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Trust/inheritance question

I have a question relating to the creation of trust following inheritance. Say two individuals ("X" and "Y") want to create an agreement whereby 5% of whatever is inherited from the other's paternal line goes to them. Just to be clear, X's father dies so Y gets 5% of the inheritance. Likewise when Y's father dies X will receive 5% of the inheritance. As there is no certainty of subject I see issues in creating a trust. Is there any way around this?

Thank you,
Lwyerup
Why do you need trusts law for this exchange at all? Wouldn't an ordinary contract suffice?
There is a certainty of subject matter problem. The "5%" has not been segregated from the rest of the estate. For example, if X inherited a house, some shares and some money; the trust could only work if Y simply took a 5% interest in everything which is probably not what the parties intended. Y could not point to the particular 5% which belongs to her and thus the trust would probably fail.
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Dandyflower
LOL makes me remember Harry Potter barrister.
Reply 4
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lwyrup
OP
The intention of each party is to get a 5% share of everything that is inherited from the other's paternal line. So that could be nothing, or a whole lot. There is no guarantee of if an inheritance will take place, it's only speculative, and neither party has any rights so far. Neither party can ascertain what, if anything, will be inherited. So that's where I see a certainty of subject issue. It's an unusual agreement, so would be cool to know if anything like this has ever happened before? Contract looks hopeful...
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mja
10
Original post by jacketpotato
There is a certainty of subject matter problem. The "5%" has not been segregated from the rest of the estate. For example, if X inherited a house, some shares and some money; the trust could only work if Y simply took a 5% interest in everything which is probably not what the parties intended. Y could not point to the particular 5% which belongs to her and thus the trust would probably fail.


Indeed. But isn't there also a logically prior problem of there being no trust property to constitute the trust, even if this were treated as a case of i) co-ownership in undivided 5%/95% shares? The expectation of an inheritance is a mere spes - it is not property that can be settled on trust.

The only practical way I can see to achieve this is for X and Y to enter into contracts to settle whatever each receives on trust X as to 95% and Y as to 5% (or vice versa). The contract must be supported by good consideration, else the rule in Re Pryce will prevent this working.

It should also be an express term of the trusts that the trustees are required, after the trust is constituted, to allocate the trust property in accordance with its value, realising assets as necessary, and then to hold a segregated 5% of the total in money or assets for X (or Y) absolutely.

So basically this only works if you do it in three stages:

i) contract to assign the inheritance to trustees on specified trusts
ii) constitute trust with inheritance and hold in undivided shares
iii) trustees exercise discretionary power to allocate fund as between beneficiaries, so ending the co-ownership

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