Definition of benefit re possible disclaimer

Trusts Discussion
1

Hi folks

We are considering whether a disclaimer can be entered into by the executors of a client who died shortly after his spouse.

Client was left a life interest in various assets by the pre-deceasing spouse - shares, rental properties and some cash.
No dividends were paid on the shares in the period
Rental profits were earned, but not drawn upon in the period
No interest has been earned on the cash

We are too late for a Deed of Variation, in accordance with the Soutter’s Executry case, but are looking at whether the executors of our client can disclaim the life interest, but a condition of this is that no benefit has been enjoyed by the disclaiming party. Does the entitlement to the rental profits (although not drawn upon) mean that benefit has been enjoyed? Or does the fact that these profits were simply held on account mean that we can proceed?

I would appreciate any thoughts or guidance from those with experience in this area.

Many thanks.

Neil Groom
Argents Chartered Accountants

2

Regardless of whether income has been received in the estate, provided that no distribution was made to the husband, his personal representatives could disclaim the life interest(s) under s.93 IHTA 1984.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

3

A disclaimer requires that any benefit arising from an entitlement (eg a life interest) is not enjoyed prior to disclaiming the entitlement. Such disclaimer can be effected by the PRs of the deceased spouse.

The fact that rental income, for example, accrues prior to executing the disclaimer does not preclude a disclaimer from being executed so long as there has been no distribution of the rents ie no acceptance by the surviving spouse of the rents (other income).

Malcolm Finney