Where there's a will, there may be a life time trust!
In a recent decision of the English High Court (Clarke-Sullivan v Clarke-Sullivan), which will be of interest and relevance in Cayman and elsewhere, the Court was tasked with construing a will and its effect in circumstances where the deceased was very sadly killed in an avalanche while skiing. The Will provided that the residuary estate was to go to a New Zealand discretionary trust which had subsequently been wound up.
The brief background was that the deceased and her husband as settlors, created the trust in 2014 which was established to hold property intended to be purchased in NZ, but that purchase did not go ahead. In 2015, the deceased executed the will, which directed her husband as executor to pay her net residuary estate to the Trust (the Clause). In 2016, the trust was wound up on advice from a NZ lawyer that its existence adversely affected their non-resident tax status in NZ. The couple had lived in London from 2006 to 2010, in Dubai from 2010 to 2015 and then in London from 2015 until the deceased’s death in 2019. The issue as to the effect of the Clause arose when the deceased’s husband applied under s.48 of the Administration of Justice Act 1985 (power of High Court to authorise action taken in reliance on counsel’s opinion) in respect of the will.
The case is a good example of the court’s approach to the construction of a will of a foreign domiciled testator and that the question of determining domicile is a question of mixed fact and law. In this case, although the deceased had made a statement that she had not been domiciled in NZ for tax purposes at the time of the will, the Court examined the various factual matters relevant to the deceased’s domicile; as well as evidence as to NZ law on the interpretation of the will.They concluded that the deceased was domiciled in NZ at the time of executing the will and therefore NZ law was the applicable law to the construction of the will.) On the proper construction of the will, applying NZ law, the deceased’s estate was held on testamentary trust to be distributed in accordance with the directions set out in the will and incorporating the terms of the trust, even though the trust had been wound up.
The case is an important reminder that statements made, for instance in a person’s will, in relation to a person’s domicile will not be definitive and that as part of a person’s succession planning they should take all necessary steps to ensure that any such statement is reflective of the factual position.