Trust Dispute

In a recent US inheritance dispute case, it highlighted a fundamental issue and, even though it has no bearing in law over cases decided in England and Wales, it highlights how the facts of the case could quite easily have followed a similar path if decided in England and Wales.

The case involved Elizabeth Hurley’s son, Damian, who was born out of wedlock. His father, the son of a very wealthy individual, refused to publicly acknowledge he was Damian’s father until later in Damian’s life.

Dr Bing had created a family Trust in the 1980’s, likely with a view to limiting the Inheritance Tax due on his estate on his death, and on creation included in the class of beneficiaries ‘future grandchildren’. The Trust was created before any grandchildren were born out of wedlock. Once it was apparent that Damian, and his illegitimate cousin, may benefit from the Trust to in the region of £180,000,000, Dr Bing, acting as Trustee, sought to apply a different interpretation to the definition of ‘grandchild’ by inserting words/definitions into the Trust Deed after its creation by excluding those individuals that were born out of wedlock and/or that did not live in the parents’ family home.

In 2019, a Los Angeles court ruled that the Trust fund was simply set aside for unnamed grandchildren, and that because Damian was biologically Dr Bing’s grandchild, that he should have the right to inherit. Dr Bing’s desire to exclude illegitimate grandchildren was taken to be an afterthought following their birth, rather than being an intention that he held at the time of the Trust’s creation.

Despite the initial ruling and following the death of Damian’s father, Dr Bing has successfully appealed the ruling, meaning that Damian will no longer inherit on the basis the trust fund will not be passed on to “any person born out of wedlock unless that person had lived for a substantial period of time as a regular member of the household.” In this case, Damian (and his cousin) had not lived in their respective parent’s family home and had not formed any kind of relationship with their parent until they approached adulthood.

In the law of England and Wales, it is possible to rectify a Trust Deed after its creation on the basis of an error. However, the applicant would need to show that the intention of the Settlor at the time of the Trust’s creation had some other intention to the one expressed in the Trust Deed itself.

It is always best to discuss in full any matters, beliefs and interpretations before finalising a Will or Trust as, for example, they can specify what references to children mean, rather than applying the general law.

Agri Advisor have a team of specialist Solicitors and Advisors who can assist with matters relating to Wills, Tax, Trusts and their administration.

Nicola Davies