Probate law

The Budget

The most interesting aspect of the Budget for most probate practitioners is probably the changes to the procedure for post-death variations.

In the case of variations made on or after 1 August 2002 the variation will automatically apply for the purposes of capital gains tax and inheritance tax (IHT) if the person making the variation specifies that it is to have this effect.

It appears that it is no longer possible to make an election outside the instrument.

Clause 117 of the Finance Bill 2002 provides that the variation must contain a statement made by all the relevant persons - that is the beneficiaries and, if more inheritance tax is due as a result, the personal representatives.

The Inland Revenue does not require to see the variation unless additional tax is due as a result of the variation.

However, in the more common case where less tax is due, the taxpayer will have to produce the variation to justify the claim for a refund or the payment of a reduced sum.

The most recent IHT Newsletter says that the Revenue will be revising its leaflet on variations.

There is also a measure to reverse the effect of the decision in Melville v CIR so that powers over trust property will be disregarded for IHT purposes.

Severance of joint tenancies

Re Woolough, Perkins v Borden Wills & Trusts Law Reports, May 2002, 595

This decision looks to have some far-reaching implications for practitioners when taking instructions for a will and when dealing with the administration of an estate.

It concerns severance of joint tenancies by mutual agreement.

Len and Emma were brother and sister and bought a house as beneficial joint tenants together with another sister, Jane.

Jane died and her interest passed to Len and Emma by survivorship.

After Jane's death Len and Emma made wills in identical form leaving all their property to each other and to another sister.

In 1981, when that sister died, they made new wills - also in identical form.

The 1981 wills provided that the survivor should have the house for life and after that it was to go to their niece with a substitutional gift to her children.

After Emma's death, Len made a new will leaving everything to charity.

The issue was whether or not the joint tenancy had been severed before Emma's death.

There had been no notice of severance under section 36 of the Law of Property Act 1925, but the three pre-1925 methods of severance were expressly preserved.

One of these is 'mutual consent'.

On behalf of Len's estate it was argued that this was inapplicable because there had been no agreement.

However, Master Anthony Moncaster found that the fact that the two had made wills giving each other a mere life interest in the property was sufficient to amount to an agreement.

'It is not a case of one of them acting behind the back of the other.

The reference in the will to a half share makes it clear that they were treating their share as disposed of by their wills.' It would not, of course, have amounted to severance had one joint tenant alone made a will dealing with the half share.

Clearly, when taking instructions for a will, it is desirable to have more clarity as to whether or not the parties wish to sever than was present here.

The safest course is to prepare a notice of severance or a recital of the parties agreement to sever.

When administering an estate there may be cases where it is necessary to investigate whether or not there was an earlier severance by consent.

Although a deceased may appear to have acquired the entire interest in a property by survivorship, there may have been severance by consent at an earlier stage.

The case gave rise to a further interesting discussion in Sherman v Perkins Wills & Trusts Law Reports, May 2002, 603 on conflict of interest (in the context of a wasted costs application).

The solicitors who prepared the wills, acted in the administration of Emma's estate and also for Len's estate.

David Mackie QC said that it was 'negligent and improper' for the solicitors 'having acted in the estate of Emma to take a position contrary to the interests of that estate when acting in Len's estate.'

Contested will

In Re Yvonne Cynthia Sholto-Small, Deceased (2002) LTL,14 May

The testator (T) left all her estate to C, a close friend of some ten years' standing, and C's family.

The deceased's next of kin contended that the will was invalid on the grounds that T's supposed signature on the will was a forgery, the will had not been properly executed, and that T had not known and approved its contents.

C's case was that the will had been executed at the surgery of T's GP.

Both the GP and one of the attesting witnesses to the will gave corroborative evidence on C's behalf to that effect.

The defendants called a handwriting expert whose evidence was that, on the basis of the evidence available to her, the signature on the will was more likely than not to be a forgery but she could not exclude the possibility that the signature was in fact genuine.

The defendants' case was that C, the GP and the attesting witnesses were all party to a fraudulent conspiracy.

Nicholas Stewart QC held that leaving aside the allegation of forgery, the court was satisfied that it was appropriate to apply the presumption of due execution.

There was nothing in the evidence to suggest that the formalities of the Wills Act 1832 had not been complied with.

Although the handwriting expert considered that forgery of S's signature was more likely than not, the possibility that it was genuine coupled with all the other circumstances led the court to conclude that, on the balance of probability, the will was genuine.

The allegation of want of knowledge or approval was not made out.

By Lesley King, College of Law, London