WAE - Post-death changes

What does the applicant need to show to make a claim under IPFDA?

- T's will did not make reasonable financial provision for the applicant

AND/OR

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

What is the jurisdiction for IFPDA?

- only applies where the deceased died while domiciled in England and Wales

What is domicile of origin?

- determined at birth

- based on the father's domicile if the parents were married or mother's if they were not.

What is domicile of dependency?

If the relevant parent (father if parents married, mother if not) changes domicile, the domicile of children under 16 changes too.

What is domicile of choice?

- if individual emigrates to another country with no intention of return

What are the 6 categories of applicant that can apply under IPFDA?

1. spouse of the deceased.

2. A former spouse who has not remarried.

3. A person (other than a spouse) who cohabited with the deceased as if they were spouses for two years prior to their death.

4. A child of the deceased.

5. Any person who was treated by the deceased as a child of their family. (e.g., stepchild)

---- above this line, no need to show maintenance by the deceased ---

6. Any other person who was financially maintained (wholly or partly) by the deceased immediately before their death.

What is the standard required to claim as someone being financially maintained by the deceased?

will be eligible to claim "only if the deceased was making a substantial contribution in money or money's worth towards the reasonable needs of that person, other than a contribution made for full valuable consideration pursuant to an arrangement of a commercial nature."

e.g., £100 a week would be enough, a chocolate bar per week would not

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

must be within 6 months of the date of the grant of representation

When can the court extend the time limit for making a claim under the IPFDA?

court has discretion to extend this (Re Salmon) taking 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

- whether the applicant has recourse to any other remedy

- whether C has an arguable case (Re Dennis)

In which court should applications under IPFDA be lodged?

- HC or County C

- if using High Court, use Family Division when an application is made by a spouse, civil partner or cohabitee and there are no complex issues of interpretation

- use Court of Chancery for other cases

Which property can be applied for under IPFDA?

- normal succession estate

- property that T held power of appointment over which was not exercised

- property that T nominated by stat. nomination or gave via donartio mortis causa

- T's share of property held as joint tenants (only if court considers this "just in all the circumstances")

- Property disposed of during T's lifetime

What types of remedy can C receive if they succeed in a claim under IPFDA?

- Periodical payments

- Lump sum.

- Transfer of property.

- Variation of marriage settlements.

- Variation of civil partnership settlements.

- Variation of the trusts on which the deceased's estate is held.

When will an order made under IPFDA be dated back to?

treated as if T had made that disposition at the time of their death

What is a reasonable standard of financial provision for a SPOUSE/CIVIL PARTNER?

The surviving spouse standard:

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

- higher than provision of mere maintenance

What is the reasonable standard of financial provision for NON-SPOUSE/NON-CIVIL PARTNER?

The maintenance standard:

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

When can the standard of financial provision for spouses be extended to non-spouses?

All three conditions must be satisfied:

- applicant is a former spouse of the deceased who has not remarried

- or applicant is a spouse who is judicially separated from the deceased

AND

- Divorce, dissolution, nullity or judicial separation occurred within 12 months of the death

AND

- No order for financial provision has been made or refused in the ancillary (secondary) proceedings.

How do courts assess what would be necessary for maintenance?

- courts will assess what would be reasonable, neither living in luxury or poverty

- will consider as a factor the actual standard of living enjoyed by C and T, but will not blindly use this

What 7 factors must the court consider when reviewing the application for financial provision?

- applicant's financial resources and financial needs

- financial resources and needs of any other applicants and any beneficiary of the estate

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

- size and nature of the net estate of the deceased

- Any physical or mental disability of any applicant or beneficiary

- Any other matter the court considers relevant in the circumstances (including the conduct of the applicant or any other person)

Must also consider foreseeable future financial resources and needs

Which additional factors must the court consider when reviewing the application for financial provision for SPOUSES, EX-SPOUSES and COHABITEES?

- applicant's age

- duration of the marriage/relationship

- contribution made by applicant to the deceased (e.g., caring for family)

for cohabitees - how long they lived together

Just for spouses:

- the amount the applicant might have been reasonably expected to receive in divorce proceedings if C and T ended their relationship on the date of death (guidance only, not binding)

Which additional factors must the court consider when reviewing the application for financial provision for CHILDREN OF DECEASED?

- the manner in which applicant was or may be expected to be educated

Which additional factors must the court consider when reviewing the application for financial provision for applicants TREATED LIKE A CHILD OF THE DECEASED?

- whether and to what extent T maintained the applicant

- whether and to what extent T assumed responsibility for T's maintenance

- how long they maintained them

- whether T maintained C while knowing they were not their child

- liability of any others to maintain the applicant

Which additional factors must the court consider when reviewing the application for financial provision for those who do not fall into any other category, but were maintained by T?

- length of time for which and the basis on which T maintained the applicant

- the extent of the contribution made by way of maintenance.

- whether and to what extent T assumed responsibility for the maintenance of the applicant

If making an award, what will the court require from the applicant to decide on how much they should award and through what method?

a list of the applicant's assets and liabilities (including any future assets or liabilities).

What will courts consider when considering trusts under IPFDA?

- interest in discretionary trust may not be enough as does not guarantee anything

- life interest may be enough, depending on the income being produced

- court may prefer to award an interest over awarding capital

e.g., awarding a life interest in the family home to Wife 2, then remainder interest to children from Wife 1

When will distribution of an estate be considered unsatisfactory by Bs?

- inadequate provision has been made for a particular person

- too great / unwanted provision has been made for a beneficiary

- the distribution results in an undesirable tax situation

What are the tax consequences of a B giving away their inheritance without varying it?

IHT

- beneficiary is making a PET, which will be chargeable if they die within 7 years

CGT

- any increase in the value of the asset since the date of the deceased's death would be subject to CGT if the increase is greater than B's tax free allowance

What is a variation?

- a direction from a beneficiary to the deceased's PRs, to transfer property that the beneficiary is entitled to to another person instead

- possible after an inheritance has been accepted

- may be made in respect of the whole or part of an inheritance

What are the IHT consequences of a variation?

- the gift from the original beneficiary is read-back to the date of the deceased's death

- is therefore treated for IHT purposes as having been made by the deceased to the new beneficiary

- the transfer is no longer a PET (as it would be otherwise)

- IHT due on the deceased's death estate is re-calculated

- but there may not necessarily be anything additional to pay

What conditions must be met for the IHT 'writing-back' effect to be achieved on disclaimers OR variation? (s.142 IHTA)

1. made by the original beneficiary in writing (deed is not required but frequently used)

2. within the two years following the deceased's death

3. contains an express statement by the beneficiary confirming s142 should apply

4. not be made for consideration in money or money's worth

Can a B vary their inheritance without PR approval?

Yes

- but can refuse to sign the variation if the assets held by them are insufficient to discharge the additional tax payable.

What do PRs need to do if the variation results in additional IHT being due?

- PRs sign the variation

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

How can variation limit CGT due?

- if B received something from T, and then gave it to X, they may be liable for CGT if the gift has increased in value since they received it from T (if there is not money left in their allowance)

- to avoid this, can get a variation of the will so that the gift is instead treated as being left by T to X

- any increase in value from date of death will only be taxed when X later disposes of the object

What gifts are exempt from CGT?

- Gifts of cash are exempt from CGT

- CGT consequences only need to be considered on variation of non-cash assets

Will CGT be payable on the death estate after a variation of the will?

No

- unlike for IHT, there is no issue of additional CGT because no CGT is payable in respect of the deceased's death estate in the first place.

Does the variation of the will have to be written back?

No

- B can choose whether or not to use the writing back provisions for both IHT and CGT

What is a precatory trust?

- Gift is made with an express wish that the beneficiary distributes their inheritance in accordance with the testator's wishes.

- no legal obligation for the beneficiary to comply with these wishes