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02nd July 2020

“Sloppy” trust documents highlight risks of insufficient legal advice

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A recent high court case has highlighted the dangers of not taking legal advice when setting up trusts. In 2013 Mr and Mrs Bowack set up two discretionary trusts in the Isle of Man using standard form trust documentation. The trusts contained AXA bonds worth £650,000 and the Bowacks appointed themselves and their daughter as trustees, with their daughter as beneficiary.

The completed trust documents (which were provided by a financial adviser) contained a series of defects, including a missing date, a signature not being witnessed, and a failure to properly identify the AXA bonds as being the trust property.

AXA accepted Mr and Mrs Bowack’s money and issued the bonds, but later queried the validity of the trusts. After lengthy correspondence, Mr and Mrs Bowack had to resort to the courts, formally suing their daughter in order to demonstrate the validity of their plans. Judge Mathews in the High Court described the trust documents as “sloppy” and “profoundly worrying”.

Happily for Mr and Mrs Bowack, the court ultimately declared the trusts valid, despite the defects. However, with proper legal advice at the outset, a significant amount of time and legal fees would surely have been saved.

We have an experienced team of solicitors and trust managers. If you are considering setting up a trust for life insurance bonds, or any other type of trust, please speak to a member of our team using the details below.

Katherine Hague on 07741 311460 or click here to email Katherine.
Carolyn Bagley on 01908 247015 or click here to email Carolyn.