Equity and Trusts
In law, equity and trusts is used to reflect the application of legal rules by legal system such as court. Equity means fairness and in law judges must give legal ruling by practicing equity. Principles of equity are now applied in every legal system and this has resulted to trust. Trust in this aspect is applied when a person gives authority to another person to foresee his or her affairs. When a person trusts another person he or she can delegate the power to manage his own property.
The relations created by law include family, charitable organizations, inheritance, testate and charity organizations. However, it is not easy to find a person you can trust to be the custodian of your affairs once you are dead or in case of inheritance. The law of equity is therefore, applied to strengthen such relationships in a society (Ewan, 1992, p.14). Application of equity law helps parents to leave a will that provides guidelines on how a persons property may be shared among his or her sons and daughters.
The parent decides on how to distribute his property through application of trust. He only gives his or her property to the eldest child or any other child he trusts most. The case of Tony is a reflection of trust he has on Euan, the oldest son, who is responsible for distributing property between other children. Fairness or equity in this case is noted when he decides to write a will that provides the oldest son to be in charge of the property. Otherwise, he would have left the whole property to all his children and know how to handle the whole situation.
The law provides that a person who is above majority age and of sound mind to draft a will before his or her death. A will also known as testament is a declaration by a person (testator). He or she names two or more individuals who will manage his property or estate once he is dead. The testator transfers title of ownership to the person he trusts most and he gives directions on how the property should be distributed to other siblings (Langbein, 1995, 1001). The will is only affected once the testator dies and this is the reason why trust is an important aspect when it comes to writing a will.
The testator must show that he or she is the owner of the property to be distributed between siblings. For a will to be valid, two words, that is last will and testament must appear on the documents face. The testator must be free to dispose his property without any conditions. The signature of the testator must appear on the document in presence of two individuals who are not beneficiaries (Chambers, 1997, p.19). The beneficiaries of the will must be stated in the will by their names. Tony named Euan to inherit shares, to be in charge of property and ensure that the other children equally share the property, Gordon was named to inherit diarys, papers, and library, a second son to Tony, James would inherit 1million. Therefore, Tonys will was valid. This means that any incident that happened there after could be changed in court or under the guidance of a solicitor.
When the testator dies, a proceeding is initiated in a legal system that is court to verify whether the will was valid. However, the case of Tony is exceptional because one of the beneficiaries, Euan died before the testator. In such a case, principles of equity and trust are put into test. The eldest son of Tony, Euan collapsed of heart failure and it is feared that he may predecease his father (Brown, Timothy, 2003, p.145). If Euan predeceases his father, the provisions of the will have to change. This means that all that was allocated to Euan would be redistributed to his descendants. Other beneficiaries like James, Gordon and other children of Tony may not be affected by the changes.
The death of his son means that all gifts allocated to him particularly the shares in Murphys brewer will be allocated to the other child who is young than Euan. In the case of his old friend Gordon, changes may not affect his capacity to inherit papers, diaries and library. His second son James will be given the power and authority of his elder brother Euan. However, this will only happen if only his father trusts him (Brown, Timothy, 2003, 147). As per the details of the will, James is supposed to inherit 1million he is supposed to distribute the money to residents of Manchester. This implies that his father has trust in him and he can therefore be in charge of the other property.
The general rule is that, when the beneficiary dies before the testator, the gifts go to beneficiaries descendants. This will only apply when the beneficiary is a child or grand child to the testator. Tonys case is not exceptional to this and the gifts that were meant for Euan should be given to his descendants, James and his young brothers and sisters if any. On the other hand, if the beneficiary is not a descendant of the testator the gift goes to residuary beneficiary. The testator in his will may state another person who will inherit residue of the testators estate. This person legally is known as residuary beneficiary. In the case of Tony, if there were no other descendant, his friend Gordon would inherit Tonys property (Ewan, 1992, p.37). My advice to Tony is to allow the nature of law take place whereby the gift to Euan would be distributed to his descendants, James and other brothers in order of age.
Other instances, the gift may lapse but this will only happen when the beneficiary has no siblings. However the circumstances of death will dictate whether the gift will lapse or not. When the death of the testator and beneficiary occurs at a close time span, it is very important to establish the order in which the death occurred. This will help to determine whether the gift lapses or not. In the case of Tony, it is predicted that Euan may precede his father therefore the gift is passed on to his descendants.
Change of unsuccessful bequests
Changing inheritance of property in the will is a very technical process that requires observation of law provisions. A bequest is the act of a person to receive property as is provided by will. The provisions made in a will are always right because when the testator dies there is no other person who is in a position of correcting it. It requires legal process to make changes in a will. In the case of Tony, the adjustment of various acts needs the approval of the court. The court is the only body that can recommend changes to be made in a will.
One way through which I would change unsuccessful bequests is through use of codicils. A will is usually altered by codicils which show that a will is changing as a result of extraordinary happening. A codicil indicates the clause in a will that is supposed to change. It states that the rest of the will remains unchanged. In the case of Tony, I would call the same witnesses who were there when the will was been drafted. I should execute the codicil in the same way the will was been amended. This will help equity to prevail and give the right descendant gift of the deceased beneficiary.
Another way to make changes in the will for unsuccessful bequests is through the use of an executor. An executor is a person who is appointed to administer the property or estate of the testator after his death. The person in this capacity should be very much responsible and in most cases a family member or friend is appointed. He or she provides professional advice in relation to the estate. A solicitor is the best person in this case. I would approach the executor and tell him or her about what happened. This information will be prior to adjustment of some clauses in the will. Since his main work is to help distribute the estate of the testator, it becomes a necessity for him to change clause that provided distribution of property to Euan and give it to Euans descendants.
This change should be reflected in the will and it becomes easy for beneficiaries to get their share without problem. The executor is supposed to apply for probate of the will to court. Probate is a confirmation that the changed clauses make the will to be the final legal draft and that the executor is in charge of administering estate. This is one of the major changes that I would like to make such changes so that the executor will have easy time when distributing the estate. In a will, there are two executors such that if one dies before the testator the other may fill his or her vacancy. In other situations, the two executors may die before the testator. In such a case, the Supreme Court appoints a person who will act in the capacity of an executor. In the case of Tony, I should inform the executor to distribute gift meant for Euan to his descendants. Changes in the will especially the gift of shares to brewer can only be effected through deleting that clause and providing another clause that favors James.
Q.2. McPhail v Doulton
The case of McPhail v Doulton also known as Re Badens trusts was a decision of judges in the law of trusts. The case brings to an end the difference between power and trust such that the two mean the same thing. Mr. Baden executed a deed that aimed at settling trust that is non charitable in favor of Matthew Hall and company staff, relatives, and dependants. The clause stated that trustees to apply net income at their discretion to benefit officers and employees of the company as per the provisions of the trust. This clause did not qualify to be a valid trust thus it was challenged due to its insufficient (Halbach, 1999, p.255). The case was all about discretionary trust that is a trust in which the trustee is given discretion from a class of chosen people by settler should be given trust over property and the level at which each trustee should receive.
In such a trust, a settler is appointed to oversee the affairs of the people in a given list of classes. The class of people to benefit are appointed and a list is passed to the settler to monitor how property will be distributed in a trust. The settler is the custodian of the property and he or she should be a responsible person. The settler should be very careful not to allow any person benefit from property of the trust. He should work under the provisions of trusteeship to ensure that only legal beneficiaries get their dues.
Beneficiary of discretionary trust has no power or right to access trusts property or income without the consent of the settler. However, the trustees must be in a position to consider their claims in connection with those of other beneficiaries. In such a case, it becomes very difficult to distinguish trust powers and powers of appointment that are held by trustees in trust agreement. Most discretionary trusts were not recognized as property trust in the past. They did not however help as a way of planning tax liability but in the modern fiscal legislations, it is being recognized as property trust (Oaklay, 1996, p.31). This has helped to collect tax from trustees. Tax collected from property trust is used to manage activities of the trust. The case of Biden reflects how trust and power are related and it tries to define clear definition that shows the difference between power and trusts.
The background of discretionary trust and power in relation to McPhail v Doulton is referred or connected to authorities that constitute a board. The authorities in early nineteenth century forms functions that have changed the way of handling settlements to a level that may have astonished lord Eldon. The authority in 1930s established laws that called for individuals to pay high rates of tax. This made some individuals who were wealthy to establish settlements leading to accumulation of funds in the hands of companies and trustees. The practice of accumulating tax spread over to other sectors that led to capital gains in tax. Some individuals did not comply with such provisions and they wanted to avoid payment of tax. This led to establishment of measures to come up with good ways of governance for purpose of good settlement (Hayton, 1999, p.249).
Those who avoided paying tax increasingly influenced the creation of certain forms of settlement. Discretionary trusts and powers have established several authorities who have the power to control trusts. The authoritys power is conferred on them by trustees who are supposed to protect the property and interests of other individuals in a settlement. The authorities are directly concerned with disclosing important information and documents of the trust. The case of McPhail v Doulton settled the issue of trust power test the validity of settlement, trust demand and certainty of trusts object clause.
The case held the test of the trusts to be the same. However, some questions arose in the context of appeal where a difference arose between Court of Appeal and House of Lords. The Court of Appeal on its part took the test to be power while House of Lords held it to be trust. The provision of the case showed how trustees distributed income for their own benefit or benefit of employees, officers, ex-officers or ex-employees of a given company (Birks, 1995, p.23). The relatives or dependants of such persons are also considered to be beneficiaries of property or income. The settler in this case must scrutinize very well legal beneficiaries and non-legal beneficiaries. Ruling of the House of Lords prevents trustees from distributing property or income of the trust in an unprofessional way.
These observations of discretionary trust are the context in which Lord Wilberforce made his observations which were lengthily. Lords observations were very much detailed and there was need for them to be set out in full capacity. The sentiments of trust and power are connected to the rulings made in a Court of Appeal and lords observation. In any particular judgment that is given by intellectuals, what may appear as power of distribution related to trust of disposing undistributed surplus in which ever manner, may be different in another aspect of learned judgment. In such a case of learned judgment, power of distribution may be viewed as trust for distribution. A normal person may not see the difference between the two terms therefore there is need for a legal expert to interpret the difference between power and trust. The case in McPhail v Doulton to a large extend puts an end to the distinction between these two terms (Hayton, 1999, p.246). Judgment in this case as is given by House of Lords points out that the difference of the two is reduced to one degree.
The judgment of the case as is given by his Lordship Wilberforce noted that authority for this principle was compelling as per the facts of the case. The ruling is clearly connected to certainty of object in discretionary trust which is a requirement in the formation of trust. It is not satisfying to note that the validity of disposition should be influenced by delicate issues such as shading. In addition, an individual should not consider trustees to be competent in their actions. This is because trustees are only given the capacity to handle situations when every thing has been set in the right order.
Validity is the major important factor that must be considered by the relevant parties concerned with execution of powers. The court has no power to compel any party from exercising its power irrespective of the position held by any authority. Trust on the other hand is mandatory and its execution may be compelled. Whether an employee is given power or trust power, he or she benefits through fund. This gives such person to be aware of the fiduciary duties waiting to be executed. The capacity to bestow trust in a particular trustee depends on the experience, knowledge and responsibility to such duties as they are given (Oaklay, 1996, p.45). The person who administers such duties must be a high ranking official who has the capacity to give out orders in an appropriate manner.
Powers and trusts are the most influential elements in respect to execution of duties, authority and responsibility. A person who is not responsible has no power and hence cannot be trusted. Bidens case tries to bring a clear understanding on how the employees, officers, relatives and descendants of a given trust execute the powers of a trust though application of power and authority. The suitable person to fit in any area of responsibility can only be appointed when he or she has been trusted by officers and members of trust.
To be in charge of a given entity a person must be trustworthy, have power to give orders and also be experienced. When a person is appointed in a trust to be in charge of property and income, his reputation must be of high profile. Any given trustee must be aware of the area of interest. If what he has is power that is not accompanied by trust, then it becomes very hard to execute duties in the right way. The court legally on the other hand, has no power to control trust of an individual. The court can only intervene in a situation where it feels that trustee is not working as per the provisions of the trust (Birks, 1995, 51). A well behaved trustee has knowledge in his or her area of practice. His duty to perform better must be under some guidelines to avoid misappropriation of property. It is the role of the trustee to ensure that each beneficiary was within a given power and that a certain grant meant for him, is appropriate.
A trustee must prove that he or she is responsible enough to oversee distribution of property and income to the right beneficiary even without checking their names from a list. This is a good sign that the trustee has the power and trust in his or her actions. The power and trust of a trustee is similar in different types of activities that yield certain results as per the requirements of a given trust. The common element between trusts and powers is certainty. The two elements provide a common understanding of certainty. In power there are certainties and the same thing applies in trust.
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