Trust Apportionment

Ian McKeever is a member of STEP and therefore trust matter are a particular area of expertise for the firm.

A common situation which frequently generates a need for actuarial advice is where a couple have children, the wife dies and the husband remarries. When the husband dies his will creates a trust with a life interest for the second wife with a remainder to the children of the first marriage.

The assets in trust may consist of just a property or there may be additional assets of considerable value.

Relations between the second wife and the children may not be as good as they might be or the second wife may prefer to have assets free and clear which she can leave to her own children, or the children may need money now rather than at some iuncertai time in the future.

In this case, the preferred solution would be to apportion the trust assets in which case actuarial advice on the value of the respective interests would be needed. A less attractive alternative might be for one of the children to sell their remainder interest and again actuarial advice would be useful, if not essential.

Valuation of the remainders could also be required in other circumstances such as in the event of a one of the children being involved in a divorce in which account might be taken of the remainder interest.

The flexibility of trusts means that they can be created in a number of situations, and frequently they are used for tax planning purposes which can also generate circumstances where a trust valuation is required.

Quasi remainders can also arise outside a trust structure for example a mortgage might only be repayable on the death of a borrower. Although there are problems with leases terminating on death, licences to occupy property can in effect be enforceable if they arise as the result of  court order.