9-15 Topics PDF

LAW TRAINING CENTRE (KENT) LTD Topic 9: Grants of Wills, Probate and Administration Representation Version: 2 Introduction This reading explores the intricate domain of probate and es...

LAW TRAINING CENTRE (KENT) LTD Topic 9: Grants of Wills, Probate and Administration Representation Version: 2 Introduction This reading explores the intricate domain of probate and estate administration, delving into topics 9 to 11. These topics are fundamental to understanding the legal processes involved in handling a deceased person's assets and liabilities, obtaining a grant of representation, and navigating the complexities of Inheritance Tax. The need for a grant of representation A ‘grant of representation’ is a legal document issued by the Court that establishes the authority of an individual to oversee the administration of a deceased person's estate. This grant is a prerequisite for initiating the process of estate administration. However, it's important to note that not all situations require a grant of representation. The Administration of Estates (Small Payments) Act 1965 permits payments and asset transfers to the deceased's estate without the need for a grant, up to a specified maximum amount (currently £5,000 as of 20th September 2023). This Act primarily applies to registered societies and public employers. There exist three main types of grant of representation: 1. Grant of probate: Issued when the deceased left a valid will. It enables the executor to carry out the deceased's wishes as outlined in the will. 2. Grant of letters of administration: Granted when the deceased did not leave a will (intestate). It appoints an administrator to distribute the estate according to intestacy rules. 3. Grant of letters of administration with the will annexed: Necessary when there is a will, but it's considered invalid. This grant allows an administrator to manage the estate. The term ‘grant of representation’ serves as an umbrella term encompassing all three types mentioned. Relevant provisions of the non-contentious probate rules Rule 20 of the Non-Contentious Probate Rules (NCPR) 1987 outlines the hierarchy of persons entitled to obtain a grant of probate when the deceased left a valid will. Those higher in the list take precedence over those lower down. Page 1 LAW TRAINING CENTRE (KENT) LTD Topic 9: Grants of Wills, Probate and Administration Representation Version: 2 For those who passed away on or after 1st January 1926, the order of priority for obtaining a grant of probate is as follows: (a) The Executor: This is the person named in the deceased's will to execute their wishes. (b) Residuary Legatees or Devisees in Trust: Individuals holding assets in trust for others. (c) Other Residuary Legatees or Devisees: Those with a share in the remaining estate, including the Treasury Solicitor when representing the Crown. (d) Personal Representative of a Residuary Legatee or Devisee: Appointed if the residuary legatee or devisee does not wish to take on the role. (e) Other Legatees or Devisees or Creditors: Individuals named in the will, including creditors. (f) Personal Representative of Other Legatees or Devisees or Creditors: Appointed if the legatee, devisee, or creditor is unwilling or unable to act. In case multiple individuals belong to the same category, a grant can be issued to any of them without notifying the others. Disputes between such individuals will be resolved by a district judge or registrar. Living beneficiaries take precedence over personal representatives of deceased beneficiaries within the same category. Adults are favored over minors. For those who died intestate on or after 1st January 1926, Rule 22 NCPR 1987 governs the granting of administration. Priority is given to beneficiaries with a beneficial interest in the estate, including the surviving spouse, children, parents, siblings, grandparents, uncles, aunts, and other relatives. If no one has a beneficial interest, the Treasury Solicitor can claim bona vacantia on behalf of the Crown. Application procedure for a grant of representation Obtaining a grant of representation is generally straightforward. Probate jurisdiction lies with the High Court and is categorised into contentious and non- contentious business. Contentious matters typically involve disputes over will validity, entitlement, or the discovery of a later will. County Courts handle contentious probate matters when the estate's net value is below £30,000. To avoid litigation, solicitors specialising in contested estate matters may adhere to the Association of Contentious Trust and Probate Specialists (ACTAPS) Code of Conduct. This code provides guidelines on various issues, such as will preparation, letter of claim requirements, obtaining medical records, and assessing a deceased's capacity. For non-contentious matters, obtaining probate can be done through postal applications or online via the HMCTS online application service. Application forms include PA1P (for estates with a will) or PA1A (for estates without a will). Page 2 LAW TRAINING CENTRE (KENT) LTD Topic 9: Grants of Wills, Probate and Administration Representation Version: 2 Each application must be accompanied by a statement of truth, certifying the grounds for the application as per NCPR 1987, SI 1987/2024, Rule 8(1). As of January 11, 2021, certain less complex probate applications must be submitted online. The online application process generates a legal statement and typically eliminates the need for supplementary affidavit evidence. However, under certain circumstances, additional affidavit evidence may be required to resolve doubts about the will's execution, physical damage, or the use of a copy. Common types of affidavit evidence include: 1. Affidavit of due execution: Required when there are doubts about the will's proper execution and attestation. 2. Affidavit of plight and condition: Needed to explain physical damage to the will that may indicate revocation. 3. Affidavit in support of a copy: Necessary when the original will is lost, and a copy needs to be proven. Regarding the Inland Revenue account, if an Inheritance Tax (IHT) form (IHT400) is needed, it must be prepared and submitted to the Inland Revenue. The returned form, receipted with the Inheritance Tax paid, is then submitted to the Court. If an IHT205 form is prepared, it should be submitted directly to the Court. Fees [20/09/23] for obtaining grants of representation vary depending on the estate's value: 1. Estates under £5,000: No fee is payable. 2. Estates over £5,000: Fees are £215 for personal applications to the Court and £155 for applications via a solicitor. An additional charge of 50p applies for each extra sealed copy of the grant required. In conclusion, probate and estate administration involve intricate legal procedures, including obtaining grants of representation, which are essential for overseeing the distribution of a deceased person's assets. Understanding the rules, hierarchy, and application processes outlined in the Non-Contentious Probate Rules is crucial for efficient estate management and compliance with legal requirements. Page 3 LAW TRAINING CENTRE (KENT) LTD Topic 9: Grants of Wills, Probate and Administration Representation Version: 2 Probate and estate administration: Procedures, valuation, and taxation Introduction Probate and the administration of estates are complex legal processes that involve the validation of a person's authority to manage the assets and liabilities of a deceased individual. This reading delves into the multifaceted aspects of probate and estate administration, covering topics 9 to 11, including the need for a grant of representation, relevant provisions of the Non-Contentious Probate Rules (NCPR), the application procedure for obtaining a grant of representation, valuation of assets and liabilities, the definition of excepted estates, and the methods of funding the initial payment of Inheritance Tax (IHT). It also explores the burden and incidence of Inheritance Tax on estates. The need for a grant of representation A grant of representation is a critical document issued by the Court, establishing the authority of an individual to administer a deceased person's estate. This grant is essential to initiate the process of estate administration. However, it is not required in all cases. Under the Administration of Estates (Small Payments) Act 1965, certain organisations, such as registered societies and public employers, can make payments and transfer assets to the deceased's estate without obtaining a grant, provided the value does not exceed a specified maximum amount. There are three main types of grants of representation: probate, letters of administration, and letters of administration with the will annexed. The type of grant needed depends on whether the deceased left a valid will, an invalid will, or no will at all. These grants establish the legal authority of the person responsible for estate administration. While there is no strict time limit for issuing a grant, delays can lead to complications, such as the court appointing an executor or administrator to expedite the process and avoid prolonged delays in estate administration. Relevant Provisions of the Non-Contentious Probate Rules (NCPR) The NCPR outlines the rules and procedures for obtaining grants of representation. Rule 20 of the NCPR 1987 lists the hierarchy of individuals entitled to apply for a grant of probate when a valid will exists. This hierarchy includes the executor, residuary legatees or devisees, other legatees or devisees, personal representatives, and creditors. Page 4 LAW TRAINING CENTRE (KENT) LTD Topic 9: Grants of Wills, Probate and Administration Representation Version: 2 Similarly, Rule 22 of the NCPR 1987 defines the order of priority for obtaining letters of administration when there is no valid will. Surviving spouses, children, parents, siblings, grandparents, uncles, aunts, and creditors are among those eligible to apply. These rules help establish a clear framework for determining who has the legal authority to administer the deceased's estate and in what order. Application procedure for a grant of representation Obtaining a grant of representation involves a standardised application process. The actual process differs slightly for personal applications and those made by legal practitioners. For legal practitioners, they can apply for a grant of representation using postal application forms (PA1P or PA1A) or an online application service provided by HMCTS. These applications must be supported by an appropriate statement of truth, setting out the grounds for the application, as required by Rule 8(1) of the NCPR 1987. The online application service was rolled out in stages, and certain applications by practitioners can only be made by post. Since January 11, 2021, certain less complex probate applications must be made online. Supplementary affidavit evidence may be required in cases of doubt regarding the will's execution, damage to the will, or when only a copy of the will is available. Valuation of assets and liabilities The valuation of the deceased's assets and liabilities is a crucial step in estate administration. This process typically begins by requesting valuations from relevant institutions holding the assets. These valuations must reflect the assets' open market value as of the date of the deceased's death, as per the Inheritance Tax Act 1984. Inquiries into gifts made by the deceased are directed towards family members or professional advisers who might have knowledge of these transactions. Debts owed by the deceased are deductible from the estate's gross value, reducing the inheritance tax liability. Page 5 LAW TRAINING CENTRE (KENT) LTD Topic 9: Grants of Wills, Probate and Administration Representation Version: 2 The response time to obtain asset and liability values varies, so keeping track of correspondence and maintaining organised records is essential. The gathered information is then recorded in the Inheritance Tax form to calculate the gross and net value of the estate. Methods of funding the initial payment of inheritance tax Several methods are available to fund the initial payment of Inheritance Tax: 1. Sale of assets: Some assets, like chattels or quoted shares, can be sold before obtaining a grant and used to pay the tax if they generate sufficient funds. 2. Bank loan: Personal representatives may secure a bank loan with an undertaking to use estate proceeds to repay it. Interest paid may be eligible for income tax relief. 3. Loan from a beneficiary: Beneficiaries can lend money from their own resources or inheritances to cover the tax, potentially with lower or no interest. 4. Direct payment to HMRC: If life insurance policies are involved, the insurance company may pay the required tax directly to HMRC if the funds are due to the estate. Page 6 LAW TRAINING CENTRE (KENT) LTD Topic 9: Grants of Wills, Probate and Administration Representation Version: 2 Burden and incidence of inheritance tax The burden of Inheritance Tax refers to who is responsible for paying the tax, while the incidence determines on which part of the estate the tax liability falls. Section 109 of the Senior Courts Act 1981 requires the High Court to withhold a grant of representation until HMRC certifies that the inheritance tax has been paid or that no tax is payable. Liability for inheritance tax falls on four categories of persons: 1. Personal representatives: They are liable for all inheritance tax on the deceased's free estate, including property held jointly and transferred property. 2. Trustees of an existing settlement: They are responsible for tax on settlement assets. 3. Persons entitled under the Will or intestacy rules: Beneficiaries are liable for tax on their entitlements. 4. Beneficiaries under a pre-existing discretionary trust: They are liable for tax on income or assets they receive from the trust. 5. Inheritance tax may be paid out of estate assets or the residuary estate: If the Will includes provisions for gifts to be ‘free of tax’, the recipient bears no tax burden. Any unpaid tax may be reclaimed by the personal representatives from the recipient. Conclusion Probate and estate administration involve intricate legal processes, from obtaining a grant of representation to valuing assets and liabilities, handling inheritance tax, and determining tax liability. These processes ensure the orderly distribution of a deceased individual's assets and the fulfilment of their tax obligations. Proper organisation, documentation, and adherence to legal rules and regulations are essential for efficient and legally compliant estate administration. Page 7 LAW TRAINING CENTRE (KENT) LTD Topic 10: The Administration Wills, Probate and Administration of Estates Version: 2 Introduction The administration of a deceased's estate is a meticulous process that must adhere to prescribed rules and procedures. Central to this process is the role of personal representatives, who play a crucial role in ensuring that the deceased's affairs are settled correctly and in accordance with the law. This reading delves into the various duties and liabilities of personal representatives during the estate administration, their legal protections, the sale of assets, and the steps involved in distributing the estate to entitled beneficiaries. Duties and liabilities of personal representatives The administration of estates is governed primarily by the Administration of Estates Acts 1925 and 1971, which lay down the foundation for the duties and liabilities of personal representatives. Personal representatives are individuals or entities appointed by the deceased's will or by law to handle the affairs of the deceased's estate. Their primary responsibilities include: 1. Debt collection: Personal representatives are tasked with collecting all debts owed to the estate, ensuring that any money owed to the deceased is recovered. 2. Asset control: They must obtain possession or control of all assets that constitute the estate, ensuring that nothing is overlooked. 3. Debt settlement: Personal representatives are responsible for paying off all debts and liabilities of the deceased, including administration costs and taxes. 4. Investments: They are required to convert unauthorized investments into authorised ones, aligning the estate's investments with legal guidelines. 5. Distribution: Finally, personal representatives must distribute the estate assets in line with the terms of the will or the laws of intestacy, ensuring that beneficiaries receive their rightful shares. Personal representatives also possess powers conferred by the will and statutory duties, such as selling assets, appointing trustees, settling claims, and more. These powers must be exercised in good faith for the estate's best interests. To safeguard themselves from potential claims under the Inheritance (Provision for Family and Dependents) 1975 Act, personal representatives should refrain from distributing the estate for at least six months from the grant's issuance. This allows potential claimants to come forward. Some argue that waiting ten months is prudent, given the four-month period claimants have to serve proceedings after issuing a claim. Page 1  Topic 10: The Administration LAW TRAINING CENTRE (KENT) LTD of Estates Wills, Probate and Administration Version: 2 Protection from unknown creditors is achieved by advertising for claimants under section 27 of the Trustee Act 1925. This notice is published in the London Gazette and a local newspaper, providing claimants with a timeframe to submit their claims. However, this protection only extends to unknown claims. Sale of assets In many cases, personal representatives opt to sell most of the deceased's assets, excluding those specifically bequeathed in the will. The sale generates a cash sum, forming the residuary estate to be distributed among beneficiaries. However, personal representatives should consult beneficiaries regarding asset sales. Section 41 of the Administration of Estates Act 1925 empowers personal representatives to appropriate assets to beneficiaries, provided all beneficiaries consent. Valuation of the asset in question is necessary in such cases. Land sales require consultation with beneficiaries under the Trusts of Land and Appointment of Trustees Act 1996. Distribution of the Estate Distribution involves legal and equitable rules: Legal rules of apportionment: These rules apply when a will leaves a life interest in the residuary estate. The Apportionment Act 1870 governs the allocation of income received after death, considering periods both before and after death. This applies even if the will excludes these rules. Equitable rules of apportionment: These rules seek fairness between life tenants and remaindermen. Assets like land or property must be sold to protect the life tenant's interests. Income from these assets is apportioned between the capital and income, maintaining fairness. How assets are transferred depends on the type, and personal representatives must obtain receipts from beneficiaries for legacies paid. After paying legacies and settling expenses, personal representatives will consider the distribution of the residue, accounting for estate expenses, including reasonable funeral expenses. Page 2 LAW TRAINING CENTRE (KENT) LTD Topic 10: The Administration Wills, Probate and Administration of Estates Version: 2 Conclusion Administering a deceased's estate is a complex and demanding process that requires personal representatives to fulfil their duties diligently. These duties encompass debt collection, asset control, debt settlement, investments, and distribution of assets. To protect themselves from potential claims, personal representatives follow legal procedures, such as waiting periods and advertising for claimants. The sale of assets and the equitable rules of apportionment ensure that the interests of beneficiaries are maintained. Finally, the distribution of the estate concludes this intricate process, with personal representatives ensuring the settlement of expenses and liabilities before distributing assets to the rightful beneficiaries. Estate administration is a meticulous undertaking that necessitates both legal knowledge and ethical responsibility. Page 3 LAW TRAINING CENTRE (KENT) LTD Topic 11: Claims made Wills, Probate and Administration against an Estate Version: 2 Introduction Family provision is a contentious and complex facet of wills and estates law, raising profound questions about the tension between an individual's freedom to distribute their assets as they see fit and the societal expectation that certain individuals should receive a portion of an estate. The crux of this issue is embodied in the Inheritance (Provision for Family and Dependants) Act 1975 (IPFD), which grants English and Welsh courts the authority to make orders concerning estates only if the deceased was domiciled in England or Wales at the time of their death. This legislation does not apply to individuals who were domiciled in Scotland or Northern Ireland, which each has its own distinct legal framework governing family provision. Domicile, a crucial determinant in family provision cases, refers to the legal concept that links an individual to a particular jurisdiction based on their closest personal connections. There are three types of domicile: domicile of origin, domicile of choice, and domicile of dependency. While domicile can be a complex legal issue, in general terms, a person is typically considered domiciled where they maintain their permanent residence. It is the responsibility of the applicant to establish that the deceased was domiciled in England or Wales at the time of their death. Furthermore, family provision applications are subject to strict time limits. Generally, applications must be submitted within six months from the date on which ‘representation with respect to the estate of the deceased is first taken out’, as stipulated in section 4 of the IPFD Act. This timeframe seeks to balance the need for efficient estate distribution with providing potential applicants with an adequate window to learn about the death and decide whether to apply. It also allows time for negotiations between applicants and estate beneficiaries. Eligible applicants The IPFD Act designates several categories of applicants who can seek family provision, as outlined in section 1: (a) Spouse and registered partners: The surviving spouse or registered partner of the deceased may apply, provided they can demonstrate the existence of a valid marriage or registered partnership at the time of the deceased's death. This category also includes parties to voidable marriages not annulled at the time of death and judicially separated spouses, unless separation terms dictate otherwise. Following legislative changes, same-sex spouses are also eligible applicants under this category. Page 1  Topic 11: Claims made LAW TRAINING CENTRE (KENT) LTD against an Estate Wills, Probate and Administration Version: 2 (b) Former spouse: A former spouse who has not remarried may apply for family provision unless a court order issued during the divorce proceedings prohibits such claims. (c) Cohabitants: An applicant in this category must have cohabited with the deceased as if they were a married couple for at least two years before the death. The applicant must have lived with the deceased at the time of death without any interruption in cohabitation during the two-year period preceding the death. The parties must have conducted their relationship as husband and wife, as platonic relationships do not qualify for claims. Decisions regarding such cases should consider the significant judgments in Stack v Dowden (2007) UKHL 17 and Kernott v Jones (2011) UKSC 53, which revolve around beneficial interests in former cohabitations. (d) Children: This category includes legitimate, legitimated, adopted children, and even children conceived but unborn at the time of death. Notably, an adopted child cannot claim against the estate of their natural parent. While adult or married children can apply, the court typically refrains from making provisions for self-sufficient, able-bodied children. (e) Child of the family: These applicants are individuals for whom the deceased assumed a parental role at any point in time. To qualify, the applicant must show that the deceased provided substantial financial support to meet their reasonable needs immediately before the death. This support should not have been part of a commercial arrangement. The definition of ‘immediately before death’ has been a subject of debate in court decisions, with an emphasis on the broader, ongoing arrangement rather than the precise conditions at the time of death. This category allows for claims by individuals who were being financially maintained by the deceased. Grounds for family provision Under section 1(1) of the IPFD Act, a person can apply for family provision ‘on the ground that the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for the applicant’. This establishes a two-stage process for determining reasonable financial provision. Page 2 LAW TRAINING CENTRE (KENT) LTD Topic 11: Claims made Wills, Probate and Administration against an Estate Version: 2 1. Stage one - Objective Assessment: The court first examines whether the will or intestacy has failed to provide reasonable financial provision for the applicant. This assessment is objective, focusing on whether the provision made for the applicant is reasonable. The court does not consider whether the testator's actions were reasonable but rather whether the provision itself is reasonable. 2. Stage two - Determining Reasonable Provision: If the court determines that reasonable financial provision has not been made, it proceeds to determine what constitutes reasonable provision. Two standards are used: one for surviving spouses and another for all other applicants. Surviving spouse standard: This standard requires the court to provide financial provision equivalent to what would be reasonable for a surviving spouse, regardless of whether it is necessary for maintenance. It was introduced to ensure that a surviving spouse receives at least the same amount as a divorced spouse would. The court considers the provision that would be granted in divorce proceedings. Maintenance standard: For other applicants, the court assesses what would be reasonable in the circumstances for their maintenance. The court must strike a balance between subsistence-level support and what may be considered reasonably desirable for the applicant's general welfare. Section 3(1) of the IPFD Act outlines several factors the court must consider in family provision cases, including the financial resources and needs of the applicant, other potential applicants, beneficiaries, the size of the estate, any disabilities, and other relevant matters. The court is no longer required to set specific upper or lower limits on the provision it can order, as determined by the Inheritance and Trustees' Powers Act 2014. In conclusion, family provision in wills and estates law navigates the intricate balance between an individual's testamentary freedom and society's expectation of financial protection for specific beneficiaries. Domicile, time limits, eligible applicants, and the grounds for family provision all contribute to a complex legal landscape. Courts apply a rigorous, two-stage process to determine the reasonableness of provision, guided by the surviving spouse or maintenance standards and an array of relevant factors. This area of law continues to evolve, reflecting societal changes and legal developments. Page 3 LAW TRAINING CENTRE (KENT) LTD Topic 12: Inheritance Tax Wills, Probate and Administration Version: 2 Introduction Inheritance tax, a pivotal component of modern fiscal policy, enables the government to claim a portion of the assets left behind by deceased citizens. The Inheritance Tax Act 1984 provides the foundation for this tax, stipulating that it is due at a rate of 40% on an estate's value exceeding £325,000, commonly known as the nil rate band. The essence of inheritance tax lies in the concept of ‘transfers of value’, encompassing any transfer that reduces the value of the donor's estate. However, certain transfers, termed ‘exempt transfers’, remain immune from inheritance tax. These encompass most transfers between spouses and relatively small gifts within a specified annual limit. For ‘chargeable transfers’, tax is assessed on the cumulative sum of all such transfers within seven years preceding the taxpayer's death. Nevertheless, taper relief adjusts the tax rates for transfers made between three and seven years before death. Transfers made more than seven years before the taxpayer's death escape inheritance tax. This topic delves into the intricacies of lifetime and posthumous transfers, including exemptions, reliefs, and provisions to combat tax avoidance. Lifetime transfers Inheritance tax may apply to transfers made during one's lifetime, with exemptions and reliefs available in specific scenarios. Non-exempt transfers fall into two categories: 1. Lifetime chargeable transfers chargeable immediately (LCT): These typically encompass transfers into discretionary or accumulation trusts that do not qualify as Potentially Exempt Transfers (PETs), as detailed below. Tax is payable at the time of the transfer, albeit at half the death rate. If the transferor passes away within seven years of the gift, the recipient will be liable to tax at the rates prevailing on the date of death. 2. Potentially exempt transfers (PET): This category includes most non-exempt lifetime transfers. No tax is levied at the time of the transfer, and if the donor survives seven years post-transfer, no tax becomes payable. However, if the donor dies within this seven-year period, the gift transforms into a chargeable transfer, subjecting it to inheritance tax. The tax calculation is based on the gift's value at the time it was made, with the rates applicable at that time. Page 1  Topic 12: Inheritance Tax LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 In cases involving former PETs or LCTs, the donor's death within seven years of the transfer renders it liable to tax. The value of the gift is usually assessed at the date of the LCT or former PET. However, if the property's value has decreased between the gift date and the death date (e.g., a depreciated shareholding), the lower value may be used, provided it involves non-tangible, non-moveable property and a wasting asset. Section 160 of the Inheritance Tax Act 1984 underscores that property's value for inheritance tax purposes should mirror what it could reasonably fetch in an open market sale at a specific time. This emphasizes that the market value is contingent on circumstances prevailing at that time. Taper relief is another relief applicable to former PETs and LCTs if the transferor passes away more than three years post-transfer. In such cases, the rate of taper relief applied to the tax liability is as follows: 3-4 years post-transfer: 20% 4-5 years: 40% 5-6 years: 60% 6-7 years: 80% Example of Taper Relief: Suppose David passed away in June 2015, bequeathing his £5,000,000 estate to his daughter Susan, with no exempt portions except the nil rate band. In October 2011, David gifted £400,000 to Susan for property acquisition. Aside from the available annual exemptions, he deducted the unused nil rate band of £325,000, leaving a chargeable transfer of £69,000. At the 40% tax rate, this would yield an initial inheritance tax payment of £27,600. Since the gift fell between 3 and 4 years before his death, taper relief reduced the inheritance tax to £22,080. For partially exempt transfers, sections 36 to 42 of the IHTA 1984 dictate how the tax liability should be distributed when part of the property passes to an exempt beneficiary, and part passes to a non-exempt beneficiary. Page 2 LAW TRAINING CENTRE (KENT) LTD Topic 12: Inheritance Tax Wills, Probate and Administration Version: 2 Transfers on death Section 4 of the IHTA 1984 deems a transfer by the deceased of all estate assets immediately before death. Subsequently, any former PETs and LCTs are treated as chargeable transfers, potentially subjecting them to inheritance tax. However, section 171(1) of the 1984 Act emphasises that changes in the estate's value due to the death should be considered as if they occurred before death. This means that changes in market value resulting from the death's impact are taken into account. Special valuation rules are in place for quoted and unquoted shares, often involving specialised valuation firms. In cases where two or more individuals pass away simultaneously, and it's impossible to ascertain who died first, section 4(2) of the IHTA 1984 stipulates that they are deemed to have died at the same time for inheritance tax purposes, preventing double taxation. Inheritance tax also considers income that accrued before death but is paid afterward. Exemptions and reliefs Numerous exemptions and reliefs exist to mitigate the impact of inheritance tax. Some significant exemptions include: Spouse exemption: Immediate gifts between spouses are exempt from inheritance tax, regardless of the donor's domicile status. The exemption also applies to registered civil partners and same-sex spouses under the Marriage (Same Sex Couples) Act 2013. Normal expenditure out of income: A lifetime exemption that applies to immediate gifts and transfers into settlements, provided they originate from income rather than capital, and the donor's standard of living remains unaffected. Gifts to charities: Gifts to charities, including organizations like the National Trust and universities, are exempt, provided they are immediate, unconditional, and meet specific conditions. Annual exemption: Donors can make gifts in any tax year of up to £3,000 that are exempt from inheritance tax. Any excess is taxable, and unused exemptions can be carried forward for one year. Gifts in consideration of marriage: Exemptions are available for gifts made before or during marriages and civil partnerships, with specific limits based on the donor's relationship to the recipients. Page 3  Topic 12: Inheritance Tax LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 Small gifts: Donors can make gifts of up to £250 to any single recipient per tax year without incurring inheritance tax, although exceeding this limit triggers taxation on the entire gift. These exemptions, coupled with careful tax planning, offer individuals opportunities to reduce their inheritance tax liability while ensuring their assets are passed on as intended to beneficiaries. Understanding inheritance tax reliefs: Strategies and implications Introduction Inheritance tax (IHT) is a crucial component of modern tax policy, and while certain assets may not be exempt from this tax, various reliefs and provisions exist that can significantly reduce the overall tax liability. This reading delves into the key reliefs available under the Inheritance Tax Act 1984 (IHTA 1984), their eligibility criteria, and the implications for taxpayers. Agricultural property relief Agricultural property relief is applicable both during an individual's lifetime and on their death. This relief offers the possibility of a substantial reduction, either 50% or 100%, of the ‘agricultural value’ of agricultural property. Agricultural property encompasses agricultural land, pasture, woodland, and associated structures such as farmhouses and cottages, provided they are integral to agricultural land or pasture. The ‘agricultural value’ is determined as the property's value under the assumption of a perpetual covenant restricting its use to agriculture. This means that any potential enhanced value due to development opportunities is disregarded. However, such property might qualify for business property relief. To be eligible for agricultural property relief, the property typically must have been: 1. Occupied by the transferor for agricultural purposes for the two years immediately preceding the transfer. 2. Owned by the transferor for seven consecutive years preceding the transfer and used for agricultural purposes. Full 100% relief is granted if the transferor was the owner or tenant in possession or had the right to vacant possession within twelve months. In other cases, 50% relief is available. Page 4 LAW TRAINING CENTRE (KENT) LTD Topic 12: Inheritance Tax Wills, Probate and Administration Version: 2 It is important to note that for lifetime transfers (whether LCTs or PETs), the relief is only granted if the recipient (the person receiving the gift) owns the property from the date of the gift until the death of either the transferor or the recipient, if earlier. Business property relief Business property relief is another relief available either during an individual's lifetime or upon their death. This relief is linked to ‘relevant business property’, which includes businesses or interests in businesses, unquoted shareholdings, and certain land or buildings associated with a business. Depending on the nature of the property, 100% or 50% relief may be claimed. Full 100% relief is available for businesses, interests in businesses, or shareholdings that allowed the transferor to control a company. Additionally, minority shareholdings in unquoted companies, where the transferor held more than 25% of voting power, also qualify for 100% relief. A 50% reduction is granted for other unquoted shareholdings, shareholdings that granted control, and land, buildings, machinery, or plant primarily used for a business in which the transferor was a partner or used for a business controlled by the transferor. For business property relief, the typical qualifying period of ownership is two years immediately preceding the transfer. The rules regarding LCTs and PETs mirror those of agricultural property relief. Quick succession relief Quick succession relief is solely applicable on death. Section 141 of the IHTA 1984 outlines that if an individual dies within five years of a transfer to them, whether during their lifetime or posthumously, a reduction in the tax payable on the later death may be attainable. The relief percentage is as follows: 100% if death occurs within a year 80% if it happens between one and two years 60% if it occurs between two and three years 40% if it takes place between three and four years 20% if it happens between four and five years This reduction in tax payable is calculated based on the inheritance tax paid on the original transfer. Page 5  Topic 12: Inheritance Tax LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 Importantly, the relief applies irrespective of whether the deceased still owned the property transferred to them within the five-year timeframe. Woodlands relief Woodlands relief is applicable solely upon death and is related to growing timber. This relief becomes relevant when agricultural property relief is not applicable to the land in question. To qualify for this relief, the deceased must have been beneficially entitled to the land for five years before their death or have acquired entitlement within that five-year period without involving money or money's worth. This relief must be claimed within two years of the death. The recipient of the woodland can choose to have its value deducted from the deceased's estate for inheritance tax purposes. However, this relief is conditional on the timber remaining undisposed of. Disposal of the timber constitutes a chargeable event, subjecting it to inheritance tax based on its value at the time of disposal, not the date of death. Taper relief Taper relief provides a tax reduction if the individual making the gift survives seven years after the gift. The tax will be fully exempt if it was a PET (Potentially Exempt Transfer) and subject to only half the official rates if it was an LCT (Lifetime Chargeable Transfer). However, it's crucial to understand that taper relief reduces the inheritance tax attributable to the chargeable transfer and not the value of the chargeable transfer itself. Therefore, taper relief is only applicable if inheritance tax is payable on the chargeable transfer. If the chargeable transfer, taking into account cumulative totals at the gift date, does not exceed the available Nil Rate Band, no inheritance tax is payable, rendering taper relief inapplicable. Anti-avoidance provisions The Inheritance (Provision for Family and Dependants) Act 1975 contains anti- avoidance provisions designed to prevent individuals from giving away property during their lifetime or entering into binding contracts to leave property by will, thereby reducing the net estate available for family provision. In cases of evasion, the court may order the recipient of any gift to repay the value of the gift, less any inheritance tax paid. The court can also order the donee to provide money or property to facilitate family provision under the Act, effectively treating it as part of the ‘net estate’. Page 6 LAW TRAINING CENTRE (KENT) LTD Topic 12: Inheritance Tax Wills, Probate and Administration Version: 2 To trigger such an order, the court must ascertain that, less than six years before the deceased's death, they made a disposition with the intention of defeating a family provision application and that full valuable consideration was not given by the donee or any other party. Furthermore, the court must determine that exercising these powers would facilitate family provision under the Act. In conclusion, understanding inheritance tax reliefs and their implications is essential for effective estate planning. These reliefs provide opportunities to reduce tax liability and ensure that assets are distributed according to the individual's wishes while complying with the legal framework governing inheritance tax. Page 7 LAW TRAINING CENTRE (KENT) LTD Topic 13: Wills and Gifts Wills, Probate and Administration Version: 2 Introduction We will refer back to this scenario throughout these materials. In this scenario, a will instruction meeting has been arranged by Mr. Robarts, a private client lawyer from the law firm where you work. You have been asked to join this meeting as part of your training to gain experience in handling such meetings, with the expectation that you will eventually conduct similar meetings independently. The clients, Khanie and Nikita Sterling, are a married couple in their 30s with three children: Charlotte (aged seven), David (aged five), and Nigel (aged six months). They express a desire to possibly have more children in the future. Khanie works as a policeman, while Nikita is a teaching assistant in a primary school. They acknowledge that they should have created wills earlier but admit that life's demands often took precedence. Their wishes for their wills are relatively straightforward. They want their estates to pass to each other in the event of either of their deaths. Upon the death of the surviving spouse, they want their estate to be distributed equally among their children. However, they are both of the opinion that inheriting wealth at a young age is not desirable. Therefore, they wish for their children to inherit their respective shares when they reach the age of 25. To simplify matters further, should one of their children pass away before turning 25, they want that child's share to be distributed among the surviving siblings and not extended to any grandchildren. Although they acknowledge that they might revisit this provision in the future, this is their current preference. Additionally, Nikita and Khanie express concerns about the possibility of the surviving spouse changing their will after the first one passes away. They want to ensure that their children's inheritance does not go to a particular female police constable whom Khanie had shown interest in during a Christmas party. Both Khanie and Nikita agree that neither of them should have the unilateral ability to modify their will without the mutual agreement of the other or providing prior notice. Mr. Robarts suggests the possibility of creating a flexible life interest will trust to address their concerns. This trust would allow the surviving spouse to benefit from the deceased spouse's share during their lifetime while safeguarding the remainder for the children. However, Khanie and Nikita are adamant that they do not wish to establish trusts. Instead, they want their estates to pass directly to the surviving spouse, who can enjoy them during their lifetime, with the assurance that whatever remains will be inherited by their children when they reach the age of 25. Page 1  Topic 13: Wills and Gifts LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 Mirror wills, mutual wills, and gifts: Understanding estate planning strategies Introduction Estate planning is a vital aspect of personal financial management, ensuring that an individual's assets are distributed according to their wishes after their passing. Within the realm of estate planning, mirror wills and mutual wills serve as common approaches for couples seeking to express their intentions cohesively. Additionally, understanding class gifts and class closing rules adds depth to the estate planning process. This reading delves into the concepts of mirror wills, mutual wills, and gifts in estate planning, highlighting their significance, differences, and implications. Mirror wills Mirror wills are a popular choice among couples, such as spouses, civil partners, or cohabiting partners, who share similar testamentary wishes. These wills are typically prepared simultaneously, with the provisions closely mirroring each other, hence the term ‘mirror wills’. Importantly, both parties remain free to amend their wills at any time. The advantages of mirror wills are numerous. Firstly, they streamline the will preparation process, as the initial will serves as a template for the second will. This reduces the time and cost associated with drafting two separate wills. However, when preparing mirror wills, it is essential to review the second will carefully, adjusting any generic references or familial relationships to accurately reflect the testator's intentions. Mutual wills Mutual wills address a different facet of estate planning, particularly when financial ties and complex arrangements are involved. These wills allow parties with similar testamentary intentions to agree not to alter or revoke their wills after the first of them passes away. In essence, upon the death of one party, the survivor is bound by a constructive trust that restricts their ability to change the agreed provisions. The doctrine of mutual wills is best exemplified in the case of Stone v Hoskins , where it was established that the survivor of mutual wills cannot alter their will after benefiting from the agreed provisions. The crucial element in mutual wills is the agreement between the parties, which must be evident and not inferred. Page 2 LAW TRAINING CENTRE (KENT) LTD Topic 13: Wills and Gifts Wills, Probate and Administration Version: 2 However, mutual wills come with complexities. They do not account for changes in circumstances that may occur after the first testator's death, such as remarriage or the birth of additional children. The assets within the trust are not ring-fenced, allowing the survivor to dispose of them as they see fit, potentially leading to disputes in the future. Implications of mutual wills The implications of mutual wills are significant. The constructive trust imposed on the survivor does not consider post-death changes in circumstances, which can lead to disputes and challenges. The commingling of trust assets with those acquired later in life can complicate asset distribution. Moreover, it is not always evident from the face of the wills that mutual wills have been executed, potentially leading to misunderstandings. Due to these issues, some firms avoid preparing mutual wills and prefer the creation of will trusts, which offer more clarity and certainty regarding asset distribution. Gifts: Class gifts and class closing rules Class gifts involve giving property to a group of beneficiaries who meet a general description, such as ‘the children of X’ or ‘the children of X who attain the age of 21’. The size of each beneficiary's share depends on the number of beneficiaries fulfilling the description, which may not be known until a later date, often after the testator's death. Class closing rules address the issue of delay by determining an earlier date for the closure of the class. Beneficiaries born after this date are not entitled to a share. These rules vary based on the type of gift, but they are subject to a contrary intention expressed in the will. Without such a contrary intention, the rules apply. Section 33 of the Wills Act 1837, as substituted by the Administration of Justice Act 1982, stipulates that if a gift is made to the testator's children or remoter issue, and a member of the class dies before the testator, leaving surviving issue, these issues become part of the class, taking their parent's share. However, these rules do not apply to other class gifts, and a testator's clear intention is required to exclude their operation. Page 3  Topic 13: Wills and Gifts LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 Immediate vested and deferred vested gifts In the context of class closing rules, vesting refers to when an asset or share becomes ascertainable by determining the number of beneficiaries within the class. Immediate vested gifts are those whose assets or shares can be ascertained when the class closes. Deferred vested gifts involve assets or shares that will vest in beneficiaries upon reaching a certain age or condition. For example, if a survivor's child is aged 25 or older when the survivor dies, the class will close, and the shares will vest immediately. However, for younger beneficiaries, the shares will vest once they reach the specified age, ensuring that assets are distributed appropriately. Conclusion In the realm of estate planning, mirror wills and mutual wills serve different purposes and come with their own set of advantages and complexities. Understanding the implications of these wills is crucial for effective estate management. Additionally, class gifts and class closing rules add layers of complexity to the distribution of assets, necessitating clear intentions in wills. Estate planning is a nuanced and intricate process, and individuals are advised to seek legal counsel to navigate its complexities effectively. Contingent gifts and their implications in wills Introduction Wills play a vital role in the transfer of assets and wealth from one generation to the next. In the intricate landscape of wills and estate planning, contingent gifts serve as a mechanism by which a testator can ensure that their assets are distributed in accordance with their wishes under specific conditions. This reading delves into the nuanced world of contingent gifts within wills, examining the types of contingencies, rules governing them, and how they affect the distribution of assets. Additionally, it explores the legal implications of various scenarios involving contingent gifts. Page 4 LAW TRAINING CENTRE (KENT) LTD Topic 13: Wills and Gifts Wills, Probate and Administration Version: 2 Contingent gifts: Understanding the basics A contingent gift in a will is a provision specifying that a beneficiary's entitlement to an inheritance is dependent on certain conditions being met. These conditions can range from age contingencies to other life events such as marriage, civil partnerships, or even gender recognition changes. Contingent gifts serve to ensure that assets are distributed according to the testator's intentions, while also accounting for the uncertainties that may arise due to the passage of time or changing circumstances. Immediate contingent gifts Immediate contingent gifts come into play when a will includes a contingency that beneficiaries must fulfill before obtaining a vested interest in their share. An essential concept in immediate contingent gifts is the closing of the class. The class refers to a group of beneficiaries who share a common contingency, such as reaching a certain age. The class will close if, at the time of the testator's death, at least one beneficiary within the class has fulfilled the specified contingency. For instance, consider the case of Looking and Jemal's will. If Charlotte or any other child (in case Charlotte predeceases the survivor) is aged 25 or older at the time of the survivor's death, the class closes. However, if none of the beneficiaries meet the contingency, the class remains open until the first beneficiary fulfils it. Subsequently, those living beneficiaries who later fulfil the contingency also become entitled. Deferred contingent gifts Deferred contingent gifts come into play when the distribution of assets to beneficiaries is contingent on an intervening event, such as the death of a life tenant. In these cases, children born before the life tenant's death and before another contingency (e.g., age) is met are counted within the class. However, the scenario becomes more complex if Charlotte has another child after David reaches the age of 25. In such a case, the newly born child would be excluded from the class. Early closing of deferred class gifts can also occur if a prior interest fails, such as when the life tenant predeceases the testator, accelerating the gift to the class as an immediate class gift. Page 5  Topic 13: Wills and Gifts LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 Gifts to children by description The rules governing contingent gifts to children also apply to gifts to other relations by description, regardless of whether they are related to the testator. These descriptions may include phrases like ‘my brothers’, ‘my sister's children’, ‘my nephews’, and so forth. If these rules do not align with the testator's intent, the drafter must include language that clearly indicates a contrary intention. Effects of changing legal landscape The legal landscape surrounding contingent gifts has evolved over time, particularly in response to changes in societal norms and legislation. Notably, the Marriage (Same Sex Couples) Act 2013 and the Gender Recognition Act 2004 have had significant implications for the interpretation of marriage-related terms and gender recognition in wills. These changes highlight the importance of ensuring that wills drafted post-legislation explicitly reflect the testator's wishes regarding these matters. Treatment of legitimate, legitimated, and illegitimate children Contingent gifts in wills often involve the classification of children based on legitimacy, legitimation, or illegitimacy. The rules vary depending on when the will was made and whether the testator expressed a contrary intention. a. Will/Codicil Made Before 1970: Common law considered gifts to ‘children’ as referring only to legitimate children. b. s1(1) Family Law Reform Act 1987: Gifts made on or after April 4, 1988, include both legitimate and illegitimate children, unless a contrary intention is expressed in the will. c. s15 Family Law Reform Act 1969: Gifts made between 1969 and April 4, 1988, followed similar provisions as in FLRA 1987, subject to a contrary intention. Adopted children The position of adopted children in wills is governed by the Adoption Act 1976 and the Adoption and Children Act 2002. These acts establish that an adopted child is treated as the legitimate child of their adoptive parents. Gifts to ‘my brother's children’, for example, would include children adopted by the brother before the class closes. Page 6 LAW TRAINING CENTRE (KENT) LTD Topic 13: Wills and Gifts Wills, Probate and Administration Version: 2 Conversely, if a natural child of the testator has been adopted by someone else, that child would be excluded from the class. Contingent gifts and scenarios The following scenarios involving contingent gifts illustrate their practical implications: 1. Harvey Specter's will: Harvey left his estate to Jessica's three children, Louis, Michael, and Donna, as joint tenants on trust to take equal shares when they reach the age of 25. The class will close when the first beneficiary reaches 25. 2. Louis's death at 24: If Louis dies at 24, leaving two children, his share would pass to his surviving children. 3. Addition of a fourth child: When Louis reaches 21, his mother has a fourth child, Rachel. When Louis reaches 25, the number of beneficiaries benefiting from Harvey's estate will depend on whether Rachel was born before or after Louis turned 25. 4. Gender recognition: The Gender Recognition Act 2004 affects wills made after April 4, 2005. Wills should be drafted to reflect the testator's wishes regarding gender recognition changes. 5. Surrogacy and fertilization treatment: Statutes address parentage in cases of assisted reproduction and surrogacy. Drafting a will that explicitly includes or excludes such scenarios is advisable to avoid later disputes. Failure of gifts: Lapse and commorientes rule Contingent gifts can also fail under specific circumstances. Two crucial concepts in this context are the lapse of gifts and the commorientes rule. 1. Lapse of gifts: A gift lapses if a beneficiary predeceases the testator or fails to satisfy a specified contingency. However, substitutional gifts can prevent complete failure, ensuring the property passes to an alternative beneficiary. Page 7  Topic 13: Wills and Gifts LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 2. Commorientes rule: This statutory presumption determines the order of deaths when multiple individuals with interrelated gifts die simultaneously or under circumstances where the order of death is uncertain. The commorientes rule helps prevent the failure of gifts in such situations. Conclusion Contingent gifts within wills provide a mechanism for testators to ensure that their assets are distributed in accordance with their intentions while accounting for various contingencies. Understanding the rules governing contingent gifts and their legal implications is essential for estate planning and will drafting. Clear communication with clients regarding their wishes is paramount to avoiding potential disputes in the future. Moreover, legal practitioners must stay updated with evolving legislation that may impact the interpretation of wills and contingent gifts in particular. Ademption and the forfeiture rule: Legal implications and reforms Introduction Ademption is a legal concept in the field of wills and estates that deals with the failure of specific gifts when the subject matter of the gift no longer exists in the testator's estate at the time of their death. This can occur for various reasons, including the sale, destruction, or change in the nature of the asset. Additionally, the Forfeiture Rule pertains to the consequences of criminal acts, particularly murder or manslaughter, on a person's entitlement to inherit under a will. This reading explores ademption, the Forfeiture Rule, and recent reforms in the context of UK law. Ademption: The failure of specific gifts Ademption occurs when a specific gift, such as ‘I give my shares in BT plc to my nephew George Andrews’, cannot be fulfilled because the subject matter of the gift no longer exists in the testator's estate at the time of their death. This can happen due to several reasons: 1. Sale or gift: If the testator sells or gives away the specific asset mentioned in the will before their death, the gift is considered adeemed, and the beneficiary will not receive it. Page 8 LAW TRAINING CENTRE (KENT) LTD Topic 13: Wills and Gifts Wills, Probate and Administration Version: 2 2. Destruction: If the property is destroyed during the testator's lifetime, the gift is also considered adeemed. For example, if a testator leaves a specific gift of a piano, and the piano is destroyed in a fire before their death, the gift fails. 3. Change in nature of asset: Sometimes, the nature of an asset may change, but if it remains substantially the same, ademption does not occur. For instance, in Re Slater , when stock in Lambeth Waterworks was replaced by Metropolitan stock, the gift was considered adeemed because it involved a substantial change. 4. Contract to sell the asset: If the testator enters into a contract to sell the specific asset before their death, the gift will fail for ademption. However, if the contract was executed before the will, the beneficiary is entitled to the proceeds of the sale (Re Calow ). Ademption by subsequent contract also applies if the contract is conditional and the condition is met after the testator's death. In Re Sweeting (Deceased) , contracts for the sale of a house and yard were conditional, but they were completed after the testator's death. 5. Assets sold by deputy or attorney: Ademption can become a complex issue when a deputy or attorney manages a testator's property due to their failing health, leading to the disposal of assets without knowledge of the testator's will. The Court of Protection has addressed this issue and recommended making a statutory will during the testator's lifetime to prevent conflicts. The Forfeiture Rule The Forfeiture Rule deals with the consequences of criminal acts, particularly murder or manslaughter, on a person's entitlement to inherit under a will. The principle behind the rule is that a person should not profit from their own conscious and deliberate crime. The rule applies to the perpetrator of the crime and those claiming property through them. 1. Murder: Under the Forfeiture Act 1982 (FA 1982), individuals convicted of murder are subject to automatic forfeiture, meaning they cannot inherit from the victim's estate. However, the court has discretion to grant relief from forfeiture in exceptional cases (Dunbar v Plant ). Page 9  Topic 13: Wills and Gifts LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 2. Manslaughter: The Forfeiture Rule was extended to cases of manslaughter in In the Estate of Hall [1911–1913], and the FA 1982 provides for relief from forfeiture in such cases. Reforms: The Estates of Deceased Persons (Forfeiture Rule and Succession Law) Act 2011 (EDP(FRLS)A 2011) To address perceived unfairness resulting from the application of the Forfeiture Rule, the EDP(FRLS)A 2011 was enacted for deaths occurring on or after 1 February 2012. This Act preserves the inheritance rights of a person's descendants if that person disclaims an inheritance or is disqualified from receiving it due to the forfeiture rule. 1. Intestacy: Under s1 EDP(FRLS)A 2011, if a person entitled on intestacy is disqualified by the forfeiture rule, the property will devolve under the intestacy rules as if that person had died immediately before the intestate. This allows the disqualified person's issue to inherit. 2. Wills: When a beneficiary in a will disclaims a gift, s2 EDP(FRLS)A 2011 treats that person as if they had died immediately before the testator, subject to the will's provisions. This includes substitution provisions and other relevant clauses. Recent cases Several recent cases highlight the court's exercise of powers to grant relief under the EDP(FRLS)A 2011: 1. Re Ninian (Deceased) : Relief was granted to a widow whose husband chose assisted suicide in Switzerland due to a terminal illness. The court considered factors such as compassionate intent and the husband's strong-willed character. 2. Re Amos (Deceased) : Relief was granted to a woman who caused her husband's death in a road traffic accident. The court considered factors such as comments during sentencing and her involvement in renovating the family home. 3. Challen v Challen : Relief was granted to a woman who killed her abusive husband with a hammer. The court considered the history of abuse and the circumstances surrounding the crime. Page 10 LAW TRAINING CENTRE (KENT) LTD Topic 13: Wills and Gifts Wills, Probate and Administration Version: 2 Conclusion Ademption and the Forfeiture Rule are crucial aspects of estate and succession law in the UK. Ademption deals with the failure of specific gifts when assets no longer exist in the testator's estate. The Forfeiture Rule prevents individuals convicted of murder or manslaughter from benefiting from their crimes. Recent reforms, such as the EDP(FRLS)A 2011, aim to provide relief in exceptional cases and address perceived injustices. The courts have exercised their powers judiciously in granting relief under these reforms while considering the specific circumstances of each case. These legal principles and reforms ensure fairness and equity in the distribution of assets and inheritance. The Legal Nuances of Interpreting and Validating Wills under Section 15 of the Wills Act 1837 Introduction The execution and interpretation of wills play a pivotal role in ensuring that an individual's testamentary wishes are carried out after their demise. The Wills Act 1837 in the United Kingdom provides a legal framework for the creation and execution of wills. One critical aspect that can often be overlooked but holds immense importance is Section 15 of the Wills Act 1837. This section pertains to the role of attesting witnesses, potential conflicts of interest, and issues related to the certainty, legality, morality, and public policy aspects of wills. This reading delves into the intricacies of Section 15, highlighting its critical components, relevance, and implications, while also discussing the role of extrinsic evidence and various rules of construction in the interpretation of wills. Section 15 of the Wills Act 1837: Witness and beneficiary conflict Section 15 of the Wills Act 1837 addresses a situation where an attesting witness to a will is also a beneficiary or the spouse or civil partner of a beneficiary. In such cases, the gift to that beneficiary becomes void, but the will as a whole remains valid. It is essential to note that the critical moment for testing the validity of Section 15 is the date of the execution of the will. Thus, if a witness marries or forms a civil partnership with a beneficiary after the will's execution, it does not affect the gift. Page 11  Topic 13: Wills and Gifts LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 This provision serves as a safeguard against undue influence or potential fraud, ensuring that the witness's testimony is not influenced by their vested interest in the will. However, due to the social-distancing restrictions imposed during the COVID-19 pandemic, more wills have been executed at home without the oversight of legal professionals. Therefore, it is imperative that individuals preparing wills, along with the accompanying covering letter or will execution instructions, emphasise the significance of this issue to avoid inadvertent errors and disputes. Uncertainty in will provisions Another crucial aspect of wills pertains to uncertainty, both in terms of the subject matter and the beneficiary. Section 15 does not directly address uncertainty, but this remains a critical consideration in will interpretation. Subject matter uncertainty can render a gift void if the subject or property cannot be ascertained with certainty, even after applying the usual rules of construction. A classic case, Boyce v Boyce (1849), exemplifies this scenario, where a testator's will left houses to trustees for his wife's lifetime and allowed his daughter to choose one house after her death. Since the daughter predeceased the testator, it became impossible to determine which houses the surviving daughter was entitled to, leading to the gift's failure for uncertainty. Similarly, vague bequests like ‘some of my best table linen’ or ‘a handsome gratuity’ have been declared void for uncertainty in cases like Peck v Halsey (1726) and Jubber v Jubber (1839). However, the introduction of s21 of the Administration of Justice Act 1982 has allowed extrinsic evidence to ascertain the testator's intention in such cases. Contrary to public policy Wills containing conditions that contravene public policy, are immoral, or involve illegal acts are rendered invalid. The court cannot enforce gifts conditional on an individual committing an illegal or immoral act or getting divorced, as this goes against public policy principles. The court will invoke the ‘contrary to public policy’ doctrine if it feels a gift should be void on these grounds. Page 12 LAW TRAINING CENTRE (KENT) LTD Topic 13: Wills and Gifts Wills, Probate and Administration Version: 2 Extrinsic Evidence and s21 AJA 1982 Section 21 of the Administration of Justice Act 1982 (AJA 1982) has significantly impacted the rules concerning the admission of extrinsic evidence in will interpretation. It outlines three conditions under which extrinsic evidence can be admitted: 1. Meaningless language (s21(1)(a)): If any part of the will is meaningless on its face, extrinsic evidence can be admitted. This applies in cases where the testator may have used ambiguous or coded language. 2. Ambiguity on the face (s21(1)(b)): This condition allows the court to admit extrinsic evidence when the language used in any part of the will is ambiguous. For example, if a will contains phrases like ‘my money’ or ‘my effects’ without further context, extrinsic evidence can be used to resolve the ambiguity. 3. Ambiguity in light of surrounding circumstances (s21(1)(c)): This condition relates to latent ambiguity, where extrinsic evidence (excluding evidence of the testator's intention) can be admitted if it shows that the language used in the will is ambiguous considering the surrounding circumstances. These provisions allow the court to consider extrinsic evidence, including evidence of the testator's intention, to interpret the will effectively. Notably, s21(2) AJA 1982 explicitly permits the admission of direct evidence of the testator's intention in certain circumstances, which is a significant departure from previous legal standards. Interpretation of a will The interpretation of a will is a complex process that requires careful consideration of the language used, the context in which it was written, and the testator's intentions. There are two broad approaches to interpreting wills: 1. Traditional approach: This approach, as articulated in Perrin v Morgan (1943), focuses on discerning the expressed intentions of the testator based on the language used in the will. The court is tasked with interpreting the words as they appear in the document, without attributing intentions that cannot be fairly deduced from the wording. Page 13  Topic 13: Wills and Gifts LAW TRAINING CENTRE (KENT) LTD Wills, Probate and Administration Version: 2 2. Liberal Approach (Marley v Rawlings, 2014): Lord Neuberger's liberal approach suggests that wills should be interpreted similarly to commercial contracts. It emphasizes identifying the intention of the testator by considering the natural and ordinary meaning of words, the overall purpose of the document, and the surrounding circumstances. This approach leans towards a more holistic understanding of the testator's intentions. Rules of construction and challenges Interpreting wills involves applying various rules of construction to navigate the uncertainties or ambiguities in the language used. Some key principles include: Usual meaning: Words are given their ordinary grammatical meaning, as per Perrin v Morgan (1943). Secondary meanings: If a word carries a secondary meaning due to a definition clause in the will, statutory rule, or surrounding circumstances, that meaning is adopted. Words with multiple meanings: In cases of ambiguity, the court selects the most probable meaning. Technical words and phrases: Words with technical legal or scientific meanings are presumed to carry those meanings. Custom: If the testator belonged to a group with a unique meaning for certain words, that custom is considered. Punctuation: Punctuation, capitalisation, and blanks are examined to Considering the document as a whole: The court examines the entire will to understand the testator's intentions, avoiding the addition or omission of words unless specific conditions, such as rectification under s20 AJA 1982, apply. Page 14 LAW TRAINING CENTRE (KENT) LTD Topic 13: Wills and Gifts Wills, Probate and Administration Version: 2 Conclusion The proper execution and interpretation of wills, as governed by the Wills Act 1837 and subsequent legal developments, are vital in ensuring that a testator's intentions are upheld. Section 15 of the Act safeguards against conflicts of interest among attesting witnesses who are also beneficiaries. Additionally, the rules of construction and the admission of extrinsic evidence under s21 AJA 1982 have further refined the process of interpreting wills. It is incumbent upon individuals and legal professionals involved in the creation and execution of wills to understand the nuances of these legal provisions and principles. Clear communication, careful drafting, and adherence to the law are essential to avoid uncertainties, disputes, and legal challenges that may arise during the probate process. Page 15 LAW TRAINING CENTRE (KENT) LTD Topic 14: Revocation - Wills, Probate and Administration Supplementary Version: 2 Introduction Wills, as legal instruments, are inherently ambulatory, allowing testators to change or revoke them as their life circumstances evolve. English law places great importance on adhering to the correct formalities when creating a will. Similarly, revoking a will must also meet specific legal requirements. This reading explores the various scenarios in which wills can be revoked in detail. Marriage and civil partnership: Section 18(1) of the Wills Act 1837 (WA 1837), as amended by the Administration of Justice Act 1982 (AJA 1982), automatically revokes a will upon the marriage or civil partnership of the testator, with some exceptions. This automatic revocation may catch individuals unaware, as marriage plans often do not include updating one's will. However, section 18(3) provides an exception. If a will reflects the testator's expectation of marrying a particular person and the intention that the will should not be revoked by this marriage, the will remains valid. This exception requires two conditions: the testator's expectation to marry a specific individual and the intent to preserve the will despite the marriage. In cases where the testator marries someone other than the person mentioned in the will, the will remains revoked. Similar rules apply to civil partnerships (ss18B(3) and (4)). The case of Court and Others v Despallieres illustrates how a poorly drafted clause can fail to meet the requirements of s18 and result in the will's revocation. Same-sex marriages: The Marriage (Same Sex Couples) Act 2013 (M(SSC)A 2013) legalized same-sex marriages in England and Wales. This act treats same-sex marriages like opposite-sex marriages regarding will revocation. However, the conversion of a civil partnership into a marriage under M(SSC)A 2013 does not revoke an existing will made by one of the parties. Similarly, if a will was made in expectation of a civil partnership with a specific person and that partnership later converted to a marriage, the will remains valid. These provisions are outlined in s18D WA 1837. Documenting discussions about will revocation during will instruction interviews is essential to ensure clients are aware of the implications. Capacity considerations: A question arises concerning whether individuals with lower testamentary capacity should be allowed to marry, leading to the automatic revocation of their wills under s18(1) WA 1837 (as amended by AJA 1982). Page 1  Topic 14: Revocation - LAW TRAINING CENTRE (KENT) LTD Supplementary Wills, Probate and Administration Version: 2 This raises concerns about vulnerable individuals marrying under duress or during a moment of diminished capacity. An examination of whether s18(1) WA 1837 should be amended to consider testamentary capacity is warranted. Effect of divorce: The effects of divorce, annulment, or dissolution of a civil partnership on wills differ from marriage. Section 18A WA 1837, as amended by the Law Reform (Succession) Act 1995 (LR(S)A 1995), invalidates appointments of ex-spouses or ex-civil partners as executors and treats gifts to them as though they had predeceased the testator. This change addresses the issue raised in Re Sinclair , where a gift to an ex-spouse lapsed, even though the will intended it for a charity. Section 6 of the Children Act 1989 also revokes appointments of ex-spouses or ex-civil partners as guardians of children, provided they are not the natural parents of the children. Revocation by a later will or codicil: For a later will or codicil to revoke a previous will, it must comply with s9 WA 1837. Mere labelling as the ‘last will’ does not constitute express revocation, and implied revocation is possible, affecting part or the entirety of the will. The revocation must be documented in a manner consistent with s9 WA 1837, with the phrase "I revoke all earlier Wills" being common. Destruction: While one might assume that destroying a will automatically revokes it, the process involves specific requirements outlined in s20 WA 1837. The testator must physically destroy the will or have someone do it in their presence with the intention of revocation. Mere marking or defacing the will is insufficient, as demonstrated in Cheese v Lovejoy. In Re Durance , a will was revoked when the testator sent a letter to his brother requesting him to collect and destroy the will, following the requirements of s9. Conditional revocation: Conditional revocation, also known as 'dependent relative revocation’, applies when a testator revokes a will based on an event that does not occur or under a mistaken belief. In such cases, the revocation may not take effect. Courts generally presume that the testator intended the old will to be revoked only if the new will was valid. Re Jones established a series of questions to determine if revocation is conditional. Page 2 LAW TRAINING CENTRE (KENT) LTD Topic 14: Revocation - Wills, Probate and Administration Supplementary Version: 2 Conclusion: Understanding the intricacies of will revocation in English law is vital for both legal professionals and individuals seeking to create or modify their wills. While the law provides mechanisms for revocation upon certain life events, careful drafting, and legal guidance are essential to ensure that a testator's intentions are accurately reflected and protected. Moreover, considerations regarding testamentary capacity and the impact of revocation on vulnerable individuals merit further examination and potential legal reforms. Lost and destroyed wills: Legal implications, procedures, and complexities Introduction Wills are legal documents that enable individuals to determine the disposition of their assets and belongings after their death. However, the loss or destruction of a will can lead to legal complications, as it raises questions about the testator's intentions and the validity of the will. This reading explores the legal principles surrounding lost and destroyed wills, the procedure for proving their existence and content, the impact of joint tenancy severance, alterations to wills, incorporation by reference, and the process of rectification in cases of clerical errors. Presumption of revocation for mutilated wills When the original will is found in a mutilated condition after the testator's death, there is a presumption that the testator intended to revoke it. This presumption was established in the case of Lambell v Lambell (1831). In such cases, the burden of proof falls on those seeking to establish the will's validity, and they must provide evidence to rebut the presumption. Presumption of revocation for lost wills If a will known to be in the possession of the testator cannot be found after reasonable searches and inquiries following their death, a presumption arises that the testator destroyed it with the intention of revoking it. This presumption was established in Welch v Philips (1836). However, this presumption can be rebutted with evidence to the contrary, which underscores the importance of demonstrating the testator's intentions. Page 3  Topic 14: Revocation - LAW TRAINING CENTRE (KENT) LTD Supplementary Wills, Probate and Administration Version: 2 Case Study: Sugden v Lord St Leonards (1876) In Sugden v Lord St Leonards (1876), a former Lord Chancellor's will went missing after his death, while the codicils remained intact. Evidence suggested that multiple people had access to the key of the box containing the will. The testator's daughter, who had acted as his secretary, provided a detailed account of the will's contents consistent with the codicils. The court considered the testator's attitude toward the will, the possibility of interference with the box, and the unlikelihood that a Chancery lawyer would destroy the will without destroying the codicils. Consequently, the court concluded that the presumption of revocation with intent had been rebutted, emphasising the significance of evidence regarding the testator's intentions. Procedure for evidencing a lost or destroyed will The procedure for establishing the validity of a lost or destroyed will is outlined in r54 of the Non-Contentious Probate Rules 1987 (NCPR 1987). Key steps include: Affidavit evidence: Proving the valid execution of the lost or destroyed will and confirming that it was not validly revoked through affidavit evidence. Enquiries: Conducting inquiries with the deceased's family, friends, professional advisors, and banks, as well as searching the HMCTS probate service, certainty will register, and placing an advert in