6. Administration: Family Provision and Post-Death Variations

Question 1

What does the Inheritance (Provision for Family and Dependants) Act 1975 allow?

Answer 1

Allows certain categories of people who may be aggrieved to apply to the court for a benefit from the estate following the testator’s or intestate’s death.

Question 2

What are two examples of someone being aggrieved?

Answer 2

1. They have been left out of a will
2. Are not inheriting on an intestacy
3. A beneficiary who is dissatisfied

Question 3

When does the Inheritance (Provision for Family and Dependants) Act 1975 apply?

Answer 3

only where the deceased died domiciled in England and Wales

Question 4

Who are the people who can make a claim?

Answer 4

• The spouse or civil partner of the deceased
• A former wife, husband, or civil partner of the deceased who has not remarried
• A child of the deceased
• Any person (not being a child of the deceased) who was treated by the deceased as a child of the family
• Any person (not listed above) who immediately before the death of the deceased was being
  maintained either wholly or partly, by the deceased.
• Any person who, during the whole of the period of two years ending immediately before
  the date when the deceased died, was living:
  (i) in the same household as the deceased, and
  (ii) as the husband, wife or civil partner of the deceased.

Question 5

How does a temporary separation, such as being in a hospital or care home before death, affect cohabitant qualification?

Answer 5

It does not disqualify the cohabitant. The court considers whether a reasonable person would view them as living as husband and wife or civil partners.

Question 6

What factors does the court assess for cohabitant qualification?

Answer 6

The court looks for some degree of permanence and commitment in the relationship to determine cohabitant qualification.

Question 7

What is required for an applicant to qualify as a cohabitant in terms of the relationship with the deceased?

Answer 7

The applicant and the deceased must have lived together as if they were spouses or civil partners.

Question 8

How does the court determine if the relationship qualifies as living together as husband and wife or civil partners?

Answer 8

The court assesses whether a reasonable person with normal perceptions would regard them as such.

Question 9

Does the absence of sexual relations affect the court’s finding on cohabitant qualification?

Answer 9

No, the absence of sexual relations does not preclude the court from deciding on cohabitant qualification.

Question 10

Is it necessary for the relationship as a couple to be openly acknowledged for qualification?

Answer 10

Yes, the relationship as a couple must be openly acknowledged for the purpose of qualification.

Question 11

What does it mean to live in the same household to qualify as cohabitants?

Answer 11

living together as one unit.

It would not include the situation where a couple is living under one roof but as two entities.

Question 12

When should a family provisions application be made from?

Answer 12

The grant of representation

Question 13

What is the time limit for making family provision applications from the date of the grant of representation?

Answer 13

within six months

Question 14

Can an application be submitted before the grant of representation is issued?

Answer 14

Yes

Question 15

How can a potential applicant check if a grant of representation has been issued?

Answer 15

A potential applicant can conduct an online or postal search of probate records or opt for a ‘standing search’ to be notified of any grant issued in the following six months.

Question 16

Is there a possibility of extending the time limit for a family provision application?

Answer 16

The court has the discretion to extend the time limit, but only if there is a good reason for the delay.

Question 17

What factors does the court consider when deciding to extend the time limit?

Answer 17

• the merits of the applicant’s claim
• how promptly the applicant sought permission
• whether the estate has been distributed
• if notice was given within the time limit, and
• if the applicant has an alternative remedy if permission is refused.

Question 18

What is the ground for making a claim?

Answer 18

the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for the applicant.

Question 19

How will the court consider whether reasonable financial provision has been made taking into account general and specific factors (s.3 guidelines - two stages)?

Answer 19

Stage 1 - The court must consider whether reasonable financial provision has been made for the applicant

Stage 2 - If the applicant has shown that reasonable financial provision has not been made, the court will proceed to decide what standard of provision to make

Question 20

What type of test is for the reasonable financial provision?

Answer 20

an objective test - not a question of whether the deceased was reasonable

Question 21

Who carries the burden to show that the test is satisfied in an application for family provisions post death?

Answer 21

on the applicant

Question 22

What are the two standards for judging ‘reasonable financial provision’?

Answer 22

1. The surviving spouse standard
2. The ordinary standard

Question 23

What does the surviving spouse standard for judging reasonable financial provision require?

Answer 23

The provision required need not to be for the claimant’s maintenance but is based on what is reasonable for

Question 24

What is the relevant factor in the surviving spouse standard for judging financial provision?

Answer 24

how much the spouse or civil partner might have expected on a divorce

Question 25

What does the ordinary standard for judging reasonable financial provision require?

Answer 25

such financial provision as it would be reasonable in all circumstances of the case for the applicant to receive for their maintenance.

Question 25

What standard of maintenance are the two standards of provisions for assessing reasonable financial provision?

Answer 25

1. Surviving spouse standard - higher, non-maintenance standard of provision
2. Maintenance standard - the lower standard of maintenance

Question 25

What does the limitation to maintenance in the ordinary standard mean?

Answer 25

means that a person who is able to pay for their living expenses out of their own resources will not obtain an award.

Question 25

What are the possible orders the court can make (taking into account s.3 guidelines) for a reasonable financial provision?

Answer 25

1. payment of periodical payments
2. a lump sum payment
3. transfer of specific property to applicant.

Question 25

What are the s.3 guidelines?

Answer 25

(i) the financial resources and needs of the applicant, other applicants and beneficiaries of
the estate now and in the foreseeable future;
(ii) the deceased’s obligations towards any applicant or beneficiary;
(iii) the size and nature of the estate;
(iv) the physical or mental disability of any applicant or beneficiary;
(v) anything else which may be relevant, such as the conduct of the applicant.

Question 26

What is the next step after determining that the estate has not made reasonable financial provision?

Answer 26

to determine the amount and nature of the provision that should be made.

Question 27

What powers does the court have to make orders against the deceased’s estate?

Answer 27

wide powers to make orders against the ‘net estate’

Question 28

What does the term ‘net estate’ encompass for the purpose of making orders?

Answer 28

includes:
* property the deceased had or could have disposed of by will
* deceased’s share of joint property passing by survivorship if ordered by the court.

Question 29

What does the court declare when making an order for family provision?

Answer 29

The court declares how the burden of the order is to be borne, specifying which beneficiary is to lose part or all of the property they would otherwise have taken.

Question 30

How is the altered disposition of the estate treated for Inheritance Tax (IHT) purposes? (takes effect from…)

Answer 30

Treated as taking effect from death.

Question 31

How can an altered disposition of the estate affect the IHT calculation?

Answer 31

IHT may need to be recalculated, depending on the order’s impact on the estate, such as an increase in the amount passing to the deceased’s spouse.

Question 32

How might a person attempt to avoid a successful family provision claim?

Answer 32

A person may try to give away their property during their lifetime so that it does not form part of their ‘net estate’ against which claims can be made.

Question 33

Why is an attempt to avoid a successful family provisional claim considered fruitless?

Answer 33

because the court can address certain actions - gifts made less than six years before death with the intention of defeating a claim can be avoided by the court.

Question 34

What happens when the court avoids gifts made with the intention of defeating a family provision claim? (made less than six years before death)

Answer 34

The property in question becomes included in the ‘net estate,’ making it subject to potential family provision claims.

Question 35

What is the significance of the six-year timeframe mentioned in the context of gifts?

Answer 35

Gifts made less than six years before death with the intention of defeating a family provision claim can be scrutinized and addressed by the court.

Question 36

What is the risk for PRs if they distribute the estate within six months of the grant and a family provision claim is allowed by the court?

Answer 36

If insufficient assets remain in the estate, PRs will be personally liable to satisfy the family provision claim.

Question 37

What advice should be given to PRs regarding estate distribution once a grant and a family provision claim is allowed by the court?

Answer 37

PRs should be advised not to distribute the estate until six months have elapsed from the issue of the grant.

Question 38

How does the timing of estate distribution affect PRs’ personal liability in the context of family provision claims?

Answer 38

If the court permits an application out of time, PRs will not be personally liable. However, the applicant may have the ability to recover property from the beneficiaries.

Question 39

Why is it recommended for PRs to wait until six months have passed before distributing the estate?

Answer 39

Waiting for six months reduces the risk of personal liability for PRs in the event of a family provision claim and allows for a more secure distribution process.

Question 40

When advising on a family provision claim what are the points that you must go through?

Answer 40

1. Did the deceased die domiciled in
   England and Wales?
2. Does the applicant fall within a category of applicant?
3. Is the applicant within the time limit?
4. Has the will/intestacy made reasonable provision for the applicant?
5. Apply general/special guidelines
6. Orders

Question 41

What are the three reasons why a post-death variation or disclaimer might be desirable?

Answer 41

1. Beneficiaries may seek changes to a will due to perceived unfairness or changed circumstances. Adult beneficiaries might want to redirect their legacy to their children.
2. To avoid legal disputes, voluntarily adjusting the will or asset distribution can lead to an out-of-court settlement.
3. Modifying an inefficient will or distribution plan could result in significant savings in Inheritance Tax (IHT) and/or Capital Gains Tax (CGT).

Question 42

What are the types of arrangements for property to be redirected?

Answer 42

(a) A lifetime gift by the beneficiary of an inheritance under a will or under an intestacy
(b) Post-death disclaimers
(c) Post-death variations

Question 43

What are disclaimers?

Answer 43

a rejection of the assets inherited under the will or the intestacy law or by survivorship

Question 44

What is the effect of a disclaimer?

Answer 44

Disclaimed assets pass as though the original beneficiary had predeceased.

Question 45

When are disclaimers appropriate?

Answer 45

Disclaimers are appropriate only if, following the rejection, the property passes to the person whom the original beneficiary intends to benefit.

Question 46

What can a beneficiary achieve through a post-death variation?

Answer 46

A beneficiary who varies a benefit through post-death variation can direct where the benefit is to go and on what terms.

Question 47

How does a post-death variation differ from a disclaimer in terms of flexibility?

Answer 47

provide greater flexibility + restrictions on disclaimers do not apply

Question 48

What requirements must the original beneficiary meet for a post-death variation?

Answer 48

• 18 or over
• have mental capacity

Question 49

What can a variation be used for?

Answer 49

to redirect the deceased’s interest in joint
property which passes by survivorship.

Question 50

What can the court do if a beneficiary lacks capacity/is an infant and cannot consent to variations for themselves?

Answer 50

court can consent on their behalf as long as the variation is for their benefit.

Question 51

What must a post-death application be for the court to approve it?

Answer 51

must be justified - e.g. it would achieve a considerable tax saving.

Question 52

What does s 142 IHTA1984 allow for IHT considerations in variations/disclaimers?

Answer 52

allows variations to be ‘read back’ into the will - as if the testator gave the legacy directly to the new beneficiary

Question 53

What are the conditions that have to be satisfied for a variation or disclaimer to be ‘read back’ to the deceased’s death?

Answer 53

The conditions are that the disclaimer or variation:
(a) is in writing and signed by the original beneficiary;
(b) is within two years of the deceased’s death; and
(c) is not made for a consideration in money or money’s worth.

Question 54

What is an additional condition for variations to be read back to the deceased’s death, which does not apply to disclaimers?

Answer 54

variations must state that s 142 IHTA 1984 is to apply

Question 55

What triggers Capital Gains Tax (CGT) in the context of inheritance?

Answer 55

CGT is triggered on disposals of assets, which include sales and lifetime gifts, but not transfers on death.

Question 56

When is CGT charged on a disposal, and what does it consider?

Answer 56

CGT is charged on any gain, which is the increase in the value of the asset since the person acquired it.

Question 57

How does a disclaimer or variation within two years of the deceased’s death affect CGT?

Answer 57

It can be read back to the deceased’s will for CGT purposes, eliminating the need for a disposal by the original beneficiary and avoiding a CGT charge.

Question 58

What is maintenance?

Answer 58

payments which enable the applicant to discharge the cost of their daily living at whatever standard of living is appropriate to them.

Question 59

What payments are addressed under maintenance?

Answer 59

payments required to meet recurring expenses, such as rent, heating and food bills.

Question 60

How does the size of the estate have an effect on an application?

Answer 60

the greater the estate, the greater the chances of success

Question 61

What are the special guidelines for cohabitants

Answer 61

• age of the applicant
• length of time the applicant and deceased lived as husband and wife
• contribution made to the family

Question 62

Is a claimant stilled entitled to make a claim if they killed the deceased?

Answer 62

Yes technically they can but it will fail.

If a beneficiary under a will is criminally responsible for the testator’s death, their entitlement under the will is forfeit