the job he cannot disclaim. He can retire however according to the terms of the trust.

A trustee can be removed from office either in accordance with the terms of the trust or if all the beneficiaries agree.

Differences Between Legal Personal Representatives and Trustees

An LPR (legal personal representative) can be appointed by will or by Court.

A trustee can be appointed by the settlor/testator, by Court, or by existing trustees.

Only one LPR is required; it is recommended that at least 2 trustees be appointed as 2 are necessary to give receipts for capital monies under the Settled Land Acts.

Receipts for land: one LPR is all that is required (unless it is for settled land) but all trustees must join in getting valid receipts.

An LPR cannot retire but a trustee can.

The powers of personal representatives and trustees are different; LPRs have wide powers deriving from common law, statute and the will.

Trustees derive their powers from statute and the will or trust deed.

If a personal representative dies before the administration of the estate a de bonis non grant is necessary; if a trustee dies his personal representative can take his place until a new trustee is appointed in his place.

Beneficiaries of a Trust

Beneficiaries are those for whom trust property is being held.

However the legal interests of those beneficiaries can vary greatly eg a life interest, an interest for a certain period, an interest subject to a condition etc.

Powers of Beneficiaries of a Trust

Beneficiaries of a trust can act collectively to terminate the trust. A beneficiary can also disclaim or sell his interest.

Some Common Misconceptions about Trusts

As a trust is not a legal entity per se it cannot hold assets or enter contracts or carry out any other legal formalities. Trust property is owned by the trustee(s) and it is the trustee(s) that has legal capacity.

A trust therefore cannot be bound by a legal contract and any contracts entered into by a trust are not legally enforceable.
By Terry Gorry