The High Court recently examined a long-running family dispute (Teixeira v Moaven) over the true ownership of valuable London properties within a deceased’s estate and, crucially, whether last-minute “Declarations of Trust” could be relied upon to reduce the estate value.
Amir Abbas Moaven (“Abbas”) died in 2012, leaving his estate equally to his wife, Gabriela, and their two children. However, more than a decade later, the estate remained largely unadministered due to disputes over its true value, specifically what should or shouldn’t form part of it.
At the heart of the issue were four properties purchased in his sole name. Shortly before his death, Abbas executed documents purporting to show that these properties were actually held on trust for himself, his brother, and their mother in equal shares. If valid, these declarations of trust would significantly reduce the value of the estate available to Gabriela and her children.
What Was the Dispute in Teixeira v Moaven?
The central legal question was whether the trust declarations reflected genuine pre-existing arrangements or if they were merely devices created shortly before death to defeat a 1975 Act claim by Gabriela and their two children.
The defendants argued that a long-standing informal family arrangement existed whereby assets were shared equally between Abbas, his brother, and their mother meaning that only one third would form part of his estate. Indeed, without the other two thirds the estate the estate may well be insolvent.
Gabriela, however, contended that Abbas was always the true owner of the properties, that the alleged family arrangement never existed and the declarations were designed to deprive her and her children of their rightful inheritance.
How Did the Court Decide the Trust Was a Sham?
The court found in favour of Gabriela.
The conclusions included:
- There was no credible evidence of any long-standing shared ownership arrangement
- The properties were purchased, controlled, and funded by Abbas alone
- The supposed contributions from family members were either unproven or insignificant
- Critically, the judge found that the Declarations of Trust were not genuine legal documents, but rather “shams” produced to give a false impression of ownership
- The purpose of the Declaration of Trust was to conceal assets to defeat 1975 claims brought by Gabriela and her children
What Happens When a Sham Trust Is Set Aside?
As the declarations were held to be shams, they had no legal or equitable effect. The properties remained entirely within Abbas’ estate which meant that the full value of those assets was available for claims under the Inheritance Act.
Under Section 10 of 1975 Act, if the Court is satisfied that assets have been deliberately disposed of in the 6 years prior to death with the purpose of defeating a 1975 Act claim, it has the power to bring those assets back into the estate.
Key Risks for Executors
The case also highlighted broader legal risks. Attempts to restructure ownership shortly before death can, and should, be challenged, a point of particular importance for professional executors and Independent Administrators.
Whilst personal representatives are usually expected to take a neutral stance where there is a dispute over estate assets, this judgment makes it clear that active steps may be required should the circumstances require it.
Personal representatives, whether appointed professionally, by will or under the intestacy rules, should not simply remain passive but must actively protect the estate, including investigating any indication that assets are being concealed or inappropriately diverted to fall outside the estate.
Courts will closely scrutinise “paper arrangements” unsupported by real evidence, and conduct aimed at defeating 1975 Act claims may trigger remedies under statutory provisions (although ultimately unnecessary in this instance).
The usual cost risks will of course apply and accordingly, care must be taken before litigation is commenced.
Key Takeaways
- Concealing assets: Courts will uncover the reality of ownership of assets
- Sham transactions fail: Documents created to deliberately mislead will be disregarded. Notably, any evidence of a ‘sham’ must be of a high standard (which was “well and truly met” by the Claimant in this instance (para 188 of the judgment)).
- Estate planning must be genuine: Artificial arrangements made to defeat claims carry significant legal risk and associated cost penalties. A stark reminder that any dispositions made within the 6 years prior to death, may be taken into account (Section 10 of the 1975 Act).
The case is a clear warning. Last-minute attempts to alter ownership, particularly in a family context, are unlikely to succeed without clear, consistent, and credible supporting evidence. Courts will look beyond the paperwork to the underlying truth.
If you require any support with estate planning or inheritance dispute resolution, please don't hesitate to get in touch.