Facts:
I act for the PR’s of Mrs X estate. At the time of Mrs X’s death she was married.
Mrs X’s will leaves estate to son.
The estate is chargeable and options being explored now with surviving spouse with Deed of Variation etc.
Problem:
Mrs X died on a Sunday.
On Friday, Saturday and Sunday Mrs X transferred the sum of £50k on each day to husband via bank transfer.
On requesting date of death valuations from the bank the gifts of £150k are not deducted as the gifts took a few days to clear the banking system. The monies were subsequently transferred to husband lets say on the Tuesday following her death.
DMC?
I believe not. I believe we have an intention to make an immediate inter vivos gift and thus falling foul of the DMC requirements that the gift is to take effect only in the event of death. Does her submission of the online bank transfer scupper this as the intention was immediate and not to be effective on her death.
If readers agree with the above… IHT position changers considerably. I recall attending a course many moons ago where a cheque was considered. To that end if Mrs X had given husband a cheque for £150k and he failed to cash it before Mrs X death then the gift fails? If this is correct, does the holdup in the bank transfer frustrate the gift or does the intention of Mrs X in submitting the request prevail Any thoughts most welcome.
It is trite law that where a gift is made by cheque, it is not perfected until the cheque is paid from the donor’s bank account.
How was the instruction given to the bank – a telephoned instruction, or an electronic instruction?
If the former, then the gifts may have failed as Mrs X could countermand her instructions before payment, in similar fashion to the ability to “stop” a cheque.
However, if an electronic instruction, even though the monies were not taken from Mrs X’s account until the Tuesday following her death, can such instructions be countermanded? If not, and that must be a question for her bank to answer, then I believe the gifts will have been “perfected” as she will have done everything possible to give effect to the gift, applying Re Rose, Midland Bank Executor and Trustee Co. Ltd. V. Rose [1952].
It should be noted, though, that if the husband is named executor, and obtains probate, that would also “perfect” the gifts to him, applying Strong v. Bird (1874).
I note the suggestion of the possible use of a deed of variation. If this is merely to reduce the IHT liability and not intended to benefit the surviving husband, HMRC might refuse relief under s, 142 IHTA. Having said that, as the husband receives no benefit under the will, the son might want to consider with his legal advisers if it might be appropriate to “buy off” any potential claim by the husband under the Inheritance (Provision for Family and Dependants) Act 1975, which could be evidenced by way of a deed of variation.
Lots of scope for argument/uncertainty. Hopefully at the very least the son will be persuaded to agree a deed of variation confirming the gifts so far as necessary
If the 3 consecutive transfers ( On Friday, Saturday & Sunday date of death
) were, as appears to me to be likely, made via on line banking then it
seems to me that, especially depending upon the state of health of Mrs X at
that time of the on line entries and proximity ( hopefully prior rather
than post! ) of the time of the Sunday transfer to the Sunday time of death
that questions could be asked regarding whether Mrs X actually made or was
even aware of the transfers.
As an example, having access to my wife’s passwords etc, I as I feel sure
others may well do for their spouses etc, deal with practically all
financial matters and therefore I personally carry out online transactions
for her - albeit I would add, with her full knowledge and authority (
albeit at the time of some transactions tacit ).