When someone dies, executors or administrators are tasked with the distribution of the estate in accordance with the deceased's will or, if the deceased died without leaving a will, following the rules relating to an intestate succession.
A person's will, however, may not reflect changes in their circumstances or in tax legislation over time, and dispositions left to beneficiaries could at the time of their death have unforeseen consequences. For example, an inheritance could push a beneficiary into a higher tax bracket or the will may fail to provide for a child or a grandchild born after the will was made. Executors and Administrators may also be faced with beneficiaries who do not wish to receive all of their inheritance.
It is often overlooked that in Jersey there is an option available to the heirs of an estate to change the distribution of assets provided for by the will or inheritance law, where there is an intestacy, by varying the dispositions of the estate which are causing an issue.
Is an application to the Royal Court necessary?
Unlike in some other jurisdictions, a will cannot be simply varied under Jersey law by way of a written agreement executed by the interested parties. An application must be made to the Royal Court. Article 25 of the Probate (Jersey) Law 1998 (the "Law") provides the Royal Court with a discretionary power to vary any disposition of the movable estate of a deceased person whether it is effected "by will, under the law of intestacy or otherwise". The application is made by way of a Representation, which is a type of originating court process in Jersey and the parties whose consent is required to the variation must be represented at the hearing.
Importantly, the Representation must set out in full the exact wording of the new provision to be inserted and read as part of the will. Anyone subsequently reading the will coupled with the Act of the Court must know exactly what it provides following the variation. Practically, if the amendment to the will is set out in a Deed of Variation, then this must be appended to the representation.
Who needs to consent to the application?
All parties affected by the proposed variation must consent to the order of the Court being made. Applicants should bear in mind that providing the court with a Deed of Variation signed by the relevant parties is not sufficient proof of consent. The Court must be satisfied that the consent is given by all parties who are sufficiently interested and affected by the application and will require them to either attend in person or be represented at the hearing.
Testators sometimes direct the executor of their will to hold assets on trust. If a variation of the disposition to the trust is sought, then the executor or the trustee may make the variation application. The executor and trustee will need to attend the application hearing. The beneficiaries of the trust which is to receive the varied disposition or created to receive the disposition will not usually be required to attend the hearing and provide their consent. The Royal Court confirmed this position in Re (A) Probate  JRC 148. It is the trustee that is required to provide its consent to a variation which affects the trust.
Practically, trustees will usually want to consult the beneficiaries of the trust before consenting to any variation and where they do consult with them to inform the Court of the beneficiaries' views on the proposed variation. However, the decision to make an application to vary the disposition to the trust provided for in the will rests, in these circumstances, with the executor or the trustee.
When to apply?
Article 25 of the Law provides that a Representation seeking a variation must be brought within two years of death. No variation can be made after this time period has elapsed. If a variation is sought for tax efficiency purposes, applicants will need to provide the professional advice on which they rely to the Court to assist in its determination as to whether it should exercise its discretionary power under Article 25 of the Law.
Tax advice should be obtained in advance of a proposed variation to allow time for an in-depth review and for discussions between executors and the affected beneficiaries to take place well ahead of the two years' time limit expiring.
What happens if the variation is ordered?
The order will have effect retrospectively, as if it were a disposition effected by the will of the deceased person or under the law of intestacy. The Court is also able to direct to whom and in what manner the movable estate of the deceased person is to be distributed. It therefore has a very broad jurisdiction.
There are a number of occasions where the Court has exercised its power pursuant to Article 25 of the Law. The variations that may be sought from the Court are wide ranging and can include for example orders that moveable assets are not to be settled into a trust due to tax consequences, instead providing that the moveable assets be distributed to the heirs directly.
By way of a practical example, in a recent unreported case, Walkers obtained an order varying a will to assist the beneficiaries of a life interest in a trust created by a will. Under the terms of the will, the deceased appointed an executor to hold the residue of her moveable estate on trust and to pay the income of the trust fund to a relative during their lifetime, and upon their death, to their spouse during the spouse's life time. However, the beneficiaries were residents of the United Kingdom and the income payable from the trust would cause them to incur a greater tax liability. The will also did not provide for the beneficiaries' child who the beneficiaries wanted to be able to share the income with and did not allow them to defer the income in years they did not need it.
A variation was sought to the will relying on advice obtained from an expert tax adviser as to the tax position to help the beneficiaries achieve their aims. It was proposed that the will would be varied to implement a more flexible structure, which involved creating a non-UK resident discretionary trust to receive the income instead of the individuals receiving it directly but only during those individuals' lifetimes. The beneficiaries' child was also included as a beneficiary of the newly created discretionary trust.
The court ordered the variation sought. The variation sought was held to be in the interests of the life interest beneficiaries as it allowed greater flexibility in permitting any income that was not needed in a specific year to accumulate and to be invested until it was needed. The structure also enabled the life interest beneficiaries to share the benefit with their daughter. All of the parties required to consent to the variation and the life interest beneficiaries supported the application.
In another interesting case, Representation of RM Talbot Estate  JRC 204, a trustee received tax advice that distributions from a trust would result in the UK resident beneficiaries suffering potentially significant adverse tax consequences. The trustee sought to vary the will, which settled monies on trust so that the monies would be paid straight to the beneficiaries rather than into trust. Submissions made to the Court highlighted that, in contrast to distributions from a trust, there was no tax charge in the United Kingdom on a person receiving under will. Tax would be only payable from the estate of the deceased where the deceased was domiciled in the United Kingdom, but in this matter, the deceased was domiciled in Australia at the time of her death. The Royal Court therefore consented to the variation of the will, with the distribution to the beneficiaries to be made from the deceased's estate directly rather than through the trust, thereby avoiding the significant additional tax liabilities that would have otherwise been payable by the heirs.
The Royal Court allowed a similar variation in the matter of the Representation of O'Sullivan  JRC 208. In this case, the deceased's will was varied to allowed the inheritance to paid directly to her heirs rather that to be held on trust for them as they would incur significant tax liability from the creation to the trust and the sums were too small to make a trust economically viable.
The deceased owned properties jointly. Can the right of survivorship attached to joint tenancy be varied after death?
The Court answered positively in the recent case of the Representation of Anthony Yianni  JRC 133 and adopted a purposive interpretation of the words "or otherwise" in Article 25 of the Law. The deceased had set up a Jersey company, in which he owned shares with his wife and son. Upon his death, a Representation was brought before the Royal Court seeking a variation under Article 25 of the Law and one of the questions for the Royal Court was whether those shares were held jointly for the holders and the survivors of them, or in equal shares as owners in common. The Court found on the facts that the deceased and his family owned the shares as joint owners. As a consequence, they would automatically devolve to the surviving owner and therefore to the Deceased's widow and son.
This caused difficulties for the beneficiaries. The deceased's widow, domiciled in the United Kingdom, raised concerns that she may not able to claim the "spouse exemption" she was entitled to under the inheritance tax regime because the shares were not transferred to her outright, but to her and her son jointly. The family therefore supported an application to vary the disposition relating to the right of survivorship so that upon death, the deceased's son held his shares in the company as owner in common.
The court ordered the variation, noting that all historic and current shareholders consented to it, and that the company had no objection. HMRC had also been notified.
Wills are often drafted many years before death. Whilst frequent reviews and updates limit the risk of unwanted consequences, they do not eliminate them completely. Beneficiaries of Jersey estates do not have to be tied to unwanted or unequal bequests. The power of the Royal Court to exercise its jurisdiction to vary a disposition from an estate can be a useful option for them to consider should these situations arise.
Takeaway points for executors considering making a variation application are as follows:
- Representations must be made within two years of death to the Royal Court;
- Representations must set out the exact wording of the variation being sought;
- If the variation is sought for tax efficiency purposes, then tax advice should be obtained promptly and well ahead of the two years' time limit; and
- Consent to the wording of the order must be expressly given by all parties affected by the variation. In the case of a bequest to a trust being varied, only the consent of the trustee is necessary but it is prudent for the trustee to seek the beneficiaries' agreement prior to making the application.
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.