Changes to estate distribution following death

Question 1

What does the Inheritance (Provision for Family and Dependants) Act 1975 (IPFDA 1975) provide for?

Answer 1

It allows close relatives of a testator to apply to vary the content of a will or an intestacy after the deceased has died.

The Court has the power to make provision for an applicant if it feels that reasonable financial provision has not been made out of the deceased’s estate.

Question 2

What are the requirements in order to make an IPFDA 1975 claim?

Answer 2

-Be within the jurisdiction of the IPFDA 1975

-Demonstrate that they fall within a recognised category of eligible applicants

-Make the claim within the prescribed time limit of 6 months after the date of grant of representation

Question 3

Who are the eligible applicants under S1(1)(a)-(e) IPFDA 1975?

Answer 3

-A spouse/civil partner of the deceased

-A former spouse/civil partner who has not remarried

-A person who cohabited with the deceased as if they were spouses/civil partners for two years prior to their death

-A child of the deceased

-Any person who was treated by the deceased as a child of their family

-Any other person who was maintained by the deceased immediately before their death

Question 4

What is the time limit for an application under IPFDA 1975?

Answer 4

An application under the IPFDA 1975 cannot be made more than 6 months after the date of grant of representation was made (although an application can be made before the grant is issued).

The Court has discretion to extend the time limit for making a claim: Re Salmon (1980).

Question 5

Where should an IPFDA 1975 application be lodged?

Answer 5

An application can be lodged in the High Court or County Court. When using the High Court, it would be appropriate to use the Family Division when an application is made by a spouse, civil partner or cohabitee.

In other cases, it is generally more appropriate to use the Chancery Division.

Question 6

What are the grounds for making a claim under the IPFDA 1975?

Answer 6

The grounds for making a claim under the IPFDA 1975 are:

-that the deceased’s will did not make reasonable financial provision for the applicant; and/or

-that the distribution of the deceased’s estate under the intestacy rules fails to make reasonable financial provision for the applicant.

Question 7

What is the two stage test that is adopted when assessing IPFDA 1975 claims?

Answer 7

1. Did the deceased fail to make reasonable financial provision for the applicant?
2. What award should the Court make?

Question 8

What is the surviving spouse standard?

Answer 8

Such financial provision as it would be reasonable in all the circumstances for a husband/wife or civil partner to receive whether or not that provision is required for his/her maintenance.

Question 9

What is the maintenance standard?

Answer 9

Such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his/her maintenance.

Question 10

What are the Section 3 guidelines under IPFDA 1975?

Answer 10

a) The applicant’s financial resources and financial needs

b) The financial resources and needs of any other applicants

c) The financial resources and needs of any beneficiary of the estate

d) Any obligations and responsibilities which the deceased had towards any applicants or beneficiaries

e) The size and nature of the net estate of the deceased

f) Any physical or mental disability of any applicant or beneficiary

g) Any other matter the Court considers relevant in the circumstances

Question 11

What specific guidelines do the Court take into account for IPFDA 1975 claims made by a spouse/civil partner?

Answer 11

a) The applicant’s age and duration of the marriage/civil partnership

b) The contribution made by the applicant to the welfare of the family of the deceased, including any contribution made by looking after the home or caring for the family

c) The provision which the applicant might reasonably have expected to receive in divorce proceedings if the couple had ended their relationship at the date of death

Question 12

What specific guidelines do the Court take into account for IPFDA 1975 claims made by a cohabitee?

Answer 12

a) The age of the applicant and the length of the period for cohabitation

b) The contribution made by the applicant to the welfare of the family of the deceased, including any contribution made by looking after the home or caring for the family

Question 13

What specific guidelines do the Court take into account for IPFDA 1975 claims made by a child of the deceased?

Answer 13

a) Whether and on what basis the deceased maintained the applicant, for what time they did so and the extent of their contribution

b) Whether and, if so, to what extent the deceased had assumed responsibility for the applicant’s maintenance

c) Whether in maintaining or assuming responsibility for maintaining the applicant the deceased did so knowing that the applicant was not their child

d) The liability of any other person to maintain the applicant

Question 14

What specific guidelines do the Court take into account for IPFDA 1975 claims made by other applicants?

Answer 14

a) The length of time for which and the basis on which the deceased maintained the applicant, and the extent of the contribution made by way of maintenance

b) Whether, and if so, to what extent the deceased assumed responsibility for the maintenance of the applicant

Question 15

What are the two components to the assessment of what award the Court makes under IPFDA 1975?

Answer 15

1. Quantum: how much should the applicant receive?
2. Form of award: what form should the award take?

Question 16

What is a variation?

Answer 16

A variation is a direction from an original beneficiary, to the deceased’s PRs, to transfer property that the beneficiary is entitled to under the will or intestacy rules to another person instead.

Question 17

What are the IHT consequences of a variation?

Answer 17

If the conditions of S142 IHTA 1984 are satisfied, the gift from the original beneficiary is read-back to the date of the deceased’s death and treated for IHT purposes as having been made by the deceased to the new beneficiary. The consequences are:

-the original beneficiary does not make a PET

-IHT due on the deceased’s death estate is re-calculated on the basis the deceased left the property to the new beneficiary

Question 18

What conditions must be satisfied for the IHT ‘writing-back’ effect to be achieved under S142(1) IHTA 1984?

Answer 18

-Made by the original beneficiary in writing

-Within the two years following the deceased’s death

-Contains an express statement by the beneficiary confirming S142 applies

-Not be made for consideration in money or money’s worth

Question 19

If a variation results in additional IHT due, what should the PRs do?

Answer 19

-sign the variation

-provide HMRC with a copy of the written variation and pay the amount due

The PRs can only refuse to sign the variation under S142 if the assets held by them are insufficient to discharge the additional tax payable.

Question 20

What is a disclaimer?

Answer 20

A disclaimer operates as a refusal to accept property to which a beneficiary is entitled.

Question 21

What are the limitations to disclaimers?

Answer 21

-a beneficiary can only disclaim before acceptance

-a beneficiary can only disclaim the whole gift

-a disclaimer of a beneficiary’s rights under a will does not disclaim their rights under any intestacy

-the inheritance passes as if the gift to the original beneficiary had failed-they cannot control who receives the assets they disclaim