Best laid tax plans tore family apart

Posted: 13th June 2013

RCJIn a painful illustration of the truism that even the best laid plans depend for their success upon the existence of good will between the parties, a bid by a multi-millionaire businessman to dispose of his wealth in a tax-efficient manner backfired and tore his family apart in a bitter High Court dispute.

The businessman had sought to minimise inheritance tax liabilities by placing assets worth approximately £2 million into a discretionary family trust for distribution after his death to his widow, his surviving son and daughter and the children of his oldest son who pre-deceased him.

Subsequent to his death, his son and daughter each took their quarter share of the trust assets but the son, in his capacity as a trustee of the settlement, would not consent to his mother taking her share. In applying to have the son removed as a trustee, lawyers representing his mother and sister contended that he was motivated by ‘spite and resentment’ and a suspicion that his mother had cut him out of her will.

The son denied those allegations, insisting that his stance was reasonable in the light of his duty to protect the trust fund and that his mother’s personal circumstances did not warrant the payment out to her of approximately £500,000.

Whilst making no findings of bad faith against the son, Mr Justice Arnold concluded that he should be removed as a trustee, opening the way for his mother’s share of the trust fund to be paid out to her forthwith. He concluded: "I consider that he (the son) has allowed himself to become unduly influenced by his concern over his mother’s will. He has allowed his judgment as a trustee to become clouded by matters which are not relevant to the exercise of his duties as a trustee. The proper course for this court is to remove him".