Property after expiry of Discretionary Trust

Hi all,

Having some difficulty getting my head around this case and hoping someone can point me in the right direction.

My client and two other people were listed as both trustees and beneficiaries in a discretionary trust in respect of a property that used to belong solely to one of the parties. The trust deed stated that the trust was to come to an end on the death of one of the parties. After the death of the eldest party, it was understood by all concerned that the property would go solely to the other remaining party (not my client). There is a will, a written agreement and other evidence to back up that this was the intention all along.

However, the Land Registry was never updated at this point and following a fraud investigation a decision has been made that my client has been overpaid a significant sum of HB on the basis of 50% ownership, purely based on the Land Registry entry.

I’m trying to argue that she had no interest in the property as the agreement between the parties was always that the property would go the other party. Is the fact that the Land Registry was never amended fatal to this argument?

Is this a freehold property?  And is your client claiming HB for this property?

If so, the Council has probably decided that the client is excluded from HB under Reg 12(2)(c) as the “owner” as defined in Reg 2.  The definition catches anyone who could execute the transfer of legal ownership, including a person who is the legal owner but has no beneficial interest.  Until legal ownership is transferred to the final intended beneficiary, the existing legal owners remain excluded from HB in respect of that property.

Does that seem likely here?

If the client is not claiming for the trust property, then the issue is capital, and registered legal ownership of course does not solely determine beneficial entitlement to capital.  Sounds like there is ample evidence to demonstrate that the client has no beneficial entitlement to the capital value of the property.

Other possibility is that the client is claiming for the trust property but it’s leasehold, not freehold.  Then it gets very messy.  I won’t go into that unless you confirm that’s the situation!

Thanks for the prompt reply.

It’s leasehold, but the client is not claiming in respect of the property in question, so this is just a capital issue, which is what the HB decision actually states. I think I’ve misdirected myself a bit with trust issue, thinking I can’t rely on an argument in trust when the trust itself has come to an end.

So am I right in thinking the argument needs to be that there is no beneficial interest based on the evidence of the intentions of the original owner to transfer the property to the other party, despite the method involved (the trust), and the registered legal ownership as per the Land Registry?

Yes, I think that’s the argument.  I don’t think the trust can be wound up without transferring the trust property to the beneficiary: the trust didn’t end instantly upon the death, what the death did was to bring about the circumstances in which the trustees became obliged to wind up the trust.  Their delay in doing so does not deprive the beneficiary of the right to receive the property and it doesn’t entitle the trustees to any beneficial stake.  That’s how I would pitch it.

Thanks, very helpful.