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Wills, probate and administration

Discretionary trusts – mistake

The Hastings-Bass principle in relation to discretionary trusts was affirmed in a recent case in which the argument of mistake was also dealt with at length.

Mr Pitt was brain damaged after a road accident and his wife, following the advice of financial advisers, transferred his money into a discretionary trust. But the trust was not a trust for the disabled under s89 ITA 1984 and was caught on the tenth anniversary of its inception by the ten-year IHT charge. IHT had not been considered when the money was transferred.

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HMRC – non-residence status

The CA held that HMRC had not changed its interpretation or guidance in relation to when it assesses whether taxpayers had achieved non-resident status.

In two recent cases, the taxpayers unsuccessfully applied for judicial review in respect of the decisions of the Revenue and Customs Commissioners (RCC).

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IHT – pilot trusts

Practitioners can use pilot trusts to minimise IHT, particularly since the changes to trust taxation after the Finance Act 2006. A pilot trust is a trust created during the testator’s (T) lifetime with a nominal sum of usually £10, with the intention that substantial sums will be added later, usually from the will.

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Wills – drafting pitfalls

Legislative changes relating to scientific and social developments have created potential drafting problems for practitioners drafting testamentary dispositions. Particularly, issues relating to same-sex partnerships, fertility treatment and adoption are matters draftsmen should take steps to identify when taking instructions.

Under the Human Fertilisation and Embryology Act 2008 a non-genetic parent, whether male or female, in same-sex couples might be recognised in certain circumstances as the legal parent of a child not naturally conceived. The impact on the meaning of ‘children’ and ‘remoter issue’ in will drafting is apparent.

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Wills – revocation by subsequent civil partnership

Entering into marriage or civil partnership will revoke a prior will unless the will specifically includes a suitable clause that it is not to be revoked, or there is a suitable subsequent codicil to that effect. It is wise for practitioners to use a proper precedent when a will is being made in such cases.

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Lifetime gifts – capacity

A donor (D) had to be capable of understanding the general nature of the transaction he was undertaking. D was an elderly man who had gifted the family home to his son in a misguided effort to minimise IHT prior to death. The gift was held invalid for lack of capacity but whether it was void or voidable was not decided, mainly because the law was unclear.

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Statutory wills – capacity

Practitioners should note that the Mental Capacity Act 2005 has had a big impact on the approach to statutory wills made on behalf of individuals lacking capacity. The Act requires all decisions made under it to be made ‘in his best interests’, the meaning of which is expanded further in s4: the person making the determination must consider all relevant circumstances including specific factors set out in the Act. Prior to this, the court would make the will the patient would have made if mentally capable at the time.

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Procedure – LPAs

New forms for LPAs came into effect in October 2009, replacing the original 2007 forms. Practitioners should note some of the important changes these introduce under the Lasting Powers of Attorney, Enduring Powers of Attorney and Public Guardian (Amendment) Regulations 2009:

The regulations do not affect existing EPAs, whether registered or unregistered.

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Property – pre-death agreements

Practitioners must be increasingly cautious regarding formal agreements relating to property owned by co-owners, where one owner enters a new relationship, and that property is included within a will.

A recent case illustrates this. Reginald and Jacqueline Heath jointly owned a property in Stoke on Trent and had three children. They divorced in 1994 and drew up a formal agreement in 1997 stating that Mr Heath would purchase Mrs Heath’s share, making him the outright sole owner of the property.

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Property – assents; rights of beneficiaries

It was appropriate to adopt a single transaction approach to a will and to assents of property distributed under that will, to ascertain the rights of the beneficiaries over a right of way granted by the testatrix.

E was the grantor of two properties left under a will to two individuals, in which she also expressly mentioned a right of way in relation to those properties. Assents were made in favour of the beneficiaries, subject to the right of way and easements affecting it in each case.

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