Probate law

TaxationAbacus Trust Company (Isle of Man) Ltd and Another v NSPCC (2001) The Times, 25 September This case offers the possibility of escape from what would otherwise be a taxation disaster.

Leading counsel had advised that to avoid a substantial capital gains tax liability trustees of a settlement should appoint assets to the National Society for the Prevention of Cruelty to Children (which was one of the class of discretionary beneficiaries).

However, it was a vital part of the scheme that the appointment be after 6 April 1998.

Unfortunately the appointment was made on 3 April 1998.Mr Justice Patten applied the rule in Re Hastings-Bass deceased [1975] Ch 25 which allows the court to interfere with the actions of a trustee which have not had the intended effect where, among other things, 'it is clear that he would not have acted as he did......had he not failed to take into account considerations which he ought to have taken into account'.Trustees are bound to have regard to the fiscal consequences of their actions.

Where, as was the case here, it could be demonstrated that a proper consideration would have led to the appointment not being made, the court should treat the purported appointment as an invalid exercise of the power.

Therefore, the appointment was void ab initio.SurvivorshipGoodman (as administrator of the estate of Brian Goodman) v Anita Carlton (Nee Matin) (2001) LTL 29 August 2001This case illustrates the importance, where property is bought as co-owners, of establishing the beneficial interests each party is to have and explaining the effect of the doctrine of survivorship.The deceased (G) had a long-term and stable relationship with C, although they never lived together.

G moved into a property as a tenant and later bought the freehold at a discount.

G had insufficient income to obtain a mortgage alone, so G and C applied jointly.

The purchase was in their joint names.

G made all the mortgage payments alone.C conceded that she and G had never discussed or agreed the extent to which either of them would be beneficially interested in the property.

However, the transfer provided, at the instigation of the parties' then solicitor, that the survivor of G and C would be entitled to give a valid receipt for sale proceeds.

After G's death in 1987, C moved into the property and paid the mortgage.

G's administrator applied for a determination of the extent, if any, of C's beneficial interest.

Peter Leaver QC found that given the circumstances of the case, and in particular the absence of any discussion, agreement, expectation or understanding that C would share in the beneficial ownership of the property, the mere fact that the property had been conveyed into the joint names of G and C carried little weight.

The same was true of the fact that the mortgage was in joint names.

C held the property on resulting trust for G's estate although credit would be given to her for payments she had made.

InsuranceMerrett v Babb [2001] 3 WLR 1Here is a worrying case for assistant solicitors.

B was employed by a firm of surveyors and provided a valuation for a building society which turned out to be negligent.

The sole principal of the firm was made bankrupt and the firm ceased business.

The trustee in bankruptcy cancelled the firm's professional indemnity insurance without run-off cover.

The purchaser of the property, M, brought an action against B personally seeking damages for a negligent valuation.

The Court of Appeal agreed with the first instance decision that B was liable.

Lord Justice May quoted from Lord Griffiths' judgement in Smith v Eric S Bush [1990] 1 AC 831: 'The essence of the case against [X] is that he as a professional man realised that the purchaser was relying upon him to exercise proper skill and judgment in his profession and that it was reasonable and fair that the purchaser should do so.'Lord Justice May went on to say 'It is, of course, unfortunate for [B], if he is not insured against this claim...

Since professional employers will normally be vicariously liable for their professional employees' breaches of duty, it may be supposed that a solvent employer's professional indemnity policy will normally cover claims against their professional employees.

Prudent professional employees will obviously want to ensure that they are covered personally by their employers' insurance and may need to take steps to obtain personal insurance if that cover does not continue after their employment ends.' Intention of deceasedDavis v Davis LTL 6 September 2001 This case turned on whether or not a life assurance policy had been assigned absolutely or for a particular purpose.

There appears to have been no documentary evidence, but the result must have been in accordance with the deceased's intentions.The deceased (D) bought a property for 36,000 in 1997.

He paid a deposit of 1,800 and the rest was borrowed.

At the time he was separated from his wife and did not want to acquire any property in his own name.

He, therefore, agreed with his sister (S) that she would buy the property with the aid of a mortgage as his nominee.

D took out term life assurance to cover the cost of the mortgage and assigned the benefit of the policy to S.He died a few months later with a will in which he left everything to his children.

S contended that the assignment to her of the policy was absolute and free from any obligation to deal with the proceeds in a particular way.

D's executor argued that the assignment was not absolute but was subject to a trust requiring S to redeem the mortgage.Mr Justice Evans-Lombe held that the assignment was on trust.

There was evidence suggesting that S had known this to be the position.

In any event her contention was unlikely to be right as it would have rendered the will pointless as there would have been no assets.

Furthermore, to use the policy to make provision for S would have been odd since it only had value during its term.Social fund paymentsSI 2001/30223 makes some changes to the Social Fund Maternity and Funeral Expenses (General) Regulations 1987.

Under these regulations people in receipt of certain benefits (for example, income support) can claim a social fund payment to meet funeral expenses.

The most significant change introduced is the removal of the bar on payment where there is another close relative with capital resources.Also note the Court of Protection (Amendment) Rules 2001 SI 2977 increases the limit on assets for 'short' orders from 10,000 to 16,000.

By Lesley King, College of Law, London