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A passing comment about grandchildren’s inheritance does not create a trust.
The High Court (the “Court”) decision on appeal in Hilton v Cosnier [2018] EWHC 3728 (Ch), [2019] All ER (D) 54 (Jan) supports the trial judge’s decision at first instance and indicates that an oral statement about who would inherit a property was insufficient to create a trust.
Mr Walker had two daughters by his first wife; Jane Hilton and the respondent, Jacqueline Cosnier. He lived with his partner Ms Janet Overton from 1991 until 1994 when they separated as he had begun a relationship with another woman. In an effort to provide for Ms Overton after their separation, Mr Walker purchased another property in May 1994.
Ms Overton died in 2014 and so was not present at the trial but had prepared affidavit evidence before her death in respect of an Inheritance Tax issue. The affidavit included evidence about the property purchase and she stated that on 31 May 1994, Mr Walker said “I have bought [the property] for you to live in for the rest of your life but I am not giving it to you - it is to go to my grandchildren”. Mr Walker later gave his property to his daughter Jacqueline in August 2001 and died in 2002.
Mr Walker had four grandchildren; Jane’s two children, Thomas and George Hilton, and Jacqueline’s two children, Alice and Joanna. George Hilton, the appellant grandson, alleged that the oral statement made by Mr Walker was sufficient to constitute a settlement of the reversion in the property upon the grandchildren and therefore the property was held by his aunt, Jacqueline for the four grandchildren whilst she contended that there was no trust.
The Court found that the oral statement did not create a trust in favour of the grandchildren, especially as Mr Walker had never told his solicitor, daughters, or grandchildren that he had created a trust. In addition, when Mr Walker gave a beneficial interest in the property to Jacqueline, this was inconsistent behaviour in respect of the alleged trust and he had no reason at the time to create a trust in favour of his grandchildren.
The Court also found that the purpose of Mr Walker’s oral statement had been to explain to Ms Overton that although she could live in the property, she would not own it and may have referred to his grandchildren to explain this. The fact that he intended for his grandchildren to inherit the property after Ms Overton died made sense because he would expect to die before her but his daughters might not outlive her. Therefore, when Ms Overton died, the property would stay in the family by passing to his grandchildren.
The Court found that Mr Walker’s words, their context, and his behaviour with regard to the property did not support that he had intended to create a settlement of property in favour of his grandchildren. The statement also had no testamentary effect as it did not comply with the Section 9 of the Wills Act 1837.
This case is a reminder to be very careful when making what may appear to be throwaway comments about who will inherit your property or other assets when you are no longer around; as they may be taken to heart by the anticipated beneficiaries and result in a disagreement.
To discuss any of the issues raised above, please contact a member of the Private Client team on 01384 410410.