Changes to estate distribution following death Flashcards
Although close relatives don’t have a legal right to inherit anything under the deceased’s estate, what can they do and when?
Make an application under the IPFDA 1975 to vary the content of a will or an intestacy post-death and court can make provision for applicant if it feels reasonable financial provision has not been made out of deceased’s estate
Can IPFDA claims only happen where there is a will?
No! Can claim under the intestacy rules too!
What requirements determine the eligibility of an application under the IPFDA?
Applicant must…
- Be within jurisdiction of IPFDA
- Demonstrate they fall within recognised category of eligible applicants
- Make their claim within prescribed time limit
What are the requirements of jurisdiction?
1st eligibility requirement
- Only applies where deceased died domiciled in E+W
- Domiciled is different to nationality/residence - but most individuals born or residing in UK likely to be domiciled in either E+W or Scotland (has own succession rules)
What are the different domiciles that may affect the jurisdiction requirement?
- Domicile of origin = determined at birth, depends on father’s domicile (or mother’s if not married)
- Domicile of dependency = if parent changes, domicile of u-16s change too
- Domicile of choice = sever all ties with domicile of origin intending to never return
What are all the categories of applicant?
2nd eligibility requirement
- Spouse/CP
- Former spouse/CP who has not remarried
- Person (not spouse) who cohabited with deceased for 2 years prior to death as if they were a spouse
- Child (inc adoption)
- Any person who was treated as child by deceased (inc step-children)
- Any person who was financially maintained (wholly or partly) by deceased immediately before death
When will a former spouse/CP not be able to bring a claim?
If they have re-married or formed a new CP
Can adopted and step-children bring a claim?
- Adopted = yes (under child category)
- Step-children = possibly (if ‘treated like child’)
Can someone already under the will make a claim?
Yes!
When will someone be treated as ‘financially maintained by the deceased’?
If deceased was making substantial contribution in money(‘s worth) towards reasonable needs of person
Does not include that of commercial nature
How long does an applicant have to make a claim under the IPFDA?
6 months from the date the grant of representation is made
IPFDA = 5 - but that would be arbitrary amount of time, so 6!
Must an applicant wait until a grant of representation is made to bring a claim?
No - can do so before claim is issued
How can an applicant find out if a grant of representation has been made?
Using GOV probate records online or lodging application form and fee at Probate Registry (who search to seee if grant has been issued within 12 months before application)
What will the court consider if the applicant applies for an extension on time and who is the onus on to prove?
- Circumstances surrounding delay
- Whether negotiations were commenced in time limit
- If estate had already been distributed before notification of claim
- Whether refusal to allow applicant to bring proceedings would leave them w/o recourse against anyone else
Onus on applicant to show special reasons for having exceeded time limits
What must the applicant demonstrate?
They have an arguable case fit to go to trial
What court should be used for an IPFDA claim?
- County Court; or
- High Court (Family Division if made by spouse, CP, or cohabitee / Chancery Division otherwise)
What property does the IPFDA apply to?
- Normal succession estate
- Any property in respect of which the deceased held a general POA which has not been exercised
- Any property which deceased nominated by statutory nomination or gave by DMC
- Deceased’s severable share of a joint tenancy
- Any other property disposed of during deceased’s life but which is made avaiable by court’s anti-avoidance powers
What are the grounds for an IPFDA claim?
I.e. what is not made for them under the will
That reasonable financial provision for the applicant is not made under deceased’s will or not provided for under intestacy rules
What will courts consider when deciding what ‘reasonable’ is?
Consider competing interests of applicant and intended B (+ original wishes of testator)
Under IPFDA, what orders can the court make?
- Periodical payments
- Lump sum
- Transfer of property
- Settlement of property
- Acquisition of property for transfer
- Variation of marriage settlements
- Variation of CP settlements
- Variation of trusts on which deceased’s estate is held
If an order is made under IPFDA, from when is it deemed to be effective?
From the deceased’s death; orders therefore ‘read back’ for tax purposes and treated as if deceased had made dispositions at death
What two questions will court consider in IPFDA assessment and what kind of assessment are they?
- Step 1 - Did deceased fail to make reasonable financial provision for applicant? (Based on standard of financial provision + s3 guidelines)
- Step 2 - If so, what award should court make?
Both will be an objective assessment of the facts
Will the court consider whether disposition was ‘morally wrong’ in deciding whether reasonable financial provision was made?
No
When carrying out objective assessment of reasonable financial provision, what two things will be considered?
STEP 1
- The two standards of reasonable financial provision (and which applies)
- The S3 factors that must be considered when assessing claims (depending on category of C)
What are the two standards of financial provision and what is the key difference?
STEP 1 QUESTION 1
- Surviving spouse standards (spouses/CPs) - such FP as would be reasonable for spouse/CP to receive whether or not provision required for maintenance
- Maintenance standard (all others) - such FP as it would be reasonable in all circumstances of case for applicant to receive for their maintenance
Key difference = surviving spouse standard simply requires court to consider what it would be reasonable for the applicant to receive without any requirement to consider what is needed for their maintenance i.e. higher standard than maintenance standard
Difference turns heavily on facts of the case
Higher standard meaning maintenance requirement is not even needed to be considered - can simply be what it would have been reasonable for them to receive! Higher standard here does not mean it is harder to prove, but the opposite
What is the ‘maintenance standard’? Will it be the same as actual living standard that C enjoyed during deceased’s lifetime?
- Requires an assessment of what it would be reasonable for applicant to live on (without luxury or poverty)
- Will not be same standard during deceased’s lifetime but will be considered
What 3 conditions are needed for the surviving spouse standard to be extended?
To a non-spouse
- Former spouse who has not remarried
- Divorce, dissolution, nullity, or judicial separation took place within 12 months before death; and
- No order for financial provision has been made/refused in ancillary proceedings (orders made on divorce)
How do the s3 guidelines work?
STEP 1 QUESTION 2
Court will consider…
- Guidelines applying to all categories of applicants
- Factors relevant to each individual category of applicant
All are given equal weight
If maintenance is discontinued because of circumstances beyond control of the deceased, what will the court disregard?
I.e. suffers stroke and bedbound for 3 months
Court can disregard this period when there appears to be a settled basis for maintenance
Will a variation only ever make IHT due on estate higher?
- No! Can make it higher (e.g. something that qualified for exemption no longer does) or lower (vice versa)
- Will sometimes not change at all (e.g. exemption now does not apply but enough NRB to pay 0%)
Example of why choice is important:
- A inherits a shareholding from the estate of his late father (F) which he wishes to vary in favour of his long-term girlfriend (G)
- At the date of F’s death, the shares were worth £105,000
- At the date of the proposed variation the shares are worth £112,000.
Should A elect to make use of s 142 IHTA and s 62 TCGA?
- Makes sense to make election to write-back for IHT, would otherwise be subject to PET
- Writing back for CGT is potentially less useful: a) if A uses writing back = G receives share with acquisition value of £105,000 (date of death value), b) if A does not write back and disposes instead, A makes a gain of £7,000, but this could be within his allowance and would mean that G receives shares at value of £112,000, meaning a later disposal would have less chargeable gain
