Family Provision and Post-death Variations

Question 1

Can those not included in the will, make a claim for the estate?

Answer 1

Certain categories of people can apply to the court under the family provisions act to claim part of the estate on the ground that the will did not make reasonable provision for them. Claims can also be made where the deceased died intestate.

Family provisions is not the only way People who are disappointed with the amount they receive under a will should consider whether the will is valid, whether the testator lacked capacity or knowledge and approval.

Question 1

Explain the function of the Inheritance (provision for family and dependants) Act 1975?

Answer 1

The act allows a certain categories of people who may be aggrieved because they been left out of a will, or are not inherting on an intestacy, to apply to the court for a benefit from the estate following the testators or intestate death.

The act may also be used by a person who received some benefit under the will or intestacy but is dissatisfied with the amount of the inheritance.

The act applies only where the deceased died domiciled in England and Wales.

Question 2

Which categories of people can make a claim under the Inheritance (Provision for family and dependants) Act 1975

Answer 2

A. The spouse or civil partner of the deceased;

B. A former spouse or civil partner of the deceased who has not remarried ( except where, on the making of the final order of divorce/dissolution or nullity, the court made an order barring the former spouse or civil partner from making a claim);

C. A child of the deceased

D. Any person treated by the deceased as a child of the family in relation to any marriage or civil partnership of the deceased, or otherwise in relation to any family in which the deceased at any time stood in the role of a parent.

E. Any person who, immediately before the death of the deceased, was being maintained by the deceased either wholly or in part.

A person is maintained if the deceased was making a substantial contribution in money or moneys worth towards the reasonable needs of that person. This is not applicable if there was an arrangement to which there was valuable consideration, making it a commercial nature

F. Any person who, during the whole of the period of two years ending immediately before the date when the deceased died, was living:
(i) in the same household as the deceased, and
(ii) as the husband, wife or civil partner of the deceased.

Question 3

Explain the category of a former spouse or civil partner of the deceased who has not remarried, in relation to making an application to claim part of the estate under the inheritance (provision for family and dependants) Act 1975

Answer 3

Applications by a former spouse or civil partner are quite rare. Usually, a financial settlement will have been agreed or imposed on the divorce.

The divorce court often orders that the former spouse cannot claim family provision against the other spouse’s estate under the Act.

Question 4

Explain the category of a child of the deceased in relation to making an application to claim part of the estate under the inheritance (provision for family and dependants) Act 1975

Answer 4

For the purposes of the Act, adopted children are regarded as the children of their adoptive parents.

Applications by infant children are uncontroversial. It is more difficult for adult children to succeed.

If the adult child is in employment and likely to have earning capacity for the foreseeable future, it is unlikely that their application will succeed without some special circumstances such as:

(a) moral obligation owed by the deceased
(b) the adult child having a disability
(c) The adult child working for the deceased for may years for a low wage
(d) the child making sacrifices in order to care the deceased.

Question 5

Explain the category of Any person treated by the deceased as a child of the family in relation to making an application to claim part of the estate under the inheritance (provision for family and dependants) Act 1975

Answer 5

This cover people who are not the deceased legal children but where deceased acted as a parent towards them. Step children have succeeded under this category although they have to prove that the deceased acted as a parent towards them.

Question 6

Explain the category of any person immediately before the death of the deceased, was being maintained by the deceased either wholly or in part; in relation to making an application to claim part of the estate under the inheritance (provision for family and dependants) Act 1975

Answer 6

This category is designed to catch anyone who does not fall into other categories but can establish financial dependency on the deceased.

The requirement is that they were maintained wholly or partly by the deceased.

The act provides that a person is ‘maintained’ if the deceased was making ‘ a substantial contribution in money or money worth towards the reasonable needs of the applicant otherwise than for full valuable consideration pursuant to an arrangement of a commercial nature.

The timing of the mainatnace, ‘immediately before death’ is not to be construed literally. A temporary break in maintenance immediately prior to death does not prevent a claim.

The maintenance must not be part of a commercial agreement. So a housekeeper or live in carer could not claim in this category, even though they might get rent free accommodation, they provide consideration pursuant to a contract to carry out household duties or provide care.

Question 7

Explain the category of any person who lived in the same household as the deceased and as their husband or civil partner during the whole period of two years ending immediacy before the deceased’s death ; in relation to making an application to claim part of the estate under the inheritance (provision for family and dependants) Act 1975

Answer 7

Cohabitants who have not formalised their relationship by marriage or the formation of a civil partnership can apply under this category if they satisfy three conditions:

1. They must have been living in the same household- This means living together as one unit. It would not include the situation where a couple is living under one roof but as two entities.
2. As the husband, wife or civil partner- The applicant and the deceased must have lived together as partners. The test applied is whether a reasonable person with normal perceptions would regard them as living together as husband and wife or civil partners. The absence of sexual relations does not preclude the court from making this finding.
3. This must have been for the whole of the two years immediately preceding the deceased death- A temporary separation such as if the deceased was in hospital or a care home for a period before death will not disqualify the cohabitant. The court considers whether a reasonable person would regard them as living as husband and wife or civil partners. There has to be some stability and commitment in the relationship.

Question 8

Is there a time limit to make applications under family provision act?

Answer 8

Applications must be made within six months from the date of the grant of representation. The reason for having a time limit is that it would be unfair to delay indefinelty the distribution of the estate to the beneficiaries due to a possible claim for family provision.

An application can be made before the grant is issued. A potential applicant can make an online or postal search of the probate records to discover whether a grant has already been issued.

It is also possible to make ‘ a standing search’ which ensures that the applicant is notified of any grant which issues in the following six month

Question 9

Can the court extend the time limit for a family provision application?

Answer 9

The court has discretion to extend the time limit but it will only permit an extension if there is good reason for the delay.

The court will consider how promptly the applicant sought permission, whether the estates has already been distributed, whether the personal representatives or beneficiaries had notice within the time limit of a possible claim and whether the applicant would have another remedy if permission were refused.

Question 10

What are the grounds for a claim?

Answer 10

The only ground is that the disposition of the deceased’s estate effected by his will or the law did not make reasonable financial provisions for the applicant’.

The first step is to determine whether estate makes reasonable financial provision for the applicant. This is an objective tests; it is not a question of whether the deceased was reasonable. The burden is on the applicant to show that the test is satisfied.

Question 11

What are the standards for judging ‘reasonable financial provision’

Answer 11

1. ‘The surviving spouse standard’ allows a surviving allows a surviving spouse or civil partner such financial provision as is reasonable in all the circumstances ‘whether or not that provision is required for his or her maintenance’. A relevant factor is how much the spouse or civil partner might have expected on a divorce.
2. ‘The ordinary standard’ applies to all other categories of applicant and allows ‘ such financial provision as it would be reasonable in all the circumstances.. For the applicant to receive for his maintenance’

Maintenance is not defined in the act, but case law has established that it connotes payments which enable the applicant to discharge the cost of their daily living at whether standard is appropriate to them. It therefore address payments required to meet recurring expenses, such as rent, heating and food bills.

Question 12

What are the common guidelines set out in the family provision for a claim?

Answer 12

The guidelines for a claim are coupled with the grounds for claim; and they are referred to as Section 3 factors.

They aim to assist the court in determining whether the will or intestacy makes reasonable financial provision for the applicant. They should be considered for every applicant. There are also special guidelines for each category of applicant.

The guidelines set out are:
(i) The financial resources and needs of the applicant, other applicants and beneficaries of the estate now and in foreseeable future- the court balances the needs and resources of the applicant against the needs and resources of the beneficiaries and all those with a claim on the estate. It will take into account their earning capacity and their financial obligations and responsibilities.

(ii) The deceased’s obligations towards any applicant or beneficiary- these obligations include legal obligations (such as the duty of a parent to maintain their infant child and moral obligations.

(iii) The size and nature of the estate- It is easier to make a successful claim against a large estate. The smaller the estate, the more difficult it is to provide for all beneficiaries and claimants and the courts do not want to encourage claims where the costs would swallow up a large part of the estate.

(iv) The physical or mental disability of any applicant or beneficiary

(v) Anything else which may be relevant, such as the conduct of the applicant- The testator may leave written reasons for excluding the applicant from their will.

The reasons may be in the will itself (and become public when the will is admitted to probate) or in a separate document. The court has a discretion as to how much weight to attach to the reasons.

The guidelines specifically refer to conduct. If a beneficiary under a will is criminally repsonsbile for the testators death, their entitlement under the will is forfeit. However they can still bring a claim for family provision.

An example of conduct which has affected the award is a prolonged period of estrangement between the applicant and the deceased.

Question 13

What are the special guidelines set out in family provision act for a claim?

Answer 13

These guidelines vary with the category of applicant.

Where the applicant is a surviving spouse or civil partner- the court takes into account the applicant age and contribution to the welfare of the family, the duration of the marriage or civil partnership and the likely finical settlement ion the marriage or civil partnership had ended.

On an application by a child of the deceased- the applicants education or training requirements are considered.

Where the application is made by a cohabitant, the court should take into account of the applicant age, the length of period of cohabitation and contribution made by the cohabitant to the welfare of the family.

Question 14

Once an objective assessment has concluded that the estate has not made a reasonable financial provision, what is then the next step?

Answer 14

The next step is to determine the amount and nature of the provision which should be made.

The court will consider the relevant guidelines and can make orders against the ‘net estate’ of the deceased, including:
- orders for periodic payment,
- lump sum payments or
- The transfer of specific property to the applicant.

Question 15

When the court makes an order against the ‘net estate’ what does the ‘ net estate’ consist of.

Answer 15

The ‘net estate, against which an order can be made includes not only property which the deceased has, or could have disposed of by will, but also the deceased’s share of joint property passing by survivorship if the court orders.

In making an order for family provision, the court will declare how the burden of the order is to be borne, ie which beneficiary is to lose part or all of the property they would otherwise have taken.

Question 16

If the court grants an order against the ‘net estate’ what happens to the IHT due.

Answer 16

IHT paid on death may have to be recalculated, eg if the order increases the amount passing to the deceased spouse, more of the estate will attract the spouse exemption.

Question 17

In order to avoid a successful claim for family provision, can a person give away their property in their lifetime so that on their death, it does not from part of their ‘net estate’?

Answer 17

No, this would be a fruitless exercise because the court can for instance, avoid gifts made less than six years before death with intention of defeating a claim under the act. As a result of the court making such an order, the property in question would be included in the ‘net estate’ from which a claim could be satisfied.

Question 18

What happens if the court allows a claim for family provisions and within six months the PRs have distributed the estate?

Answer 18

The Pre will be personally liable to satisfy the claim if insufficient assets remain in the estate.

PRs should be advised not to disbturbute the estate until six months have elapsed from the issue of the grant. Then if the court permits an application out of time, the PRs will not be liable personally but the applicant may be able to recover property from the beneficiaries.

Question 19

In summary, outline the steps you would take when trying to ascertain whether an application is to be made for family provisions?

Answer 19

Step1- Did the deceased die domiciled in England and Wales.

Step 2- Does the applicant fall within a category of applicant

Step 3- Is the applicant within the time limit which is 6 months from the grant.

Step 4- Has the will/intestacy made reasonable provision for the applicant:

If spouse, reasonable provision whether or not needed for maintenance.

If other applicant, reasonable provision for maintenance.

Step 5- Apply guidelines which are;

(i) the financial resources and needs of the applicant, other applicants and beneficiaries of the estate now and in the foreseeable future.

(ii) The deceased moral obligations towards any applicant or beneficiary.

(iii) the size and nature of the estate.

(iv) the physical or mental disability of any applicant or beneficiary

(v) Anything else which may be relevant, such as the conduct of the applicant.

Step 6- Special guidelines according to category of applicant.

Step 7- Orders, these can be periodical payments, lump sum payments or the transfer of specific property to the applicant. Or made agains the ‘net estate’ which could include deceased interest in joint property)

Question 20

What are post death variations and disclaimers?

Answer 20

This is where the beneficiaries can alter what happens to the estate. This can be down to a number reasons such as:

(a) A beneficiary may feel that a member of the family has been unfairly excluded or needs a larger legacy. Adult beneficiaries may decide that they would prefer their legacy to go to their children.

(b) Where a person is threatening to bring a claim for family provision, a voluntary variate of the deceased’s will or distribution on intestacy in favour of the claimant may secure an out of court settlement and avoid the stress, acrimony and expense, of a court case.

(c) The will or distribution on intestacy may not be tax efficient and a vacation of the terms could achieve a considerable saving of IHT and/or capital gains tax.

Question 21

What are the types of arrangements that can be made regarding post-death variations and disclaimers

Answer 21

Post death varations enable beneficiaries to alter what happens to the estate and redirect any property.

Property can be redirected in a number of ways:

(a) A lifetime gift by the beneficiary of an inheritance under a will or under an intestacy- for example Jack is given a house and would like his father’s property to go to his son, Ben. Jack could accept the devise of the house and then make a lifetime gift of the house to Ben.

(b) Post-death disclaimers- Disclaimers amount to a rejection of the assets inherited under the will or the intestacy law or by survivorship. The disclaimed assets then pass as though the original beneficiary had predeceased. Disclaimers are, therefore, appropriate only if, following the rejection, the property passes to the person whom the original beneficiary intends to benefit.

(c) Post death variations- The restrictions on disclaimers do not apply to post death variations. A beneficiary who varies a benefit can direct where benefit is to go and on what terms. In effect, the original beneficiary re-writes the deceased will or intestacy rules. Variations can also be used to redirect the deceased’s interest in joint property which passes by survivorship.

Question 22

For post death variations can the original beneficiary be under 18 years old?

Answer 22

No, the orignal beneficiary who effects the variation must be aged 18 or more and have mental capacity.

If the beneficiary is not legally capable of effecting the variation, an application could be made to the court.

Under the variation of Trusts Act 1958, the court has the power to consent for infants and people who lack capacity and cannot consent fornthemselves, provided the variation is for their benefit.

Question 23

What is the significance of s142 Inheritance Tax Act 1984

Answer 23

Allows variations to be read back into the will. In these circumstances, it is as if the tester gave the leagcy direct to the new beneficiary.

This prevents a gift from being taxed twice once on the testators death and a second time on the subsequent transfer of the gift as a result of the variation from the orignal beneficiary. Even if there is no IHT to pay on the lifetime transfer it falls within the nil band rate, it still has a tax effect because there would be less of the nil band rate available for the death estate.

Certain conditions must be satisfied for the variation or disclaimer to be read back to the deceased death. The conditions are that the disclaimer or variation:

(a) Is in writing and signed by the original beneficiary.
(b) Is within two years of the deceased’s death and;
(c) Is not made for a consideration in money or moneys worth.

In addition variations must state that s 142 IHTA 1984 is to apply