UNIT 6: Administration: Family Provision and Post-Death Variations Flashcards
A woman died last week. In her valid will, she gave her entire estate to a charity. She left her husband 18 months ago and went to live with her same-sex partner (‘her partner’) with whom she has cohabited ever since. The partner paid the rent for their accommodation and most of their household expenses. The woman is survived by her husband, her partner and a step-son, who is her husband’s child by a former marriage.
Which of the following best describes potential applicants under the Inheritance (Provision for Family and Dependants) Act 1975?
A) The partner could claim in the cohabitant category.
B) The partner could claim on the basis that the woman maintained her.
C) The step-son could claim as the woman’s child.
D) The step-son might be able to claim as a child of the woman’s family.
E) The husband could claim as a former spouse who has not remarried.
CORRECT ANSWER D - 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 woman acted as a parent towards him.
Option A is wrong because the partner had not lived with the woman for two years immediately before her 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 woman.
Option C is wrong because step-children are not regarded as a person’s ‘children’.
Option E is wrong because the woman and her husband were not divorced. (He could claim as a spouse in the first category.)
A man died seven months ago. He died intestate. No grant has been obtained yet. The man and his wife were beneficial joint tenants of a house and bank account. He also owned a car and some clothes in his sole name. The man and his daughter quarrelled seven years ago and have not seen each other since. The daughter, who is a teacher, intends to claim family provision.
Which of the following best explains whether her claim is likely to be successful?
A) The daughter will be unsuccessful because the only assets which she can claim against are the car and the clothes and the courts discourage applications in small estates.
B) The daughter will be unsuccessful because she is out of time.
C) The daughter will be unsuccessful unless she can show some special circumstance, such as a moral obligation owed by the deceased, and that she needs financial help with her day-to-day living expenses.
D) The daughter will be unsuccessful because she cannot show that she was maintained by the deceased immediately before his death.
E) The daughter is likely to succeed because the deceased should have made reasonable provision for her whether or not needed for her maintenance.
CORRECT ANSWER C - The courts have rejected claims by adult children who cannot show some special circumstance. The standard of reasonable financial provision under the Act would be the ordinary standard of reasonable provision for maintenance. Thus, any provision would be to meet daily living expenses and the court will reject her claim if she has the resources to meet these expenses herself.
Option A is wrong. The court could order that the net estate, against which orders can be made, should include the man’s interest in a joint tenancy of the house and bank account.
Option B is wrong because the time limit is six months from the grant and a grant has not been obtained in the man’s estate. In any event, the court can extend the time limit.
Option D is wrong. The daughter can bring her claim as a child of the deceased and would not have to use the maintenance category.
Option E is wrong. The standard for an applicant who is not a spouse is the ordinary standard of reasonable provision for maintenance.
A woman died six months ago, having used all of her nil rate band in her lifetime. She left her holiday cottage to her sister and the rest of her £1 million estate to her brother. The sister wants to pass the cottage to her daughter.
Which of the following is the best way for the sister to achieve her wishes?
A The sister should make a lifetime gift of the cottage to her daughter.
B The sister should disclaim her right to the cottage.
C The sister should make a variation passing the cottage to her daughter and elect to have the variation read back to the woman’s death for IHT purposes.
D The sister should make a variation passing the cottage to her daughter but she should not elect to have the variation read back to the woman’s death for IHT purposes because it would result in more IHT becoming payable on the woman’s estate.
E The sister should make a variation passing the cottage to her daughter. It should be made in writing, within two years of the woman’s death and it must be signed by the sister, the brother and the woman’s PRs.
CORRECT ANSWER C - A variation read back to the woman’s death is the best option for IHT purposes. No additional IHT will be payable on the woman’s estate (a non-exempt beneficiary is replaced by another non-exempt beneficiary). The election would mean that the sister would not be regarded as making a PET which could become chargeable if she were to die within seven years.
Option A is wrong. The lifetime gift would be regarded as a PET and would become chargeable if the sister were to die within seven years. This is not desirable especially because the cottage has already incurred IHT on the woman’s death.
Option B is wrong. A disclaimer would not pass the cottage to the sister’s daughter. The cottage would pass as though the sister had predeceased and the brother would inherit it as part of residue.
Option D is wrong. As explained above, an election to have the variation read back would not result in more IHT becoming payable on the woman’s estate.
Option E is wrong because only the original beneficiary (the sister) needs to sign the variation. The signature of the brother is unnecessary as are the signatures of the PRs (in the latter case because no additional IHT would be payable on the woman’s estate). The other conditions stated in Option E are correct.
Which one or more of the following statements about the Inheritance (Provision for Family and Dependants) Act 1975 is/are correct?
A) The court has power to allow an application to be made more than six months after the date of the grant.
B) The deceased’s share of property held as beneficial joint tenant is available to the court to make an award.
C) The court cannot make an award if the deceased died intestate.
D) The time limit for making a claim is six months from the date of the death.
E) A claim cannot be made by an adult child of the deceased.
CORRECT ANSWER A & B - The usual time limit for bringing a claim is six months form the date of the grant, but the court has a discretion to allow an application out of time. The court can use the deceased’s share of property held as beneficial joint tenants if it will facilitate the making of an award.
TRUE OR FALSE: The ‘surviving spouse standard’ is applied to civil partners under the Inheritance (Provision for Family and Dependants) Act 1975.
TRUE - ‘surviving spouse standard’ (such financial provision as is reasonable in all the circumstances ‘whether or not that provision is required for his or her maintenance’) is equally applicable to civil partners.
James died last month. He left a valid will in which he gave his entire estate to Kiki with whom he had been cohabiting for the past five years. Kiki has one child, Anna (age six), from a previous relationship, but Anna lives with her father.
James has two children, Sean (age 18) and Valerie (age 21), with his ex-wife Belinda. Belinda and James were divorced ten years ago, and Belinda has now remarried.
Who is able to make a claim against James’ estate under the Inheritance (Provision for Family and Dependants) Act 1975?
A) Belinda, Sean and Valerie.
B) Kiki and Belinda.
C) Kiki and Anna.
D) Sean and Valerie.
E) Sean, Valerie and Anna.
CORRECT ANSWER D - Sean and Valerie could claim under s1(1)(c) as children of the deceased. [Kiki could also claim but there is no need because she was given the entire estate.]. Former spouses who have remarried cannot claim. Anna cannot claim because she was not James’ child nor was she treated by him as a child of the family.
TRUE OR FALSE:
A court considering a claim by a spouse under the Inheritance (Provision for Family and Dependants) Act 1975 will not consider the size and nature of the estate.
FALSE - The ‘size and nature of the estate’ is one of the common guidelines which must be considered by the court in all cases.
Richard died intestate two months ago. He is survived by his wife, Holly, and his son, Clive (age 30). A year before his death, Richard left Holly and went to live in rented accommodation with Angela. Richard paid the rent and utility bills for this accommodation. Richard and Holly are still married.
Which of the following statements about claims under the Inheritance (Provision for Family and Dependants) Act 1975 is correct?
A) Angela cannot bring a claim because she does not fall within any of the categories of applicant under the Act.
B) Angela cannot bring a claim because it is assumed that the intestacy rules make reasonable financial provision for the deceased’s family and dependants.
C) Angela cannot bring a claim because she is entitled to the entire estate under the intestacy rules.
D) Angela could bring a claim and the standard would be reasonable provision for her maintenance.
E) Angela could bring a claim and the standard would be reasonable provision whether or not needed for her maintenance.
CORRECT ANSWER D - The estate passes to the wife and son under the intestacy rules despite the fact that Richard and Holly were separated. Angela as a cohabitant has no entitlement under the intestacy rules (C is wrong). Claims can be made whether the deceased died testate or intestate (B is wrong). Angela will not be able to bring a claim as a cohabitant because she had not lived with Richard for two years immediately preceding his death. She could, however, claim as a person who was being maintained by the deceased immediately before his death because Richard paid the rent and utility bills (A is wrong). The standard would be reasonable provision for her maintenance (E is wrong).
Gail is the sole beneficiary under the will of her late father, Martin. The net value of Martin’s estate is £2 million. Included in the estate is a diamond bracelet which had belonged to Gail’s grandmother. Gail wants the bracelet to go to her daughter, Maisie.
Gail effects a variation to pass the bracelet to Maisie. The variation is read back to the date of death for tax purposes. The bracelet was worth £20,000 at the date of Martin’s death. The bracelet is worth £25,000 at the date of the variation.
Which of the following correctly describes the tax consequences of the variation?
A) There will be more inheritance tax to pay on Martin’s estate.
B) Gail will be liable for the capital gains tax payable on the gain of £5,000 made on the bracelet.
C) There will be less inheritance tax to pay on Martin’s estate.
D) Maisie will acquire the bracelet at £20,000 for capital gains tax purposes.
E) Martin’s personal representatives will be liable for the capital gains tax payable on the gain of £5,000 made on the bracelet.
CORRECT ANSWER D - The effect of the variation is that it is as if Maisie had received the bracelet under the terms of Martin’s will. For CGT purposes a beneficiary acquires the asset at probate value. The beneficiary is liable for the CGT on the gain when they dispose of the asset. There are no IHT consequences of the variation as the bracelet has passed from one non-exempt beneficiary to another.
TRUE OR FALSE:
A gift to a minor beneficiary under a will cannot be subject to a post-death variation.
FALSE - The general rule is that the original beneficiary who effects the variation must be aged 18 or more, but the court has the power to consent for minors, provided the variation is for their benefit.
Hassan died four months ago. At the time of his death Hassan had cash of £50,000 in a deposit account, shares valued at £100,000 and a life policy written in trust for his daughter with a maturity value of £200,000. Hassan also owned a house as beneficial joint tenants with his brother.
Hassan has been estranged from his son, Ash, for several years. Ash has made a claim against Hassan’s estate under the Inheritance (Provision for Family and Dependants) Act 1975.
Which assets are available to the court to meet Ash’s claim should it be successful?
A) The cash, the shares, the proceeds of the policy and Hassan’s interest in the house.
B) The cash only.
C) The cash, the shares and the proceeds of the policy only.
D) The cash, and the proceeds of the policy only.
E) The cash, the shares and Hassan’s interest in the house only.
CORRECT ANSWER E - The policy is written in trust and so it does not form part of the estate. The proceeds of the policy therefore cannot be used by the court to meet a claim. All the other assets are available to the court.
Mick died last month. In his valid will, Mick left his house (worth £500,000) to his brother, Dan, and the rest of his estate (valued at £450,000) to his sister, Barbara.
Dan is very wealthy. He has no need for the house and would prefer it to go to his nephew, Frank.
Which of the following statements is correct?
A) The house will pass to Frank if Dan effects a disclaimer.
B) The house will pass to Frank if Dan effects a variation.
C) Dan can only pass the house to Frank by making a lifetime gift.
D) Dan can only pass the house to Frank if Barbara agrees.
E) If the house passes to Frank this will result in more inheritance tax being payable on Mick’s estate.
CORRECT ANSWER B - If Dan effects a variation he can stipulate that the house should pass to Frank (C is wrong). Under a disclaimer the house would pass as if Dan had predeceased and so would pass to Barbara as part of the residue (A is wrong). Barbara’s agreement is not required (D is wrong). If the house passes to Frank it will be IHT-neutral (both Dan and Frank are non-exempt beneficiaries).
TRUE OR FALSE:
In order to have the effect of being read back to the date of death for inheritance tax purposes, a variation must always be signed by the personal representatives.
FALSE - The signatures of the PRs are only required if the effect of the variation is that more IHT is payable on the estate.
A woman died last week. The woman left a substantial estate comprising her home, various investments and cash held in a number of bank accounts. The total value of the estate is £900,000. The woman’s brother had been staying with the woman in her home since he was evicted from his rented flat last year.
The woman left a valid will in which she gave £10,000 to her brother (who was her only surviving relative) and the remainder of her estate to charity.
The brother is unhappy with his entitlement under the terms of the will and he wishes to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”).
Which of the following best describes the position with regard to the brother’s claim?
A) As the brother of the deceased he has an automatic right to make a claim under the Act.
B) The brother can only make a claim under the Act if he was being maintained by the woman immediately before her death.
C) Any claim which the brother is able to make under the Act will be limited to seeking a share of the woman’s home.
D) The amount of IHT payable on the estate will be unaffected by any lump sum made in the brother’s favour under the Act.
E) The brother will be barred from making a claim under the Act if he fails to issue proceedings within the next six months.
CORRECT ANSWER B - A brother is not automatically entitled to make a claim (Option A is wrong). In order to make a claim the brother would have to bring himself within one of the categories in s1 of the Act. Here, the only possible category would require the brother to demonstrate that he was being maintained by the deceased
immediately before her death. Claims are not limited to specific assets (Option C is wrong). The effect of a lump sum order would be to divert assets from an exempt
beneficiary to a non-exempt beneficiary so the IHT would be affected (Option E is wrong).
A woman died a year ago. The woman’s only surviving relatives are her sister and the sister’s son. The whole of the woman’s £1 million estate passed to her sister under the intestacy rules.
Included in the estate is a flat which is let out to tenants. The sister has been receiving the rental income from the flat since the administration of the estate was concluded six months ago.
The sister wants the flat to go to her son and proposes to disclaim the flat in order to achieve her wishes.
Which of the following best describes the position?
A) The sister can disclaim the flat but cannot have it read back for inheritance tax purposes.
B) The sister can disclaim the flat, but this would amount to a potentially exempt transfer.
C) The sister cannot disclaim the flat because the administration of the estate is complete.
D) The sister cannot disclaim the flat, because too much time has elapsed since the woman’s death.
E) The sister cannot disclaim the flat because she has received the rental income from it.
CORRECT ANSWER E - A beneficiary who has received a benefit from a gift cannot disclaim it (Options A and B are wrong). There is no time limit on making a disclaimer (Options C and D are wrong) (although a disclaimer must be made within two years of death if it is to be read back for IHT purposes).
