Advancements out of engrafted trusts
05 July 2021Life interest trusts give a beneficiary (known as the “life tenant”) the right to receive the trust income for life, and then pass the capital after the life tenant’s death to other beneficiaries.
Some life interest trusts are drafted so that they look like an outright gift to the life tenant, but with the trust “engrafted” on to that gift. Those engrafted trusts stipulate that the life tenant only receives the income during their lifetime, and set out what happens after their death. These types of trust are known as “Hancock v Watson” trusts, after the 1902 case which confirmed that if the engrafted trusts fail for any reason, the outright gift to the intended life tenant takes effect.
A recent case (Womble Bond Dickinson v Glenn) looks at the statutory power of advancement in Hancock v Watson trusts, and confirms that the trustees have flexibility to use it in favour of the life tenant. Charlotte Kynaston has written an article on the case for Private Client Business, a leading publication for those involved in private client work. It appeared in the July edition at [2021] P.C.B Issue 4, p.156.
Get in touch