If so, the need for a power of attorney may arise at some stage.
A power of attorney is a legal document which allows a person (the donor) to give powers to another person (donee/attorney) to take certain actions on behalf of the donor.
There are two types of power of attorney:
a Power of Attorney
an Enduring Power of Attorney.
A Power of Attorney can only be created by a donor when he is not mentally incapacitated and understands what he is doing. It can grant a specific power-for example, to buy or sell property- or general powers to the donee. If the person becomes incapacitated, though, the Power of Attorney ceases.
An Enduring Power of Attorney(EPA) comes into being when a person becomes incapacitated.
It allows the donee to make personal care decisions on behalf of the donor when the donor becomes mentally incapacitated. Generally, anyone can be appointed an attorney (but there are exceptions eg a bankrupt or person under 18 years), but creating an enduring power of attorney is more complex than creating the general power of attorney.
How to create an enduring power of attorney
Creating an enduring power of attorney will involve a doctor and solicitor.
It can only come into effect when certain procedures have been followed.
The instrument (document) creating an enduring power of attorney must follow a certain format and must
include a statement from the doctor that the donor had the mental capacity to sign it at the time it was signed and understood the effect
contain a statement from the donor to the effect that he knew the consequences of creating the enduring power of attorney
include a statement from a solicitor that the donor had the capacity to make the enduring power of attorney, and that the donor was not acting under any duress or undue influence.
At least 2 people must be notified of the making of the enduring power of attorney, and these people cannot include the donee (attorney).
One of the notice parties must be a spouse or civil partner; if there is none, a child must be notified. If there is no child a relative must be notified.
The EPA only comes into force when it is registered. This involves an application to the Registrar of the Wards of Court in the High Court and this can only be made when the donor is, or is becoming, mentally incapable. There must be a medical certificate confirming that the donor is incapable of managing his affairs.
The High Court has extensive supervisory powers in respect of the EPA once it is registered. It can give directions about the management and disposal of the property of the donor, and it can revoke or cancel the EPA if it is satisfied that
the donor is mentally capable
fraud or undue pressure was used in the creation of the EPA
the attorney is unsuitable.
An EPA can give general powers, including personal care decisions, to the attorney, or specific powers. All decisions must be taken in the best interests of the donor and the donor’s family, and carers, must be consulted.
Personal care decisions includes things like where the donor should live, their dress and diet, who they should see and not see, and so forth.
A donor can revoke an EPA anytime before it is registered; however, if it is registered an application must be made to the Court to have it revoked.
An EPA ceases on death of the donor, and there are also some other limited circumstances where the enduring power of attorney will be terminated.
If your will is valid, there is a presumption of testamentary capacity
The test for testamentary capacity was set out in an 1870 case: Banks v Goodfellow
There are 3 aspects to testamentary capacity: a) you must understand you are making a will to dispose of your assets, 2) you must know the extent of your estate, 3) you must be able to give consideration to those who might expect to benefit from your will
Certain situations will give rise to a presumption of undue influence; generally where the relationship of trust and confidence existed eg doctor/patient
Your children are not entitled to any specific share of your estate, unlike spouses (see 26 above)
If you don’t make a will though your children (strictly “issue”) are entitled to 1/3
Your children can bring a legal action against your estate under section 117 of the Succession Act, 1965 for your failure to discharge your moral duty to them
The time limit for bringing such an action is 6 months; and it is a strict one
You can create a trust in your will
A trust is an equitable obligation binding someone (a trustee) to deal with your property for the benefit of beneficiaries whose identity may not be known yet
Your trustees will be the legal owners of your trust property but they must carry out the terms of the trust which you will decide
If your trust property is “real property” the trust must be evidenced in writing
A trust is not a legal entity so cannot be bound by a legal contract
The late poet and author, Dr. John O’Donohue, made his own will without the benefit of legal advice.
In December, 2011 Justice Gilligan in the High Court declared the will void for uncertainty and the entire estate passed to the testator’s mother.
Justice Gilligan, in his judgment, stated that
The Testator has unfortunately provided an illustration of exactly how a person should not make a will. While there can be little doubt but that the Testator was a man of considerable learning, the fact that he did not benefit from legal advice or assistance is evident from the will he drew up. Not only was it deficient in terms of the lack of certainty as to his intention but moreover he unwittingly made the classic error of having two of the intended beneficiaries act as witnesses to his signature, thereby depriving both as a matter of law from benefiting under the terms of the will.
As an introduction to his Judgment Judge Gilligan stated:
The making of a last will and testament is one of the most important tasks most people face and unfortunately it is one often approached in haste and without due consideration for its effect. A primary purpose of a will is to make a definitive statement regarding the disposition of a person’s assets on the event of their death. A properly drawn up will, prepared with the benefit of legal advice provided by a solicitor, should ensure that the testator’s wishes for the disposition of their estate will be fully complied with.
Courts can decide what the intentions of the testator were where there is doubt as to interpreting from the will the intentions of the testator and the Court’s duty is weighted by the presumption against intestacy.
However in this case the Court was unable to decipher the intentions of Dr. O’Donohoe, even though it held that the will was valid insofar as the requirements of section 78 of the Succession Act, 1965 were met.
Once the will was held to be void the entire estate passes to the mother of the deceased in accordance with section 68 of the Succession Act, 1965.
What appears to be one of the most boring topics imaginable has been the subject of closer scrutiny by those looking to put assets beyond the reach of creditors.
If you have significant debt problems and are looking to put assets out of reach of creditors, a trust can be useful.
But it is not foolproof and can be attacked and unravelled by creditors.
On the other hand you may have assets, no debt problems, but the person(s) who you would like to give those assets to may have debt issues.
And you are, understandably, afraid that those hard earned assets of yours will eventually end up in a great big pot for distribution to the creditors of your loved one.
This is the type of circumstance where a trust may be more usefully deployed…provided it is drafted correctly.
Anyway, here is the general background to trusts..
Trusts that can be used in drafting wills include:
a discretionary trust
a trust for sale
a Settled Land act trust
an interest in possession/fixed trust.
A discretionary trust fund is one where the only interest that potential beneficiaries have is the right to be considered for an appointment of property. The beneficiaries do not have an absolute right to the trust fund so do not have an interest in possession.
A discretionary trust is useful where
There are young children
The testator wishes to postpone mainstream capital acquisitions tax
The testator wants to adopt a “wait and see” approach to see how potential beneficiaries will turn out.
The trust fund, the beneficiaries, and the trustees must be set out in the will.
Here is an example:
In my Will where the context so admits
1. The beneficiaries shall mean and include:
a) My children
b) My grandchildren born within the trust period hereinafter defined.
2. The trust fund shall mean
a) The sum of €25,000 or the whole of my estate after the payment of my debts, funeral, testamentary, administration expenses and legacies and
b) All money, investments or other property accepted by the trustees as additions.
c) All accumulations (if any) of income directed to be held as an accretion to capital and
d) The money, investments and property from time to time representing the above.
The definition of the trust fund can be as narrow or as wide as the testator chooses. It can be a specific sum of money, a property, or the residue of the estate.
The trustees need to be defined also.
Here is an example:
I appoint Jim and Mary to be trustees (my trustees) of my Will and I appoint them trustees for all the purposes of the Settled Land Acts 1882 to 1890, the Conveyancing Act 1881, the Land and Conveyancing Law Reform Act 2009 and sections 57 and 58 of the Succession Act 1965.
Once the trustees, trust fund, and beneficiaries are defined the substantive trust must be created.
Here is an example of a substantive trust:
I give devise and bequeath the trust fund to my trustees upon trust either to retain or sell it on the following trusts:
Until the vesting day to pay the capital and any income arising from it to any one or more of the beneficiaries in such shares and at such times as my trustees in their discretion think fit without obligation to make payments to or for the benefit of all the beneficiaries or to require equality among those to whom payments are made and on the vesting day to divide what remains of the capital and accrued income equally among the beneficiaries then living without regard to payments already made to them.
Trusts for Sale
This trust is where the trustees are under an obligation to sell, invest the proceeds and hold the proceeds on the terms of the original trust.
This type of trust puts the trustees in control of the timing of any sale of trust property and they cannot be forced to sell, even if a beneficiary wants them to do so.
To incorporate such a trust in a will you need to first decide:
Who are the trustees and
What is the trust property.
Here is an example of a trust to sell:
I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever situate unto my trustees upon trust to sell the same and to hold the proceeds of such sale or my residuary estate for so long as the same shall remain unsold upon trust for my daughters Michaela Smith and Susan Sarandon in equal shares.
There is no power to postpone a sale in the wording above. If such as power is to be given then this will give that power:
I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever situate unto my trustees upon trust to sell the same with power in their absolute discretion to postpone the said sale and to hold the proceeds of such sale or my residuary estate for so long as the same shall remain unsold upon trust for my daughters Michaela Smith and Susan Sarandon in equal shares.
If a property is not held upon trust for sale then a power of sale must be given to the trustees in the will.
An ultimate default trust will also be needed to cover the situation where Michaela and Susan referred to above predecease the settlor/testator or the trust fails for want of a beneficiary. If this default trust is not inserted the danger is that the property will pass on intestacy.
Settled Land Act Trusts
The Settled Land Act, 1882 defines a “settlement” of land. A “settlement” is where real property is held by a succession of interests or where a minor has an interest in property.
Settled Land Act Trusts are very useful for the protection of a life tenant who has the power of sale under the Settled Land Acts.
An example of a settlement would be
To my wife for life and thereafter to my son Sheamus.
One of the benefits of this type of settlement is to fix the time at which an interest will vest in the remainderman (Sheamus above) and to postpone the payment of tax to sometime int eh future.
Fixed Trusts/Interest in Possession Trusts
A fixed trust is one in which the interests of various beneficiaries are fixed at the time of the creation of the trust.
They can be very useful to
Create an immediate interest in possession eg a life interest
Provide clarity as to who will get the trust property at a fixed time in the future
Allow a testator to postpone the vesting of an interest until a beneficiary reaches a certain age
Avoid discretionary trust tax provisions.
It is worth noting the distinction between a benefit vested in possession and a benefit vested in interest.
Eg of a benefit vested in possession:
I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever located to my daughter Emily.
Eg of a benefit vested in interest:
I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever located to my daughter Emily and on her death to my son John.
John has a benefit vested in interest.
Trusts and Taxation
You would be well advised to obtain taxation advice about using a trust because deemed disposals of property are said to have taken place for capital gains tax purposes at different times, depending on the wording of the trust instrument/will.
The Land and Conveyancing Law Reform Act 2009 introduced a simpler way of dealing with trust land which up to then had been governed by the Settled Land Acts, 1882-1890. The 2009 Act covers all trusts of land ,whether created by will or otherwise.
The Land and Conveyancing Law Reform Act 2009 also sets out the powers of trustees of land, procedures for resolution of disputes, jurisdiction of the Courts to vary and make other orders in relation to trusts, and offers protection for purchasers of trust land.
Trusts are incredibly useful legal devices which are typically used to
Ensure property is enjoyed by individuals in succession
Provide for beneficiaries whose identity may not yet be known.
Trusts can be broadly categorised into
Inter vivos (during the lifetime) trusts and
The focus of this piece will be on will trusts.
What is a Trust?
A trust is an equitable obligation, binding a person (who is called a trustee) to deal with the property over which he has control (which is called trust property) either for the benefit of persons (who are called beneficiaries) of whom he himself may be one, and any one of whom may enforce the obligation, or for a charitable purpose…, or for some other purpose permitted by law..(Source: Underhill)
The 3 Certainties
In order for a trust to be legally constituted it must have 3 certainties:
The subject matter of the trust must be certain (this imposes 2 obligations: the trust property must be certain and the interest to be taken by the beneficiaries must be certain)
The objects (beneficiaries) must be certain
The words used by the testator must have been imperative to show his (her) intention to create an obligation.
No particular form of words is required to create a valid trust but words like “wish”, “hope”, “desire” may cause a trust to fail as they are not sufficiently imperative.
If any of these certainties are “uncertain” or unclear, the trust will almost certainly fail.
Other Trust Requirements
Where the trust property is land/real property, the trust must be evidenced in writing.
If the trust is a will trust, the will must be valid and comply with the Succession Act, 1965.
There are also categories of trust which are void because they are contrary to public policy and further trusts which are voidable by the Courts on the grounds of fraud, mistake, undue influence, duress, misrepresentation.
Different Types of Trust
Before going on to look at will trusts in more detail it is worthwhile to take a briefe look at some different types of trust:
Trusts which arise by operation of law
These types of trust are either resulting or implied trusts-where the law presumes that the owner of property intended that it should be held in trust-or constructive trusts-where the Courts will impose a trust to satisfy the demands of justice in particular circumstances eg where a person in a fiduciary position makes a personal profit.
2. Statutory Trusts
The Family Law Act, 1995 and Family Law (Divorce) Act, 1996 allows Courts to order that property held by one spouse should be placed in settlement/trust for the other spouse and/or children.
Trusts Created for Purposes
A discretionary trust is one which is set up to gives the trust property to trustees with the power to the trustees to give the property as they see fit to members of a particular class of person.
3. Trusts for Sale
This occurs where trustees are given property on trust with the power to sell it or postpone a sale as they see fit.
4. Protective Trusts
This type of trust is usually for the benefit of family members and will have a restriction or condition attached eg “the income to Mick for life while he keeps out of betting shops.”
5. Revocable Trusts
A trust cannot generally be revoked but an exception is a trust for paying the settlor’s debts. This type of trust cannot be used to defeat the settlor’s creditors though.
The Parties to a Trust
There are usually 3 parties to a trust or settlement:
The testator/settlor (if the trust is created by a will he/she is referred to as the testator)
A trust which takes effect on death is a will trust.
A settlor/testator can himself be a trustee and/or beneficiary and creates the trust by deed, will, or by act. (However if he is a testator he clearly cannot be a beneficiary or trustee!)
The trustees are the legal owners of trust property and carry out the terms of the trust. The trustees have legal title to the property while the beneficiaries have equitable title.
Anyone who is not under a handicap can be appointed a trustee, including a beneficiary (but a conflict of interest may clearly arise).
Trust property is held by the trustees as joint tenants with the right of survivorhip arising on the death of a trustee. A completely constituted trust is one where a trust has been validly declared and the title to trust property has been transferred to the trustees.
You can have as many or as few trustees as you wish but the more trustees the more difficult it might be to manage the trust’s affairs.
Generally it is a good idea to have at least 2 trustees although one can perform all necessary duties.
Trustees are appointed by the settlor/testator in the first instance. Trustees can also be appointed by the original trustees, those who have statutory powers, and beneficiaries in some circumstances.
In a will trust the trustees and executors will usually be the same persons.
If trustees named in a will are unable to act or have disclaimed or if the settlor failed to appoint trustees then the Courts have the power to appoint trustees.
Both the Trustee Act, 1893 and the Succession Act provide for the appointment of trustees as circumstances dictate eg the predeceasing of the settlor by a trustee.
Trustees of a Minor/Infant Trust-Under Age Children
If a child inherits from a will, and there is no receipt clause in the will, or on intestacy there is nobody in whom the LPR (legal personal representative) can vest the asset or obtain a receipt.
57.—(1) Where an infant is entitled to any share in the estate of a deceased person and there are no trustees of such share able and willing to act, the personal representatives of the deceased may appoint a trust corporation or any two or more persons (who may include the personal representatives or any of them or a trust corporation) to be trustees of such share for the infant and may execute such assurance or take such other action as may be necessary for vesting the share in the trustee so appointed. In default of appointment the personal representatives shall be trustees for the purposes of this section.
(2) On such appointment the personal representatives, as such, shall be discharged from all further liability in respect of the property vested in the trustees so appointed.
This means that where minors inherit and no trustees have been appointed the LPR (legal personal representative) can appoint trustees for the purposes of section 57 and a trip to Court can be avoided. If the LPR does not appoint trustees he/she shall be a trustee for the purposes of this section of the Succession Act, 1965.
However it should be noted that this only applies to the share of a minor. Anybody else who is a beneficiary and is under a disability and cannot give a receipt to the legal personal representative will necessitate a trip to Court.
The powers of trustees appointed under section 57 of the Succession Act are set out in section 58 of the Act.
Section 58 also provides for a situation where a minor inherits land on intestacy ie there is no will:
Section 58 (2) Where an infant becomes entitled to any estate or interest in land on intestacy and consequently there is no instrument under which the estate or interest of the infant arises or is acquired, that estate or interest shall be deemed to be the subject of a settlement for the purposes of the Settled Land Acts, 1882 to 1890, and the persons who are trustees under section 57 shall be deemed to be the trustees of that settlement.
Duties and Powers of Trustees
Trustees have both statutory and non statutory powers and duties. Non statutory powers will be granted by the trust deed itself.
Powers and duties usually given to trustees include
The power and duty to collect and preserve the assets
The power to invest
The duty not to make a profit from the trust eg to buy trust property
To be impartial between beneficiaries
To account for and distribute the assets and keep proper accounts.
Trustees’ statutory powers derive from
The Settled Land Acts 1882-90
The Succession Act 1965
The Land and Conveyancing Law Reform Act, 2009
The Trustees Act, 1893.
Additional non statutory powers should be given to trustees such as, depending on the circumstances,
the power of sale
the power to invest
the power to run a business
the power to lend money and borrow money
the power to delegate
the power to insure property
the power to advance capital
the power to pay professional fees
the power to compromise action in claims.
A trustee who is appointed does not have to act-he can disclaim from the outset- but in a will trust if a person is appointed as executor and trustee and accepts the executorship he will be presumed to have accepted the trusteeship.
Once he accepts the job he cannot disclaim. He can retire however according to the terms of the trust.
A trustee can be removed from office either in accordance with the terms of the trust or if all the beneficiaries agree.
Differences Between Legal Personal Representatives and Trustees
An LPR (legal personal representative) can be appointed by will or by Court.
A trustee can be appointed by the settlor/testator, by Court, or by existing trustees.
Only one LPR is required; it is recommended that at least 2 trustees be appointed as 2 are necessary to give receipts for capital monies under the Settled Land Acts.
Receipts for land: one LPR is all that is required (unless it is for settled land) but all trustees must join in getting valid receipts.
An LPR cannot retire but a trustee can.
The powers of personal representatives and trustees are different; LPRs have wide powers deriving from common law, statute and the will.
Trustees derive their powers from statute and the will or trust deed.
If a personal representative dies before the administration of the estate a de bonis non grant is necessary; if a trustee dies his personal representative can take his place until a new trustee is appointed in his place.
Beneficiaries of a Trust
Beneficiaries are those for whom trust property is being held.
However the legal interests of those beneficiaries can vary greatly eg a life interest, an interest for a certain period, an interest subject to a condition etc.
Powers of Beneficiaries of a Trust
Beneficiaries of a trust can act collectively to terminate the trust. A beneficiary can also disclaim or sell his interest.
Some Common Misconceptions about Trusts
As a trust is not a legal entity per se it cannot hold assets or enter contracts or carry out any other legal formalities. Trust property is owned by the trustee(s) and it is the trustee(s) that has legal capacity.
A trust therefore cannot be bound by a legal contract and any contracts entered into by a trust are not legally enforceable.