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Private Client | DFA Law Northampton Solicitors News

Settlements

In a recent case the issue for the High Court was whether the trustees of a settlement in which the deceased had an interest could offset liabilities outstanding from the deceaseds estate against the value of the settlement in order to reduce the settlements liability to inheritance tax. The deceased had died with virtually no assets. His liabilities were considerable and there was a net deficiency in his estate of £44,671.

The Court dismissed the trustees appeal holding that the liabilities could only be deducted from the assets which were liable to bear them

For advice on settlements contact info@dfalaw.co.uk.

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Right to Set Aside Transaction

The High Court recently held that a husband and wife were entitled to set aside a reversionary lease granted by them to their two daughters as part of an inheritance tax saving scheme. The applicants subsequently came to appreciate that under the scheme they would have no right to stay in their home from June 2017. If the daughters allowed them to stay on free of charge then the tax implications would deprive the scheme of its inheritance tax saving features since the applicants would be receiving a benefit. The application to set aside the lease and, if necessary, the trust deed was not opposed by the trustees or children.

The High Court decided to grant the application on the basis that when they entered into the lease the applicants did not know that the effect of it was to deprive them of their right to occupy the property in 2017. They would not have entered into the transaction if its effect on their rights of residence had been pointed out to them and the trust deed drawn up as part of the scheme was manifestly defective and did not coincide with the applicants intentions. They had made a significant mistake as to the legal effect of the lease and were entitled to have it set aside.

Our experienced private client team will not only draft the necessary documentation to achieve your tax saving aims but also explain its consequences to you. Contact info@dfalaw.co.uk for further details.

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Revocation of Grant of Probate

The Court of Appeal recently allowed an appeal against a decision revoking a grant of probate to the appellant. The deceased had been a successful solicitor and businessman and left a substantial estate. The appellant was the deceaseds second wife and the sole beneficiary and executrix under his will. The will had been drafted by one of the appellants daughters who had no legal experience or training.

The claimants (the children of his first marriage) had sought revocation of the grant of probate on the basis that the will had not been duly executed in accordance with the Wills Act 1837 because:

  • the witnesses did not intend to attest the signature of the deceased
  • the deceased did not know and approve the contents of the will.

The Court held that where a will contained the signatures of the deceased, witnesses and an attestation clause, there was a presumption that it had been duly executed unless there was the strongest evidence that the witness did not intend to attest to that which he saw the deceased sign. The judge had been entitled to decide that there were suspicious circumstances but the judges factual conclusion that the deceased did not know and approve of the contents was wrong in the circumstances of the case.

Such complications can be avoided by having your will professionally drafted. We can help. Contact our private client team on info@dfalaw.co.uk for further information on our comprehensive service.

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Business Property Relief

In a recent case which came before the Special Commissioners the appellant (the executor of the Eighth Marquess of Hertford) appealed against the Inland Revenues assessment of the percentage of the value of Ragley Hall that was eligible for business property relief under the Inheritance Tax Act 1984. Ragley Hall, its land, contents and the business of opening it to the public, had been transferred to the appellant as a gift by his father within seven years of his death, on condition that the living quarters be leased back to him.

The Inland Revenue had assessed only 78% of the value of the property as eligible for business property relief under the Act, this being the proportion of the interior open to the public, with the rest used for accommodation. The appellant contended that the whole value should be eligible for relief as a net asset of the business. He argued that as there was no provision within the Act for apportionment and the property was mainly used for business purposes its entire value should be eligible for relief.

The court held, allowing the appeal, that 100% of the value of the freehold was eligible for relief. The nature of the business and the part played in it by Ragley Hall led to the conclusion that it was a single asset and the section leased to the appellants father was part of that asset. Consequently, the whole building was indispensable to the business being carried on and it followed that the whole value was eligible for relief.

For further information on business property relief contact info@dfalaw.co.uk.

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Assurance by testator on commencement of partnership

In a recent case the appellant had sought an order that land be conveyed to him on the basis of an oral assurance by a testator that he would inherit the land on the testators death. This assurance was on condition that the appellant left his own family farming partnership and joined the testator in the new partnership. Their relationship subsequently deteriorated and they decided to abandon the partnership and to each farm separate areas of the land independently. The testator created a tenancy in favour of the appellant comprising part of the farm land and then made a will under which he left the freehold of the farm to the respondent.

The trial judge had found that the testator had no moral obligation to leave the farm to the appellant. The partnership had not worked out and the testator had treated the appellant fairly by giving him a tenancy of the major part of the land and not insisting upon rent. In dismissing the appeal, the Court of Appeal held that it was likely that each side had entered the partnership on the assumption that it would continue until death and did not expressly consider what would happen if things did not work out. Where there was a relevant unforeseen change of circumstances, it was legitimate for the assurance to be rescinded and replaced by a different arrangement that satisfied the equity that had arisen in favour of the appellant.

This case demonstrates the fragile nature of oral assurances. If you have not yet made a will, it is important that you do so in order to ensure that your wishes are documented. We offer a comprehensive drafting service. Just contact info@dfalaw.co.uk for further details.

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Disputes in Wills and Trusts

In a recent case, a deceased agreed with his sister that she would buy a property as his nominee with the aid of a mortgage as nominee. He took out life insurance to cover the mortgage and assigned it to her. He died, leaving everything by will to his children. The sister contended that the assignment of the policy was absolute and was designed to provide for her in the event of the deceaseds demise. The executor argued that the policy was subject to a trust requiring the sister to redeem the mortgage. The judge held that the assignment was on trust. There was evidence suggesting that the sister had known this to be the position. In any event her contention was unlikely to be right as it would have meant that the will was unnecessary since there would have been no assets. Furthermore the suggestion that the policy was to make provision for her, would have been odd since it only had value during its term.

Clear will drafting is absolutely vital to prevent your relatives disagreeing over interpretation of things that seem clear to you. Contact info@dfalaw.co.uk to ensure your wishes are carried out without dispute.

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Protective Trusts - What are They?

A protective trust is a trust that provides for beneficiaries who are spendthrifts: people to whom you might wish to leave money but you wish to manage the way that they use assets. An example might be a mentally disabled child. But it could as easily be a person who you feel may squander your inheritance. Protective trusts cannot be used to tax efficiently one's own assets: they are of little use in Inheritance Tax planning. Other vehicles are better to minimise legatees' liability for Inheritance or other tax.

info@dfalaw.co.uk will be glad to assist you in setting up a protective trust. Also, ask about tax planning issues relating to your will.

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Deeds of Variation and Inheritance Tax

In a case before the High Court the claimant (M) applied for rectification of a deed of variation of the will of her late husband. By the will, the whole estate passed to M with a gift over to the couples two children. Subsequently, a deed of variation was executed so as to set up a discretionary trust and utilise the testators nil rate band, thus avoiding excess liability to inheritance tax on the aggregated value of the two estates on Ms death. The deed of variation was defective. The deed created a trust fund of £200,000, which was the amount of the nil rate band at the date of execution of the deed of variation. However, the nil rate band at the date of the testators death was £154,000, which left a sum of £46,000 liable to inheritance tax.

The Court granted the application. The question was whether M had intended to save the maximum amount of inheritance tax by reference to the nil rate band in effect as at her husbands death, in which case it was not necessary to specify the exact sum, or whether she had intended to settle £200,000 on trust in the mistaken belief that this was the amount of the nil rate band, in which case rectification could not be justified. On the evidence, Ms intention had been to create a discretionary trust of an amount equal to the nil rate band at the death of her husband.

For tax efficient inheritance provision contact our private client team on info@dfalaw.co.uk.

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Human Rights

In a case which came before the European Court of Human Rights the applicant complained that the respondent state had discriminated against him as an adopted child in relation to his inheritance rights. The claimants adoptive father had inherited the estate of his mother as tenant for life. Her will had stated that the father should leave the estate to "a son or grandson of a lawful and canonical marriage", failing which the estate would pass to the remaindermen. The father married and he and his wife had adopted the claimant to whom he subsequently willed his mothers estate. Following the fathers death other members of the extended family applied for an order to declare the fathers will void and for his mothers estate to be passed to them as the remaindermen. They contended that as an adopted son, the claimant was not eligible to inherit the estate.

The court of first instance dismissed the action on the grounds that an adopted child had the same rights as a biological child and that the mother had not expressly excluded adopted sons from her will. That decision was overturned on appeal with the appellate court holding that it had to look at the la