W2 Flashcards
What is the significance of testamentary capacity in making a valid will?
To make a valid will, the testator must have testamentary capacity. This means they must understand the nature of the act, appreciate the extent of their property, understand and appreciate moral claims against their estate, and have no disorder of the mind that perverts their sense of right or prevents the exercise of their natural faculties in disposing of property by will.
What are the requirements for a valid will in England & Wales?
To make a valid will in England & Wales, a testator must be aged 18 or over, have testamentary capacity, understand the nature of the act and its effects, appreciate the extent of their property, understand and appreciate moral claims, and have no disorder of the mind that affects their judgment. No specific wording or form is required, and a testator has testamentary freedom to leave their property to whomever they choose.
What is the purpose of the golden rule in relation to making a will?
The golden rule suggests that when taking instructions for a will from an elderly or seriously ill client, a medical practitioner should be instructed to assess the testator’s capacity and make a contemporaneous record of the assessment and conclusion. While not a legal obligation, following the golden rule reduces the likelihood of later disputes regarding testamentary capacity.
What is the burden of proof in establishing testamentary capacity?
The burden of proof technically lies with the propounder of the will, who seeks to admit the will to probate. However, capacity is presumed if the will appears rational on the face of it and has been duly executed. If someone wishes to challenge the validity of the will based on lack of capacity, they must provide evidence sufficient to raise doubt.
What are the timing requirements for testamentary capacity?
A testator must have testamentary capacity at the time the will is executed. However, there is a limited exception established by Parker v Felgate, where a testator who lacks testamentary capacity at the time of execution can still make a valid will if they had capacity when giving instructions for the will and the will was prepared in accordance with those instructions.
What factors may affect a testator’s testamentary capacity?
A testator’s testamentary capacity may be affected by factors such as fluctuating capacity, particular life events, depression, and other mental health conditions. It is important to consider the effect of these factors on a testator’s decision-making abilities when assessing their testamentary capacity.
What happens if a person dies without making a valid will?
If a person dies without making a valid will, their assets will be distributed in accordance with a statutory order, which may not reflect their wishes. The intestacy rules will determine who will inherit the assets that were not disposed of by a valid will.
What is the concept of testamentary freedom?
Testamentary freedom refers to the ability of a testator to leave their property to whomever they choose. In England & Wales, no specific wording or form is required for a valid will, and a testator has the freedom to distribute their property as they wish.
What is the purpose of the IPFDA 1975 in relation to wills?
The IPFDA 1975 allows certain individuals to make claims against an estate if they have not been adequately provided for in a will. It sets out the time limit, applicants, and grounds for such claims.
What are the formal requirements for making a valid will?
No specific wording or form is required to make a valid will in England & Wales. However, a testator must be aged 18 or over, have testamentary capacity, understand the nature of the act and its effects, appreciate the extent of their property, understand and appreciate moral claims, and have no disorder of the mind that affects their judgment.
When can a solicitor accept instructions for the preparation of a will from a client?
A solicitor should not accept instructions for the preparation of a will if the client lacks testamentary capacity. However, if the court authorizes the execution of a will on behalf of an adult who lacks capacity, a solicitor may proceed with the instructions.
What are the requirements for making a valid will?
To make a valid will, a testator must have testamentary capacity, know and approve of the contents of their will, and comply with the requirements of the Wills Act 1837. Additionally, the testator must intend to make a will and intend to make the will they sign, which requires knowledge and approval of its contents.
What is the significance of knowledge and approval in the validity of a will?
Knowledge and approval are essential for the validity of a will. They are presumed if the testator has testamentary capacity, but the presumption can be rebutted in the presence of suspicious circumstances. Lack of knowledge and approval can render a will invalid. The burden of proof then shifts to those seeking to enforce the will.
What is the effect of undue influence on the validity of a will?
A will (or gift within it) made as a result of undue influence will be invalid. Undue influence occurs when a testator is coerced into making a will or including particular terms against their judgment and true intention. It goes beyond persuasion and requires evidence to prove.
What is the significance of the attestation clause in proving knowledge and approval?
If there is no presumption of knowledge and approval, an attestation clause that addresses knowledge and approval can help prove its presence when submitting the will to probate. It may also be possible to take steps in advance to mitigate the risk of having to prove knowledge and approval later.
What is the distinction between undue influence and persuasion in relation to wills?
Undue influence occurs when a testator is coerced into making a will or including particular terms against their judgment and true intention. It goes beyond persuasion, which involves convincing the testator through a convincing argument. The distinction between the two is not always clear and depends on the presence of coercion.
What is the burden of proof in establishing undue influence in relation to wills?
The burden of proving undue influence lies with the person making the allegation. The court requires evidence to demonstrate that the testator was coerced into a course of action and did not genuinely exercise choice. There is no presumption of undue influence in relation to testamentary dispositions.
What is the purpose of an affidavit of knowledge and approval in relation to wills?
An affidavit of knowledge and approval may be needed when submitting a will to probate if there is no presumption of knowledge and approval. It can help provide evidence of knowledge and approval when the attestation clause does not address this aspect.
How can the risk of having to prove knowledge and approval be mitigated in advance?
To mitigate the risk of having to prove knowledge and approval later, steps can be taken in advance. For example, if a client has a medical condition that renders them unable to read or understand the will, the attestation clause can be drafted to reflect the steps taken to ensure the testator fully understood the document they were signing.
What are the requirements for a valid attestation clause in relation to wills?
The requirements for a valid attestation clause depend on the circumstances. For example, if a testator is blind, unable to read English, or physically unable to sign, the attestation clause should reflect these conditions and the steps taken to ensure the testator understood the document they were signing.
How does the physical and mental strength of the testator affect the determination of undue influence?
The physical and mental strength of the testator are relevant when determining how much pressure would be necessary to overbear the will. A weak or ill testator may be more susceptible to undue influence.
What is the relevance of fairness in determining the validity of a will?
Whether or not the court considers the testator’s will to be fair is irrelevant. The question is whether, in executing the will, the testator acted as a free agent.
What are the formal requirements for making a valid will according to the Wills Act 1837?
To make a valid will, a testator must have testamentary capacity, know and approve of the contents of their will, and comply with the requirements of section 9 of the Wills Act 1837. This includes the will being in writing, signed by the testator (or someone else on their behalf), and witnessed by two adult witnesses.
What happens if a beneficiary acts as a witness to a will?
If a beneficiary (or their spouse/civil partner) acts as a witness to a will, the gift to the beneficiary is void. However, the will as a testamentary document remains valid.
What are the requirements for a valid signature in a will?
A valid signature in a will can be made by the testator themselves or by some other person in the testator’s presence and by their direction. Any mark may constitute a signature if the testator intends it to be. It is preferable for a testator to use their normal signature to avoid doubt.
How many witnesses are required for a valid will?
A valid will requires two or more witnesses. The witnesses must be physically and mentally present at the same time as the testator when the signature is made or acknowledged. There is no maximum number of witnesses.
What should be included in the attestation clause of a will?
An attestation clause describes the circumstances under which the will was executed. It is not legally required to include an attestation clause, but a properly drafted one raises a presumption of due execution. The clause should be amended to reflect any special circumstances and provide evidence of the requisite knowledge and approval.
What are the key aspects to consider when drafting non-dispositive clauses in a will?
When drafting non-dispositive clauses in a will, it is important to start with an appropriate precedent and insert, amend, or remove clauses according to the client’s instructions. The will should include introductory clauses, appointment of executors and guardians, dispositive clauses, administrative provisions, and execution/attestation clauses.
Who can act as an executor in a will?
Any adult with mental capacity may act as an executor in a will. The appointment of a law firm partnership requires all partners to be appointed, while an LLP and trust corporation can be appointed directly. Most wills appoint executors and trustees in the same clause and appoint the same people in both capacities.
What powers do executors and trustees have in carrying out their role?
Executors and trustees have powers to carry out their role as stated in the administrative clauses of a will. Express powers take priority over statutory and common law defaults.
What is the purpose of the introductory clauses in a will?
The purpose of the introductory clauses in a will is to identify the testator (stating their full name and address) and, sometimes, their occupation. It may also include any other name the testator is known by or assets owned in another name.
Why is it important to include a revocation clause in a will?
Including a revocation clause in a will ensures that all former wills and testamentary dispositions are revoked, leaving only one valid will at any given time. While a will is valid without a revocation clause, including one helps avoid uncertainty.
What are burial and funeral wishes in a will?
Burial and funeral wishes in a will refer to the testator’s specific instructions regarding the use of their body for transplantation, as well as their desired burial and funeral arrangements. While these instructions are not legally binding on the personal representative, they are typically followed where possible.
Why is it important to appoint at least two executors in a will?
Appointing at least two executors in a will is important in case a sole executor does not survive the deceased or is unwilling/unable to act. This ensures that there is always someone available to administer the estate and fulfill the responsibilities of an executor.
What is the significance of including a charging power for professional executors and trustees?
Professional executors and trustees may charge for their time and services. Including an express charging power in the will clarifies their entitlement to reasonable remuneration for the services they provide. This is important because professional executors and trustees have statutory restrictions on charging.
Why should a testator include specific gifts in their will?
Including specific gifts in a will allows the testator to designate certain assets or items to specific individuals. This ensures that those individuals receive the intended gifts and helps avoid disputes or confusion.
What is the purpose of general gifts in a will?
General gifts in a will refer to gifts of a particular type or category, rather than specific assets or items. These gifts are typically made to individuals or groups and can include things like cash, stocks, or personal property.
What is a residuary gift in a will?
A residuary gift in a will refers to the gift of the remaining assets or estate after all specific, general, and pecuniary gifts have been distributed. It ensures that any assets not specifically mentioned in the will are accounted for and distributed according to the testator’s wishes.
Is receiving payment for services under section 29 TA 2000 a breach of fiduciary duty?
No, receiving payment for services under section 29 TA 2000 or an express charging clause is not a breach of fiduciary duty.
What happens if a will contains no express administrative powers?
If a will contains no express administrative powers, then only statutory and common law powers will apply. This is also the case when someone dies intestate (without having made a will).
What are express administrative powers in a will?
Express administrative powers in a will override default powers and may restrict, re-state, or expand the default position. They may also create new powers that would not otherwise exist. Professionally drafted wills usually contain express administrative provisions that reflect the needs of the client.
What is the purpose of an attestation clause in a will?
An attestation clause describes the circumstances in which the will was signed. It usually states that the will was executed in the presence of two or more witnesses who attest the execution, confirming the requirements for due execution as per the Wills Act 1837.
What is the purpose of including alternative substitute gifts in a will?
Alternative substitute gifts can be included in a will to ensure that a beneficiary receives something even if it is not possible to give effect to the original gift. For example, an alternative item or cash equivalent can be specified to take effect only if the gift of the original item does not.
What should be considered when making a gift of a collection?
When making a gift of a collection, it is important to clearly identify the collection to avoid uncertainty. The will should specify how agreement should be reached if a division is required, the time frame for deciding on a division, and how any failure to agree within that time should be resolved.
What are chattels and how are they defined in a will?
Chattels are personal possessions that are included in a person’s succession estate when they die. In a will, chattels are defined by section 55(1)(x) of the Administration of Estates Act 1925, which includes all tangible movable property except for money or securities for money, assets used solely or mainly for business purposes, and assets held solely as an investment.
What is a general legacy and how does it differ from a demonstrative legacy?
A general legacy is a gift of property that is not distinguished from property of a similar type. It can be specific (e.g., a particular item) or general (e.g., a gift of cash). A demonstrative legacy, on the other hand, is a type of general legacy that is directed to be paid out of a specified fund. If the specified fund no longer exists or is inadequate, the beneficiary is entitled to receive what is left in the fund and the balance of the legacy is paid as a general legacy.
What is a pecuniary legacy and how is it typically expressed in a will?
A pecuniary legacy is a gift of money. It can be specific (e.g., a specific amount of money) or general (e.g., a gift of cash). In a will, a pecuniary legacy clause often contains the amount of the gift in both numbers and words to avoid errors in typing a numerical figure.
What is a residuary legacy and what does it include?
A residuary legacy is a gift of all the testator’s property that has not already been disposed of under the will or any later codicil. It includes all property capable of passing by the will that is not part of specific gifts, general legacies, or demonstrative legacies.
What should be considered when making a gift of a specific collection of chattels?
When making a gift of a specific collection of chattels, the collection must be clearly identified to avoid uncertainty. The will should specify how agreement should be reached if a division is required, the time frame for deciding on a division, and how any failure to agree within that time should be resolved.
When should a trust be imposed in a residue clause?
A trust should generally be imposed in a residue clause when a beneficiary is given a life interest in the residue, a discretionary trust of the residue is to be set up, the residue is given to more than one person, or there are contingent or minor interests. The clause should be drafted to cover the declaration and terms of the trust.
What is a substitution clause in a residue clause?
A substitution clause in a residue clause comes into effect if the primary gift fails. It specifies an alternative beneficiary or beneficiaries to receive the residue in case the original gift does not take effect. This helps avoid partial intestacy and ensures that the testator’s intended distribution is carried out.
Why are express substitution clauses and ultimate gift over clauses used in will drafting?
Express substitution clauses and ultimate gift over clauses are used in will drafting to reduce the risk of partial intestacy and ensure that the testator’s intended distribution is carried out. They provide for alternative beneficiaries or specify who should receive the estate in the event that other gifts fail.
What is the significance of the date from which a will speaks?
The date from which a will speaks determines when the subject matter or object of a gift should be ascertained. Unless a contrary intention is shown, a will speaks from the date of the testator’s death. However, certain wording in the will can demonstrate a contrary intention and make the date of execution the relevant date.
What are some examples of wording that demonstrate a contrary intention in a will?
Examples of wording that demonstrate a contrary intention in a will include the use of words like ‘my’, ‘now’, or ‘at present’ when describing a gift. These words make the date of execution of the will the relevant date instead of the date of the testator’s death.
How are collections and shares treated in relation to the date from which a will speaks?
Collections and shares are treated in relation to the date from which a will speaks by considering the items included in the collection or the number of shares owned at the date of the testator’s death. This is unless the testator expressly states otherwise in the will.
What happens if an asset given by an earlier gift in a will fails?
If an asset given by an earlier gift in a will fails, the subject matter of the gift will usually pass under the residue clause instead. This means that the item that has not already been given away will become part of the residue and distributed accordingly.
What are relieving provisions in a will?
Relieving provisions in a will deal with matters such as who should bear the burden of taxes, charges, expenses, and costs of transfer. They provide clarity on how these financial aspects should be handled and ensure that the testator’s intentions regarding the distribution of the estate are properly addressed.
What are some specific rules of construction in will drafting?
Some specific rules of construction in will drafting include the rule that a will speaks from death in respect of the items given unless a contrary intention is shown, the rule that specific gifts are made subject to expenses and costs of transfer, and the rule that a gift of property subject to a charge bears the liability of that charge. These rules help guide the interpretation of the will and ensure that the testator’s intentions are properly understood.
What are the general rules regarding inheritance tax and expenses/costs of transfer in a will?
In the absence of express provisions, an individual gift in a will is made free of inheritance tax (IHT) and IHT would be payable out of the residue as a general testamentary expense. Similarly, in the absence of any express provision, specific beneficiaries bear the burden of the cost of delivery of the item of property to them and expenses incurred since the date of death in preserving the item or ensuring its upkeep.
How can a testator relieve a property of a charge in a will?
A testator can expressly relieve a property of a charge in a will. By doing so, the charge becomes a general debt of the estate to be paid out of the residue.
What is the purpose of Section 21 of the Administration of Justice Act 1982?
Section 21 of the Administration of Justice Act 1982 allows the courts to rule on the construction of a will when its meaning is unclear or ambiguous. The court’s role is to determine the meaning of the words within the will and give effect to the testator’s intention.
Under what circumstances can extrinsic evidence be submitted in relation to the construction of a will?
Extrinsic evidence (evidence that is not from the will itself) may be submitted in the following circumstances: if the will or any part of it is meaningless, if the language used in any part of it is ambiguous on the face of it, or if the will is ambiguous in light of the surrounding circumstances. Extrinsic evidence is used to help with the construction of the will, not to vary or contradict the language used by the testator in the will.
What is the effect of the commorientes rule in relation to two deaths occurring within a short period of time?
Under the commorientes rule, if two deaths occur within a short period of time and the order of death is uncertain, the eldest is deemed to have survived the younger. This can have implications for the distribution of assets and potential tax liabilities.
What is the purpose of a survivorship clause in relation to two deaths occurring together or in very close succession?
A survivorship clause in a will specifies that in order to take a particular gift, the beneficiary must survive the testator by a specified period of time. This clause helps avoid problems and confusion regarding two deaths that occur together or in very close succession.
What is the role of the court in determining the construction of a will?
The court has the power to determine the effect of a will and the overriding principle regarding construction is that the intention of the testator should be given effect to. The court’s role is to determine the meaning of the words within the will and what the testator intended by these, not to look behind the will to identify any other ‘real’ intention.
What is the effect of Section 4 of the Inheritance Tax Act 1984?
Section 4 of the Inheritance Tax Act 1984 treats deaths as simultaneous when the order of death is unknown. For inheritance tax purposes, neither person inherits from the other, and the estates are taxed separately. Property that passes from the first to die to the second to die is not taxed again in the second estate.
What is a class gift in a will?
A class gift in a will is when a gift is given to a group of beneficiaries who meet a general description, such as ‘children’ or ‘grandchildren’. Each member of that class is entitled to inherit.
How do the class closing rules provide certainty in the distribution of class gifts?
The class closing rules are rules of construction developed by the courts to provide certainty and enable distribution. The general rule is that a class closes when any one member of the class first becomes entitled in possession. This ensures that the beneficiaries within the class are identified and no one born subsequently can qualify.
What is the difference between vested interests and contingent interests in a will?
A vested interest is a gift that is given outright and absolutely, with no conditions to be met. A contingent interest is a gift where the beneficiary will have to satisfy a condition before they can inherit.
What is the purpose of substitutional gifts in a will?
Substitutional gifts in a will specify what should happen in the event of a gift lapsing. They provide an alternative beneficiary or beneficiaries to inherit if the original beneficiary pre-deceases the testator.
What is the effect of Section 33 of the Wills Act 1837?
Section 33 of the Wills Act 1837 applies to gifts in a will to the testator’s issue (child or other lineal descendant). If the intended beneficiary dies before the testator, leaving issue of their own who are living at the testator’s death, the gift will take effect as a devise or bequest to the issue living at the testator’s death, unless a contrary intention appears in the will.
What considerations should be made when leaving a gift to a club, institution, or charitable organization?
When leaving a gift to a club, institution, charitable organization, or other unincorporated association, the drafter must consider the following: ensuring the organization exists and providing a full name and address, considering the organization’s registered charity status, making provision for potential changes in name or cessation of existence, and specifying who can give a valid receipt.
What happens if a charitable gift is stated for general charitable purposes?
If a charitable gift is stated for general charitable purposes, it results in the application of the cy-pres doctrine. Under the Charities Act 2011, the gift can be given to a different charity with a similar purpose if the original gift cannot be given effect.
What is the Inheritance (Provision for Family and Dependants) Act 1975?
The Inheritance (Provision for Family and Dependants) Act 1975 allows individuals who feel that a deceased person has not made reasonable provision for them out of their estate to make a claim against that estate. The act applies to the estates of persons domiciled in England and Wales at the time of their death.
Who can make a claim under the Inheritance (Provision for Family and Dependants) Act 1975?
To make a claim under the Inheritance (Provision for Family and Dependants) Act 1975, an applicant must fall within a recognized category of eligible applicants. These categories include spouses/civil partners, children of the deceased, persons who cohabited with the deceased, and persons who were maintained by the deceased.
What are the grounds for making a claim under the Inheritance (Provision for Family and Dependants) Act 1975?
The grounds for making a claim under the Inheritance (Provision for Family and Dependants) Act 1975 are that the deceased did not make reasonable financial provision for the applicant, either by their will or under the intestacy rules.
What powers does the court have if a claim under the Inheritance (Provision for Family and Dependants) Act 1975 is successful?
If a claim under the Inheritance (Provision for Family and Dependants) Act 1975 is successful, the court has wide powers to make appropriate orders, such as lump sum and periodical payments, out of the net estate of the deceased.
What can close relatives do if they feel they have been unreasonably left without anything in a will?
Close relatives have no automatic legal right to inherit a fixed proportion of an estate, but they can make an application to the court under the Inheritance (Provision for Family and Dependants) Act 1975 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 from the deceased’s estate.
o An application under the IPFDA 1975 cannot be made more than six months after the date the grant of representation was made (although an application can be made before the grant is issued).
to make an application under the IP(F)DA 1975, an applicant must
Be within the jurisdiction of the IP(F)DA 1975.
Demonstrate that they fall within a recognised category of eligible applicants.
Make their claim within the prescribed time limit (cannot be made more than six months after the date the grant of representation was made – but the court can extend this).
What is domicile and why is it important in relation to the Inheritance (Provision for Family and Dependants) Act 1975?
Domicile refers to an individual’s permanent home or legal residence. It is important in relation to the Inheritance (Provision for Family and Dependants) Act 1975 because the act only applies to individuals who died domiciled in England and Wales. Domicile can change during a person’s lifetime, and it is necessary to establish the deceased’s domicile at the time of death.
What are the recognized categories of eligible applicants under the Inheritance (Provision for Family and Dependants) Act 1975?
The recognized categories of eligible applicants under the Inheritance (Provision for Family and Dependants) Act 1975 include spouses/civil partners, former spouses/civil partners who have not remarried or formed a subsequent civil partnership, persons who cohabited with the deceased, children of the deceased, and any other person who was maintained by the deceased.
- Following Banks v Goodfellow a testator will have testamentary capacity if they
Understand the nature of the act and its effects;
Appreciate the extent of the property of which they are disposing;
Understand and appreciate the moral claims to which they ought to give effect; and have no disorder of the mind that perverts their sense of right or prevents the exercise of their natural faculties in disposing of property by will.
What is the time limit for making an application under the Inheritance (Provision for Family and Dependants) Act 1975?
An application under the Inheritance (Provision for Family and Dependants) Act 1975 cannot be made more than six months after the date the grant of representation was made. However, an application can be made before the grant is issued. o The Court has discretion to extend the time limit for making a claim (see Re Salmon (Deceased) [1980] 3 All ER 532 and Re Dennis [1981] 2 All ER 140).
o Following Re Salmon, the onus is on the applicant to show special reasons for having exceeded the time limit. The Court should take into account:
the circumstances surrounding the delay,
whether negotiations were commenced within the time limit,
if the estate had already been distributed before notification of the claim, and
whether a refusal to allow the applicant to bring proceedings would leave them without recourse against anyone else.
* Re Dennis added that the applicant must demonstrate that they have an arguable case fit to go to trial.
How can an application for a standing search be made?
An application for a standing search can be made by lodging the application form and fee at the Probate Registry.
What does the Probate Registry do when a standing search application is made?
When a standing search application is made, the Probate Registry will search the index of grants to see if a grant has been issued within 12 months before the application and, if not, for the following six months. The application can be renewed at the end of the six-month period on payment of a further fee.
Under what circumstances can the time limit for making a claim be extended under the Inheritance (Provision for Family and Dependants) Act 1975?
The Court has discretion to extend the time limit for making a claim. The applicant must show special reasons for having exceeded the time limit. The Court should take into account the circumstances surrounding the delay, whether negotiations were commenced within the time limit, if the estate had already been distributed before notification of the claim, and whether a refusal to allow the applicant to bring proceedings would leave them without recourse against anyone else. The applicant must also demonstrate that they have an arguable case fit to go to trial.
What are the options for lodging an application in court under the Inheritance (Provision for Family and Dependants) Act 1975?
An application can be lodged in the High Court or County Court. When using the High Court, it would be more appropriate to use the Family Division when an application is made by a spouse, civil partner, or cohabitee and there are no complex issues of interpretation. In other cases, it is generally more appropriate to use the Chancery Division.
What property is included in the net estate under the IPFDA 1975?
The net estate under the IPFDA 1975 includes the normal succession estate, any property in respect of which the deceased held a general power of appointment which has not been exercised, any property which the deceased nominated by statutory nomination or gave by donatio mortis causa (minus any inheritance tax paid by the donee), the deceased’s severable share of a joint tenancy (if ordered by the court), and any other property disposed of during the deceased’s life but made available by the court’s anti-avoidance powers.
What are the grounds for making a claim under the IPFDA 1975?
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.
How does the court assess claims under the IPFDA 1975?
When assessing claims under the IPFDA 1975, the court considers the competing interests of the applicant and intended beneficiary, as well as the original wishes of the testator. It is difficult for an applicant to predict what award they may be given, should their claim be successful.
What orders can the court make under section 2(1) of the IPFDA 1975?
Under section 2(1) of the IPFDA 1975, the court has the power to make periodical payments, lump sum payments, transfer of property, settlement of property, acquisition of property for transfer, variation of marriage settlements, variation of civil partnership settlements, and variation of the trusts on which the deceased’s estate is held.
What is the effect of an order made under the IPFDA 1975?
Any order made under the IPFDA 1975 is deemed to be effective from the deceased’s death. Orders are therefore read back for tax purposes and treated as if the deceased had made the dispositions at death.
What is the first step in assessing a claim under the IPFDA 1975?
The first step in assessing a claim under the IPFDA 1975 is to consider whether the deceased has made reasonable financial provision for the applicant. This is an objective assessment based on statutory criteria, and it does not consider whether the deceased was morally wrong in their estate disposition.
What are the different standards of financial provision under the IPFDA 1975?
The different standards of financial provision under the IPFDA 1975 are the surviving spouse standard and the maintenance standard. The surviving spouse standard applies to spouses/civil partners and requires financial provision that would be reasonable in all circumstances, whether or not it is required for maintenance. The maintenance standard applies to all other applicants and requires financial provision that would be reasonable in all circumstances for their maintenance.
What factors are considered when assessing claims under the IPFDA 1975?
When assessing claims under the IPFDA 1975, the court must consider statutory guidelines and factors that vary depending on the type of applicant. It is an objective process where all factors have equal weight. The courts will consider the competing interests of the applicant and intended beneficiary, as well as the original wishes of the testator.
How does the court determine whether a deceased has made reasonable financial provision for someone?
The court determines whether a deceased has made reasonable financial provision for someone through a two-stage test for IPFDA 1975 claims. The first stage involves considering whether the deceased failed to make reasonable financial provision for the applicant. The second stage involves determining what award the court should make. Both stages require an objective assessment of the facts of the case with reference to guidelines set out in section 3 of the IPFDA 1975.
What factors does the court consider when determining reasonable financial provision under the IPFDA 1975?
The court considers various factors, including the applicant’s financial resources and needs, the financial resources and needs of any other applicants, the financial resources and needs of any beneficiary of the estate, any obligations and responsibilities the deceased had towards the applicants or beneficiaries, the size and nature of the net estate of the deceased, any physical or mental disability of any applicant or beneficiary, and any other matter the court considers relevant in the circumstances.
What specific guidelines does the court consider for spouses/civil partners under the IPFDA 1975?
For spouses/civil partners, the court also considers the applicant’s age and the duration of the marriage/civil partnership, 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, and the provision which the applicant might reasonably have expected to receive in divorce/dissolution proceedings if the couple had ended their relationship at the date of death.
What specific guidelines does the court consider for cohabitees under the IPFDA 1975?
For cohabitees, the court considers the age of the applicant and the length of the period of cohabitation, and 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. The third criterion does not apply to cohabitees.
What specific guidelines does the court consider for children of the deceased under the IPFDA 1975?
For children of the deceased, the court must consider the manner in which the applicant was (or might expect to be) educated or trained. If the applicant was not a child of the deceased but was treated as such, the court must also consider whether and on what basis the deceased maintained the applicant, for what time they did so, and the extent of their contribution. The court also considers whether and to what extent the deceased had assumed responsibility for the applicant’s maintenance and the liability of any other person to maintain the applicant.
What specific guidelines does the court consider for other applicants under the IPFDA 1975?
For other applicants who were maintained (wholly or partly) by the deceased, the court takes into account the length of time for which and the basis on which the deceased maintained the applicant, the extent of the contribution made by way of maintenance, and whether and to what extent the deceased assumed responsibility for the maintenance of the applicant. Section 1(3) states that an applicant falling within this category is treated as being maintained by the deceased only if the deceased was making a substantial contribution in money or money’s worth towards the reasonable needs of that person.
What are the two components considered when determining the award for an applicant under the IPFDA 1975?
The two components are the quantum, which refers to how much the applicant should receive, and the form of the award, which refers to what form the award should take. The considerations for the form of the award depend on the category into which the applicant falls, and all relevant section 3 factors must be given equal weight.
What does the court assess in order to determine the value and nature of an award under the IPFDA 1975?
In order to assess the value of a claim, the court obtains a list of the applicant’s assets and liabilities, including any future assets or liabilities. This information is used to assess the relevant section 3 factors and determine whether the applicant has a particular need, such as insufficient income or a need for housing. The assessment helps determine the amount that should be awarded and the nature of the award.
What are the orders that the court can make under Section 2(1) of the IPFDA 1975?
The court can make various orders, including periodical payments, lump sum payments, transfer of property, settlement of property, acquisition of property for transfer, variation of marriage settlements, variation of civil partnership settlements, and variation of the trusts on which the deceased’s estate is held.
Under what circumstances may the distribution of an estate be considered unsatisfactory by the beneficiaries?
The distribution of an estate may be considered unsatisfactory by the beneficiaries if inadequate provision has been made for a particular person, too great/unwanted provision has been made for a beneficiary, or the distribution results in an undesirable tax situation.
What options are available to an original beneficiary who does not wish to keep their inheritance?
An original beneficiary who does not wish to keep their inheritance is free to give it away as they see fit. However, such a gift will take place after the administration of the deceased’s estate and will be treated for tax purposes as a transfer made by that beneficiary.
What are the potential adverse tax consequences for a beneficiary who chooses to give away their inheritance?
If a beneficiary chooses to give away their inheritance, there may be adverse inheritance tax (IHT) and capital gains tax (CGT) consequences for the donor. The IHT consequences include the original beneficiary making a potentially exempt transfer (PET) and being subject to CGT if the increase in value of the asset since the date of the deceased’s death is greater than the beneficiary’s tax-free allowance.
What are the methods available to mitigate the tax consequences of giving away an inheritance?
Changes can be made to the original estate distribution after a person has died to mitigate the tax consequences of giving away an inheritance. These methods include variation, disclaimer, and precatory trust.
What are the inheritance tax consequences of a variation?
If the conditions of section 142 of the Inheritance Tax Act 1984 (IHTA) 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 original beneficiary does not make a potentially exempt transfer (PET) and the IHT due on the deceased’s death estate is re-calculated based on the new beneficiary receiving the property.
What are the conditions for a variation to achieve the writing back effect for inheritance tax purposes?
A variation must comply with the following conditions for the writing back effect to be achieved for inheritance tax (IHT) purposes: it must be made by the original beneficiary in writing within two years following the deceased’s death, and it must contain an express statement by the beneficiary confirming section 142 of the IHTA should apply. The variation must not be made for consideration in money or money’s worth.
What is the role of the personal representatives (PRs) in a variation?
A beneficiary can vary their entitlement to the estate assets without approval from the PRs of the deceased’s estate. However, if the variation results in additional IHT being due in respect of the deceased’s estate, the PRs should 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/approve the writing back under section 142 if the assets held by them are insufficient to discharge the additional tax payable.
How can a variation affect the IHT payable in respect of the deceased’s estate?
The IHT payable in respect of the deceased’s estate may not be affected by a variation. However, if the amount an exempt beneficiary receives either increases or decreases, this may result in an increase or decrease in IHT payable.
What is the relevance of capital gains tax (CGT) in variations?
Capital gains tax (CGT) is relevant to variations because it is charged on the disposal of a non-cash asset. If someone gives an asset away, they are deemed to make a gain with reference to the market value at the time of the gift. Variations can have CGT consequences if the assets have increased in value since the date of the deceased’s death.
What is the writing back effect in relation to capital gains tax (CGT) and variations?
The writing back effect in relation to CGT and variations means that the gift is written back to the deceased’s date of death and treated as having been made by the deceased. The new beneficiary is deemed to acquire the assets at their date of death value, and any increase in the value of the assets since the date of death will be taxed in the hands of the new beneficiary when/if they later dispose of it
Are cash gifts subject to capital gains tax (CGT) in variations?
No, cash gifts are exempt from CGT. Therefore, the CGT consequences of variations only need to be considered where non-cash assets are the subject of the variation.
What are the conditions for a variation to achieve the writing back effect for capital gains tax (CGT) purposes?
The conditions for a variation to achieve the writing back effect for CGT purposes are the same as for inheritance tax (IHT) purposes. The variation must comply with section 62 of the Taxation of Chargeable Gains Act 1992 (TCGA), which includes being made by the original beneficiary in writing within two years following the deceased’s death and not being made for consideration in money or money’s worth.
What is the purpose of a formal variation in relation to inheritance tax (IHT) and capital gains tax (CGT)?
A formal variation allows the original beneficiary to choose whether or not to use the writing back provisions for either or both of IHT and CGT. If no writing-back is required, no formal variation is needed and the beneficiary can simply make a gift to the intended beneficiary. The choice to enter a formal variation depends on the circumstances.
What are the restrictions and limitations when it comes to variations in relation to property?
Property passing by will, intestacy, and interests in joint property can all be the subject of a variation. However, property in which the deceased was a life tenant immediately before death cannot be varied. Additionally, property that was gifted with reservation of benefit cannot be varied post-death. The trust deed will determine the distribution of such assets. Furthermore, an instrument will not fall within s142 if it further redirects any item that has already been redirected under an earlier instrument.
What is the difference between a variation and a disclaimer?
A variation involves changing the distribution of property to which a beneficiary is entitled, while a disclaimer is a refusal to accept property to which a beneficiary is entitled. A beneficiary can only disclaim before acceptance and can only disclaim the whole gift. A disclaimer of a beneficiary’s rights under a will does not disclaim their rights under any intestacy that may arise as a consequence of disclaiming their testamentary inheritance.
What are the implications of a beneficiary disclaiming their inheritance for inheritance tax (IHT) and capital gains tax (CGT)?
When a beneficiary disclaims their inheritance, the provisions of s142 IHTA and s62 TCGA apply in the same way as they do to variations. The original beneficiary is not treated as having made a transfer to the new beneficiary. Instead, the deceased’s estate is taxed as though the person who is ultimately entitled had actually been entitled on death. However, there are no equivalent CGT rules, and s62 TCGA does not apply.
What are the limitations and practical considerations when it comes to disclaimers?
A beneficiary can only disclaim before acceptance and can only disclaim the whole gift. A disclaimer of a beneficiary’s rights under a will does not disclaim their rights under any intestacy that may arise as a consequence of disclaiming their testamentary inheritance. The ultimate destination of the assets is determined by provisions in the will or the intestacy rules, and the original beneficiary cannot control who receives the assets they disclaim.
What are the exceptions to the beneficiary principle when it comes to purpose trusts?
The two significant exceptions to the beneficiary principle are charitable purpose trusts and the Endacott exceptions. Charitable purpose trusts are enforceable by the Charity Commission and benefit from less strict rules on certainty of purpose and perpetuity. The Endacott exceptions are a narrow class of anomalous non-charitable purpose trusts that are valid but do not have anyone to enforce them. Non-charitable purpose trusts are subject to the normal rules on certainty of objects and the common law perpetuity rules.
What is the difference between a precatory trust and a formal trust?
A precatory trust arises when a gift is made to a beneficiary with a wish expressed as to how the beneficiary should pass on those assets to others. Unlike a formal trust, no formal trust is created due to an absence of intention, and the testator’s wishes are not binding on the beneficiary. In a precatory trust, the beneficiary has the discretion to keep all of the assets if they choose to do so.
What are the implications of a precatory trust for inheritance tax (IHT)?
A precatory trust does not directly vary the distribution of an estate, but if the original beneficiary makes the distributions intended by the testator within 2 years of the testator’s death, these distributions are treated for IHT purposes as gifts made by the testator’s will and not by the original beneficiary. This means that the original beneficiary is not treated as having made a potentially exempt transfer (PET) of these items.
Are there any capital gains tax (CGT) implications for a precatory trust?
There are no equivalent CGT rules for precatory trusts, and s62 TCGA does not apply. Therefore, a redistribution in accordance with the testator’s wishes would be treated as a disposal by the original beneficiary. However, this is usually not an issue because there is likely to be only a short time between the death of the testator and the distribution by the beneficiary, and most chattels are unlikely to significantly increase in value.
What are the limitations and practical considerations when it comes to variations?
There is no limit to the number of times a will can be varied, but each asset can only be varied once. Additionally, an instrument will not fall within s142 if it further redirects any item that has already been redirected under an earlier instrument. Variations are not subject to the same practical limitations as disclaimers and are usually preferred.
What is a precatory trust and how does it differ from a formal trust?
A precatory trust arises when a gift is made to a beneficiary with a wish expressed as to how the beneficiary should pass on those assets to others. Unlike a formal trust, no formal trust is created due to an absence of intention, and the testator’s wishes are not binding on the beneficiary. In a precatory trust, the beneficiary has the discretion to keep all of the assets if they choose to do so.
What are some benefits of trusts having charitable status?
Some benefits of trusts having charitable status include: no requirement to comply with the beneficiary principle, more flexible rules on certainty of objects (certainty of purpose), no limit on their duration (they can exist in perpetuity), and the cy-près doctrine which allows the trust property to be applied for other charitable purposes even if the specific trust fails. Tax benefits are also a major practical advantage of having charitable status.
What are the requirements for a trust to have charitable status?
To have charitable status, a trust must be for a charitable purpose, satisfy a public benefit test, and be wholly and exclusively charitable.
What is the difference between charitable purpose trusts and non-charitable purpose trusts?
Charitable purpose trusts have charitable status and must meet certain requirements, while non-charitable purpose trusts do not have charitable status and must fall within a recognised exception to the beneficiary principle.
What is the cy-près doctrine?
The cy-près doctrine allows the trust property of a charitable purpose trust to be applied for other charitable purposes even if the specific trust fails.
What are the recognised exceptions to the beneficiary principle for non-charitable purpose trusts?
The recognised exceptions to the beneficiary principle for non-charitable purpose trusts apply only when a trust is created in a will and were classified in the case of Re Endacott [1960] Ch 232.
What is the public benefit test for charitable purpose trusts?
To have charitable status, a trust must satisfy a public benefit test, which means it must provide a benefit to the public or a section of the public.
What is the beneficiary principle?
The beneficiary principle is a requirement for trusts to have identifiable beneficiaries who can enforce the trust.
What is the duration limit for trusts with charitable status?
Trusts with charitable status have no limit on their duration and can exist in perpetuity.
What are the exceptions to the beneficiary principle for non-charitable purpose trusts?
Non-charitable purpose trusts must fall within recognized exceptions to the beneficiary principle to be valid. These exceptions include trusts for the maintenance of particular animals, trusts for the erection and maintenance of monuments and graves, and trusts for the saying of private masses.
What is the perpetuity rule and how does it apply to trusts?
The perpetuity rule prevents people from tying up their assets on trust indefinitely. It consists of two related rules: the rule against remoteness of vesting and the rule against inalienability. The rule against remoteness of vesting applies to charitable trusts, requiring property to vest in the charity within a specified period. The rule against inalienability applies to non-charitable purpose trusts, limiting the trust’s duration to the common law perpetuity period.
What is the difference between charitable purpose trusts and non-charitable purpose trusts in terms of certainty of purpose?
The rules regarding certainty are more flexible for charitable purpose trusts compared to non-charitable purpose trusts. For charitable purpose trusts, it is sufficient to have an intention to apply property for a charitable purpose, and any uncertainty can be resolved by the court or the Charity Commission. Non-charitable purpose trusts require a clearly defined purpose that the court can carry out if the trustees surrender their discretion.
What happened in the case of Re Astor’s Settlement Trusts?
In the case of Re Astor’s Settlement Trusts, a non-charitable purpose trust was found to be void in part because the intended purposes were too uncertain. The court concluded that the purposes must be so defined that the court could carry out the declared purposes, not just a selection of them. The case highlighted the strict requirements for certainty in non-charitable purpose trusts.
What is the common law rule against inalienability?
The common law rule against inalienability applies to non-charitable purpose trusts and prevents assets from being tied up on trust for longer than the common law perpetuity period. This period is a life in being plus 21 years, or just 21 years if no life in being is specified. The rule requires that it must be clear from the outset that the trust will end within the prescribed perpetuity period.
What is the difference between property vesting in beneficiaries and property vesting in a charity?
When property vests in beneficiaries, the trust is extinguished once the capital is distributed to them. In contrast, when property vests in a charity, the trust continues to subsist as long as the purposes of the trust are fulfilled and the property does not run out. This allows charitable purpose trusts to exist indefinitely.
What is the practical difference between charitable purpose trusts and non-charitable purpose trusts?
Charitable purpose trusts have the practical advantage of being able to exist indefinitely, while non-charitable purpose trusts are known as trusts of imperfect obligation because there is no recognized method of enforcement for them. Charitable purpose trusts also have more flexible rules on certainty of purpose compared to non-charitable purpose trusts.
What is the purpose of the perpetuity rule?
The perpetuity rule prevents people from tying up their assets on trust indefinitely for policy reasons. It ensures that assets are not locked away and remain in circulation in the wider economy. Without the perpetuity rule, individuals could control their assets for many generations into the future.
What is the rule against remoteness of vesting in relation to charitable trusts?
The rule against remoteness of vesting applies to charitable trusts and requires that the property held on a charitable trust must vest in the charity within a specified period. This ensures that the trust property is used for charitable purposes and allows charitable purpose trusts to exist indefinitely.
What is the rule against inalienability in relation to non-charitable purpose trusts?
The rule against inalienability applies to non-charitable purpose trusts and prevents assets from being tied up on trust for longer than the common law perpetuity period. This period is a life in being plus 21 years, or just 21 years if no life in being is specified. The rule ensures that the trust will end within a reasonable time.
What is the difference between charitable purpose trusts and non-charitable purpose trusts in terms of certainty requirements?
Certainty requirements are more flexible for charitable purpose trusts compared to non-charitable purpose trusts. For charitable purpose trusts, it is sufficient to have an intention to apply property for a charitable purpose, and any uncertainty can be resolved by the court or the Charity Commission. Non-charitable purpose trusts require a clearly defined purpose that the court can carry out if the trustees surrender their discretion.
What was the provision in the case of Re Endacott and how was it held?
In the case of Re Endacott, a testator gave his residuary estate “for the purpose of providing some useful memorial to myself.” The provision was held to be void because the purpose was too uncertain to be charitable and did not fall within a recognized class of non-charitable purpose trusts.
What is a trust of imperfect obligation?
A trust of imperfect obligation refers to non-charitable purpose trusts falling within an Endacott exception. While the court recognizes their validity (meaning they will not fail if included in a will), they are not enforceable. It is prudent to check that the appointed trustee is willing to carry out the terms of the trust.
What is a perpetuity period and how does it apply to non-charitable purpose trusts?
A perpetuity period is the common law period of 21 years within which a trust must come to an end. The rule against inalienability applies to non-charitable purpose trusts, and it requires the trust to come to an end within the perpetuity period. The perpetuity period can be extended by reference to a human life in being, meaning the 21-year period does not start to run until the person dies.
What happens if a trust does not come to an end within the perpetuity period?
If a trust does not come to an end within the perpetuity period, it will be void. It must be certain at the time the trust is created that it will come to an end within the perpetuity period.
Why should a drafter always include an express perpetuity clause in a non-charitable purpose trust?
A drafter should always include an express perpetuity clause to limit the duration of a non-charitable purpose trust to the perpetuity period and ensure its validity. The rule against inalienability is applied strictly, and including an express perpetuity clause is best drafting practice.
When does the 21-year perpetuity period start to run?
The 21-year perpetuity period starts to run when the trust comes into effect, which is typically on the date of the testator’s death.
What happens if the purposes of a charitable trust fail?
If the purposes of a charitable trust fail, the cy-près doctrine applies. This allows the property to continue to be used for other charitable purposes.
What is meant by an identifiable benefit in relation to the public benefit requirement?
An identifiable benefit refers to a benefit that can be identified and described, even if it cannot be quantified or measured. The question of whether there is an identifiable benefit is separate from whether the trust is for a charitable purpose as a matter of law.
What does it mean for a purpose to be beneficial to the public or a section of the public?
For a purpose to be beneficial to the public or a section of the public, it must not be restricted to a private class of individuals. The possible beneficiaries must not be negligible in number, and the quality that distinguishes them from other members of the community must be a quality that does not depend on their relationship to a particular individual.
Can charities pursue political objectives?
No, charities cannot pursue political objectives such as seeking to change the law or government policy, or promoting the views of a political party. The courts and Charity Commission prefer to maintain political neutrality.
What is the distinction between a political purpose and the use of political means to achieve a non-political objective?
The distinction between a political purpose and the use of political means to achieve a non-political objective can be difficult to draw in practice. For example, a trust set up by Amnesty International to secure the release of prisoners of conscience by procuring the reversal of government policy was not held to be charitable. On the other hand, an organization that protects the environment and engages in political activity aimed at changing government policy in relation to airports can be considered charitable.
Under what circumstances can the original purpose of a charitable gift be altered?
Under section 62 of the Charities Act 2011, the original purpose of a charitable gift can be altered if: the original purpose has been fulfilled or cannot be carried out, the original purpose may still be workable but does not provide a use for all the property available to the trust, the property from similar trusts is combined for more effective use, the original purpose referred to an area or class of persons that is no longer relevant or suitable, or the purpose has been adequately provided for by other means, ceased to be charitable in law, or ceased to provide a suitable and effective method of using the property.
What is the distinction between a specific intention and a general charitable intention in relation to the cy-près doctrine?
The distinction between a specific intention and a general charitable intention is important in relation to the cy-près doctrine. If there was a specific intention to benefit a particular object, the property can be applied cy-près on the failure of the initial purpose. However, if there was an intention to give effect to a general mode of charity, the property can be applied cy-près from the beginning.
What are the 12 specific heads of charity set out in the Charities Act 2011?
The 12 specific heads of charity set out in the Charities Act 2011 expand on the four traditional heads of charity recognized at common law. They include the prevention or relief of poverty, the advancement of education, the advancement of religion, the advancement of health or the saving of lives, the advancement of citizenship or community development, the advancement of the arts, culture, heritage, or science, the advancement of amateur sport, the advancement of human rights, the advancement of environmental protection or improvement, the relief of those in need by reason of youth, age, ill-health, disability, financial hardship, or other disadvantage, the advancement of animal welfare, and any other purposes beneficial to the community not falling under the previous heads.
What is required for a charitable trust to be considered wholly and exclusively charitable?
For a charitable trust to be considered wholly and exclusively charitable, its purposes must be solely charitable. If the trust has non-charitable purposes, they must be ancillary to the charitable purposes. It is also possible to sever the fund and save the charitable component if necessary.
What happens if a trust fails?
If a trust fails, the property will return to the settlor on a resulting trust.
Under what circumstances will a trust remain effective even if it has a non-charitable purpose?
If the non-charitable purpose can be construed as incidental or subsidiary to the main charitable purpose, the trust will remain effective (Latimer v IRC).
How can a trust with both charitable and non-charitable purposes be recognized by the court?
If the charitable and non-charitable purposes can be separated, and a portion of the fund allocated to each, the court will sever the trust and recognize the charitable part. This is only possible if the trust language contemplates severance of the fund (Salusbury v Denton).
What is the difference in enforceability between charitable and non-charitable purpose trusts?
Charitable purpose trusts are enforceable by the Charity Commission, while non-charitable purpose trusts are not enforceable and require a willing trustee. The residual beneficiaries have standing to enforce the undertaking given by the trustee.
What is the net estate considered under the Inheritance (Provision for Family and Dependants) Act 1975?
Under the Inheritance (Provision for Family and Dependants) Act 1975, the net estate is considered, meaning only the value of the estate after deducting liabilities.
