Recent developments highlight the importance of keeping your will up to date.
In this year's Budget the Government announced plans to promote charitable legacies by lowering the rate of IHT from 40% to 36% where at least 10% of the net estate after reliefs, exemptions and the nil-rate band passes to charity.
A recent consultation document sets out this proposal in greater detail. Ultimately, its success will depend on the extent to which individuals feel they have made adequate provision for their dependants prior to making any charitable gifts – and whether HMRC can resist the urge to over-complicate the proposed relief.
In any case, its introduction will lead many to review their wills – although this is something that should be done on a regular basis while the individual remains able.
The recent case of RSPCA v Sharp [2010] EWCA Civ 1474 demonstrated how drafting an imprecise will can throw up difficulties when trying to decide how an estate should be distributed.
The case hinged on the interpretation of a nil-rate band clause which, had the RSPCA been successful, would have resulted in the deceased's family receiving considerably smaller bequests than they thought they were entitled to. Such clauses need to be reviewed anyway following the introduction of the transferable nil-rate band in October 2007.
Making proper provision for your dependants was the subject of Ilott v Mitson [2011] EWCA Civ 346. This was an action brought under the Inheritance (Provision for Family and Dependants) Act 1964 by an estranged daughter (Ilott) whose mother had left her estate to three animal charities and made no provision for her.
Ilott was able to establish that despite having been financially independent of her mother for many years, she was still entitled to reasonable provision from the estate, and that special circumstances or moral obligation were not pre-conditions for a successful claim.
Some commentators have interpreted this judgment as an attack on the principle of testamentary freedom. But, whatever your views, it does underline the need to give due consideration to the needs of family and dependants.
If all else fails and there is goodwill between the legatees, variation can be carried out within two years of death by a deed of family arrangement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
