Drafting Trusts and Will Trusts

Review by John Dilger

The first edition of this book was a sensation. Mr. Kessler has not succumbed to the temptation to play safe with the new edition. His work retains its freshness and is remarkably readable - a triumph of draftsmanship in itself. This is an honest book with an apt title, for it is a treatise on how and why settlements and will trusts should be drafted rather than an encyclopaedia of precedents. The author gives us a precedent for a discretionary settlement, two forms of interest in possession settlement (in one the settlor has an interest in possession) and four accumulation and maintenance settlements. The wills are a discretionary trust will, a will giving a life interest to widow and a nil rate sum discretionary trust legacy. There is a full set of administrative provisions which can be used with minor variations with any of the 10 trust precedents. As a matter of policy Mr. Kessler does not provide appointments of new trustees, advancement resolutions, appointments and resettlements and variations of wills. The scope of the precedents is however wide enough to cover virtually all the common situations which a draftsman is called upon to draft a trust for a client and the very fact that the precedents are quite short and many use the same phraseology is in itself a commendation. The precedents are usefully reproduced on a companion diskette (with instructions) which proved on trial to be accurate and user friendly. Mr. Kessler sets out to demonstrate how a clear-minded approach can reduce considerably the verbiage of settlements and render them comprehensible to the intelligent reader, be it settlor or trustee, with a modicum of professional guidance. In the early chapters he sets out his trenchant views on drafting principles and style. This reviewer while not necessarily accepting all of them, is highly satisfied with the results and the author will no doubt be content with that.

The book also contains a treasure chest of gems. In explaining the reason why he has adopted his sets of precedents and rejected alternatives, Mr. Kessler gives us a lucid explanation of the relevant principles of trust law and an outline of the taxation of trusts. One might say to a student starting training in the trust field that a thorough knowledge of Kessler would enable him or her to answer the overwhelming majority of the problems that were likely to pass across the desk. He puts the rule against perpetuities in context in a couple of pages and his analysis of the distinctions between trusts and powers is masterly, avoiding impalement on the twin prongs of trust powers and beneficial powers.

Mr. Kessler writes from the point of view of the distinguished practising barrister he is. He rightly reminds those of us who practice in solicitors' offices that one instructing counsel is required to review his work and can be professionally negligent if he fails to spot a mistake. In other ways, however, some of the author's proposals, albeit key factors in simplifying the drafting, do not seem to accord with a lay client's likely wishes. Settlors and beneficiaries will welcome the simple language while mistrusting the lack of structure.

Mr. Kessler is wedded to overriding powers of appointment vested in the trustees and one is introduced in every draft. Such powers are well used in practice in appropriate circumstances but settlors are usually concerned to specify so far as possible the destination of the assets at the time of their gift. Testators are more easily persuaded of the utility of overriding powers as they hope their wills will not take effect for years to come, by which time the world may have changed. In an interest in possible settlement, for example, a settlor will usually wish for there to be a specific provision that the children of the life tenant will take when the life interest determines and it would have been helpful if the drafting difficulties of such class gifts could have been addressed. Families can become nervous of the exercise of discretions by trustees who might disinherit some family members entirely. In practice, parents do not often cut out black sheep. The same theme continues where in the context of possible bankruptcy the protective trust, which is enjoying a resurgence of popularity in the context of disasters at Lloyd's, is rejected in favour of a trustees' overriding power.

The drafts invariably give reversionary life interests to the widow of a life tenant though these life interests can be overridden by exercise of powers of appointment. Again, a settlor or testator is unlikely to wish to provide what applies to be a definite interest for a non-blood relative he or she may never meet. Mr. Kessler mistrusts a power given to a beneficiary to give a life interest to his widow, saying it may not be exercised, but surely the same applies to trustees' powers.

The author rightly regards the "A & M settlement" as his greatest challenge. His drafts, however, proceed on the assumptions that section of the Inheritance Tax Act 1984 permits first a discretionary power over income for beneficiaries under 25 when all relevant accumulation periods have expired and, secondly, that accumulations of income may be capitalised and added to the trust fund as a whole and not specifically to the share of the relevant beneficiary, thus opening up the possibility of a beneficiary over 25 obtaining a benefit from the accumulation. Mr. Kessler may well be correct in these assumptions, but a contrary view is certainly tenable. It is not, in the opinion of this reviewer, the role of a provider of precedents to lead those who follow his drafts into areas of risk. A more conservative approach is to be preferred even at the cost of bringing forward the attainment of interests in possession.

These criticisms must not be allowed to obscure the great merits of a book which should be in the library of any trust lawyer who has ambitions for his drafting to be considered precise, clear and well thought out.

Here is information on how to buy James Kessler's books.