Jersey: Thanks, But No Thanks - Where Legacies Cause Problems

Last Updated: 30 January 2014
Article by Appleby  

Where a testator or testatrix makes a specific bequest in his or her will it is almost without exception done with the intention of benefitting the recipient of that bequest. Such, after all, is the main point of a will – to pass ownership to specific assets to individuals or to other bodies such as charities as a final act of benevolence on the part of the deceased.

For a number of reasons, however, either the assets bequeathed or the manner in which it is bequeathed can lead to unnecessary costs and complications for the beneficiaries. Where a beneficiary actively does not want a particular legacy then the matter is easily dealt with – he or she can simply disclaim his or her interest under the will. Where, however, the beneficiary does want to receive the benefit of the legacy but wishes that it had been left to him or her in a different manner the situation is more complex. The will is, after all, the will. Happily, however, the Probate (Jersey) Law 1998 as amended (the Law) can assist.

The recent case of Representation of Bisson and Taylor [2013] JRC148 concerned the will of a testator (T) who had lived and been domiciled in Jersey for over 40 years up until the time of his death. During his life he had successfully conducted his business affairs through the medium of a number of Jersey and Guernsey companies and, when he came to make his will, he wished to pass on his assets to his two children through the medium of two Jersey trusts (one of which was established for the benefit of one child and that child's family, the other for the other child and his family).

Liable for UK Capital Gains Tax

One of the children (J) was, at the time of T's death, resident in the United Kingdom for tax purposes and the executors of T's estate thought to take advice on any consequences which might arise as a result prior to distributing the relevant assets from the estate to the trustees of J's trust. Whilst it was accepted by all parties that (quite properly) capital gains on the assets destined for J's trust following the date of T's death would properly be liable to UK capital gains tax, the advice received by the executors indicated that the UK tax net could go further. It transpired that simply transferring some of T's companies to J's trust would also expose the gain in value of those companies during the course of T's lifetime (when neither they nor he had any connections to the UK) to UK capital gains tax. The advice also indicated how this exposure could have been avoided if T's will had been drafted differently so as to split out the lifetime capital gains prior to transferring the relevant companies to J's trust.

All well and good, but surely the horse had now bolted? T had died and could no longer amend his will in the manner suggested by the tax advisors.

Article 25 of the Law

Happily, article 25 of the Law provides that:

(1) Subject to paragraph 2, the Court may by order made with the consent of all parties who in its opinion should be consulted and having regard only to the interests of the beneficiaries or heirs interested in so much of the estate as is effected by the order.

(a) vary any disposition (whether effected by will, under the law of intestacy or otherwise) of the moveable estate of the deceased person; and

(b) provide that any variation made under sub-paragraph (a) shall have effect as if it were a disposition effected by the will of the deceased person or under the law of intestacy, as the case may be;

(2) An order for a variation under paragraph (1)(a) may only be made within two years after the death of the deceased person.

Variation to the Will

In summary, a will can be retrospectively varied by the Royal Court if (i) all relevant parties agree to the variation, (ii) the application for the variation is made within two years of the death of the testator or testatrix and (iii) in all the circumstances the Royal Court is happy that the variation is appropriate.

As far as the question of who the relevant parties are in a given situation, this appears to include both the executors to the will and all parties directly affected by the proposed variation. Where the interests of minors are in issue then the Court will normally expect them to be separately represented at the hearing. Where an affected party is a trustee, however, the Court will not normally expect to see the beneficiaries of that trustee's trust separately represented - looking after the interests of such individuals is a matter for the trustee itself.

The second condition for variation - the two year time limit - must be strictly observed since the Law grants no discretion over this point to the Court. It is therefore incumbent on the executors of an estate to satisfy themselves as to whether a variation of the will might be desirable as quickly as possible after they start to administer the estate. The tax residence of the beneficiaries of the estate is always an area that ought closely to be considered in this context, although there may well be other issues which would also merit consideration of a variation.

The final question comes down to the Court being satisfied that the proposed variation is one which ought to be ordered in all the circumstances. Generally, if all relevant parties agree to the variation and the reason for the variation is clearly set out then it seems that the order will normally be granted. Those making the application have a duty to give a full and frank account of the reasons for seeking the variation to the Court, however, and it is certainly conceivable that the Court might refuse to order a variation if it considered that doing so would, for instance, be contrary to public policy issues.

In the case of Bisson and Taylor the Court sanctioned the desired variation and, as a result, the full value of the legacy was passed to J and his family - undoubtedly an outcome with which T would have been well pleased.

This article originally appeared in the Jersey Evening Post – Wealth Management Supplement in November 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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