6. Family Provisions and Post Death Variations

Question 1

What is the purpose of the Inheritance (Provision for Family and Dependants) Act 1975?

Answer 1

Allows certain categories of people who may be aggrieved because they have been left out of a will, or are not inheriting on an intestacy, to apply to the court for a benefit from the estate following the testator’s or intestate’s death

Question 2

What are the categories of applicants who can make a claim under the Act?

Answer 2

(a) Spouse / civil partner
(b) Former spouse / civil partner who has not remarried
(c) Child
(d) Person treated as child
(e) Person being maintained by deceased immediately before death (wholly or in part but no minimum period)
(f) Cohabitant

Question 3

What are the requirements for a cohabitant to claim under the Act?

Answer 3

Must have in the 2 years prior to the death been living:

1. In the same household
2. As the husband / wife or civil partner

Question 4

What are the special circumstances in which an adult applicant of the deceased IS more likely to succeed in their application?

Answer 4

Moral obligation owed

Have a disability

Worked for the deceased for many years at a low wage

Made sacrifices to care for the deceased

Question 5

When must an application under the Act be brought?

Answer 5

Within 6 months from date of grant of representation

Question 6

Will the court ever extend the 6 month limit?

Answer 6

Yes, but only if there is good reason for the delay

Question 7

What is the grounds on which an applicant is relying for an application under the Act?

Answer 7

That the disposition of the estate did not make “reasonable financial provision for the applicant”

Question 8

What are the two objective tests for assessing whether the applicant meets the grounds?

Answer 8

The surviving spouse standard

The ordinary standard

Question 9

What is the difference between the surviving spouse standard and the ordinary standard?

Answer 9

For the surviving spouse standard, it is assessed based on what would be reasonable in all the circumstances whether or not required - i.e. what they might have expected on a divorce

For the ordinary standard, it is only what is reasonably expected in all the circumstances for their maintenance

Question 10

What are the common guidelines which the court will consider, set out in s 3 of the Act?

Answer 10

Financial resources and needs of applicant (incl state benefits), other applicants and beneficiaries of the estate now and in the foreseeable future

Deceased’s obligations (legal and moral) towards any applicant or beneficiary

Size and nature of the estate – easier to make a successful claim against a larger estate

Physical or mental disability of any applicant or beneficiary

Any else of relevant, e.g. conduct of applicant – testator may leave written reasons for excluding the applicant from their will

Question 11

What types of payment may the court order under the Act?

Answer 11

Periodical payments, lump sum payments or the transfer of specific property to the applicant - made against “net estate”

Question 12

What is contained in s 2 of the Act?

Answer 12

Courts powers regarding an order to reassess the distribution of the estate

Question 13

Can joint property be included in the “net estate” of the deceased?

Answer 13

Yes, if the court order this

Question 14

If the court order an altering of the disposition, what is the IHT impact?

Answer 14

The altered disposition is treated as taking effect from death and therefore IHT may need to be recalculated

Question 15

What is the relevant time frame in which property disposed of in order to avoid its inclusion in the “net estate” can be ordered to be included by the court?

Answer 15

6 years

Question 16

What is a post-death disclaimer and what is the outcome?

Answer 16

The beneficiary rejects the benefit, and therefore it passes as if they had pre-deceased

Question 17

What is a post-death variation and what is the outcome?

Answer 17

Beneficiary can reject the benefit and vary where the benefit is to go and on what terms

Question 18

What are the procedural requirement for post-death variations?

Answer 18

Original beneficiary must be over 18 and must have mental capacity

If effect of the variation is that more IHT is payable on the estate, then must have signatures of PRs

Question 19

If a benefit is disclaimed or varied, what is it considered for IHT purposes?

Answer 19

A PET

Question 20

How can the possible IHT and CGT implications (paying tax twice if original beneficiary dies within 7 years) be avoided?

Answer 20

By “reading back” the IHT and CGT into the will, using s 142 IHTA 1984

Question 21

What is the effect of invoking s 142 on a disclaimed / varied benefit?

Answer 21

It is as if the testator gave the legacy direct to the new beneficiary and they acquired the asset at probate value

Question 22

What are the 4 requirements for a variation or disclaimer to invoke s 142?

Answer 22

1. In writing and signed by original beneficiary
2. Within two years of the deceased’s death, and
3. Not made for a consideration in money or money’s worth
4. Elects that s 142 is to apply (that the IHT and/ or CGT is to be read back)