Family Provision and Post-death Variations Flashcards
What are the 3 conditions required so that variations/disclaimers can be read back into the deceased’s death for IHT purposes
a) variation/disclaimer is in writing / signed by beneficiary
b) made within 2 years of deceased’s death
c) it is not made for consideration or for money’s worth
* must also state that s142 IHT 1984 is to apply
How can a variation/disclaimer avoid CGT charges ?
Any disclaimer or variation made within 2 years of the deceased’s death can be read back to the deceased’s will for CGT purposes so that there is no disposal by the original beneficiary and no CGT charge
What are the courts powers under the Variation of Trusts Act 1958
the court has the power to consent for infants and people who lack capacity and cannot consent for themselves, provided the variation is for their benefit
What is the effect of variations being read back into the wall for IHT purposes
the variation is read back into the will- meaning that it would be as if the testator originally gave the legacy directly to the new beneficiary
What are the 3 main ways property can be re-directed ?
- A lifetime gift by the beneficiary of an inheritance under a will or under an intestacy
- Post-death disclaimers
-Post death variations
What are the limitations on disclaimers ?
- only appropriate if following , rejection of the asset, the property passes to the person whom the original beneficiary intends to benefit (i.e cannot direct where gift goes to after variation)
- a beneficiary cannot disclaim part of a gift
- a beneficiary cannot disclaim once they have accepted benefit from the gift
What is the effect of a disclaimer ?
Disclaimers amount to a rejection of the assets inherited under the will / or the intestacy law or by survivorship
What is the general effect of a variation?
The original beneficiary re-writes the deceased’s will or intestacy rules. Variations can also be used to redirect the deceased’s interest in joint property which passes by survivorship
What are the two assessments for reasonable provision?
these are used to determine whether the estate makes reasonable financial provision for the applicant
The surviving spouse standard -allows a surviving spouse or civil partner such financial provision that is reasonable in all circumstances whether or not provision required for maintenance
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
What categories of applicant can make a family provision claim
a) spouse or civil partner of the deceased
b) former spouse or civil partner of the deceased who has not remarried
c) a child of the deceased
d) a child of the family
e) any person who, immediately before the death of the deceased, was being maintained by the deceased either wholly or in part
f) any person who, during the whole of the period of two years ending immediately before the date when the deceased died, was living in the same household as the deceased as the husband, wife or civil partner of the deceased
What are the different types of order that can be made
Periodical payments . lump sum payments or the transfer of specific property to the applicant
Made against ‘net estate’
What is the difference between the General + Special Guidelines
General
takes into account factors such as
i) financial resources and needs of applicants, other applicants and beneficiaries now and In the future
ii) the deceased’s moral obligations towards an applicant/beneficiary
iii) size and nature of the estate
iv) physical or mental disability of any applicant or beneficiary
v) anything else which may be relevant
Special guidelines - vary according to the category of applicant.
A man died last week. In his valid will, he gave his entire estate to a charity. He left his wife 18 months ago and went to live with his same-sex partner (‘his partner’) with whom he has cohabited ever since. The partner paid the rent for their accommodation and most of their household expenses. The man is survived by his wife, his partner and a step-son, who is his wife’s child by a former marriage.
A
The partner could claim in the cohabitant category.
B
The partner could claim on the basis that the man maintained her.
C
The step-son could claim as the man’s child.
D
The wife could claim as a former spouse who has not remarried.
selected
E
The step-son might be able to claim as a child of the man’s family.
Option E is correct. The step-son might be able to bring a claim as a person (not being a child of the deceased) who was treated by the deceased as a child of the family. It will depend on whether the man acted as a parent towards him.
Option A is wrong because the partner had not lived with the man for two years immediately before his death.
Option B is wrong because the woman did not make a substantial contribution towards the partner’s reasonable needs. Rather, the partner was maintaining the man.
Option C is wrong because step-children are not regarded as a person’s ‘children’.
Option D is wrong because the man and his wife were not divorced. (She could claim as a spouse in the first category.)
A woman died one year ago, leaving a valid will. The will leaves her entire estate to her sister. The executor has paid the inheritance tax (IHT) on the estate. The woman’s sister decides that she does not need any of the estate and wishes to pass it to her son instead. The woman’s sister signs a deed of variation, which includes a statement that s142 Inheritance Tax Act 1984 is to apply.
If the woman’s sister dies within seven years of making the deed of variation, will it affect her own position for IHT purposes?
A
Yes, because the woman’s sister made a potentially exempt transfer (PET) by signing the deed of variation.
B
No, because the effect of the statement regarding s142 Inheritance Tax Act 1984 allows the variation to be read back into the will.
C
Yes, because the woman’s sister entered into the deed of variation for consideration in money or money’s worth.
.
D
No, because IHT has already been paid on the woman’s estate.
selected
E
Yes, because the deed of variation was entered into too long after the woman’s death.
Option B is correct, as including the statement regarding s142 Inheritance Tax Act 1984 into the deed of variation will allow the variation to be read back into the will. The effect of this is that it will be as if the woman gave the estate directly to her sister’s son in her will, and the sister does not make a transfer of value.
Option A is wrong as the gift will only be classed as a PET if the statement regarding s142 Inheritance Tax Act is not included in the deed of variation. If this were the case, on entering into the deed of variation, the woman’s sister would be seen as making a lifetime PET, which would become chargeable if she died within seven years of making the gift.
Option C is wrong because, on the facts, the deed of variation is not being made for any consideration. If the deed of variation was made for consideration in money or money’s worth, the variation would not be read back into the will.
Option D is wrong because although IHT has already been paid on the woman’s estate, it is not this fact that means the sister’s tax position is unaffected. It is because she has made a deed of variation complying with the requirements of s142 Inheritance Tax Act 1984 that means the gift is read back into the will and the sister does not make a PET.
Option E is wrong because the deed of variation was entered into one year after the woman’s death. In order to be valid, a deed of variation only has to be entered into within two years of the woman’s death, so this is satisfied here.
