Settled Estates

At times, there is a beneficiary named in a will that does not receive any direct capital, but rather is assigned a portion of the future income of the estate, this is known as a Settled Estate (the individual is said to have an interest in a “settled estate”).

A Settled Estate is the expression that applies to someone (a beneficiary) whose share of the estate is restricted to part (or all) of the income of the estate only.  They do not receive any capital.

This could be the proceeds of a business investment or rental income of a property investment, for example.  A particularly tricky task to document in advance, as you need to factor in the role & expectations of the Trustee and any other powers that the deceased has outlined in the will.  If not itemised correctly then restrictions to the investment for trusts are set out in the Trustee Act.

For example, a willmaker may leave the income that is accrued by the estate to their spouse, and then after the spouse passes the generated income is then passed on to the children.  The trustee is then obligated to invest the assets of the trust such that it protects the income due to the spouse and children.   The willmaker can articulate in the will how they wish the settled share to be invested, however if the will does not specify, it would be recommended the trustee enlist professional advice, as this area of law is exceedingly complex.

If you are planning on incorporating any income provisions into a will you should seek the advise of a Wills & Estates Lawyer – as it is a complex area of Estate Law.  You should consider such questions such as:-

  • How is the value of the investment preserved?
  • Who are you expecting to manage this investment?
  • How long do you think the estate be generating an income?
  • What happens when the capital is realized?
  • Has a Settled Estate provision been set out in a will already?

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