My client is the executor under the testator’s English will. He is also the sole beneficiary of the testator’s estate in Spain under a Spanish will. The English will was written by the testator and was poorly drafted.
The will gave the testator’s tenant an option to buy the testator’s basement and ground floor flats. The will also gave the tenant a tenancy for life with reversion to the testator’s nephew. The will then goes on to say,
‘After all my debts are paid: i.e. inheritance tax, income tax, funeral costs; I bequeath to the following beneficiaries…’
The will then goes on to leave general legacies to three charities. The will does not say anything about what should happen to the residue.
My view is that the requirement that all debts be paid, including inheritance tax, means that the testator has freed specific foreign legacies from UK inheritance tax, but not foreign inheritance tax. I derive this conclusion from WM&S at 41-48:
‘A direction that all taxes be paid out of residue , and/or that specific gifts of foreign property be free of tax discloses an intention that foreign property be, not forming part of the residue, should be free of UK inheritance tax. However, such a direction (and also a direction to pay testamentary expenses out of residue) will not generally be construed as freeing a specific gift of foreign property from foreign taxes, unless the will expressly extends the free of tax provision to foreign taxes.’
However, one could argue that the statement, ‘After all of my debts are paid’ also frees specific foreign legacies from foreign inheritance tax and that that section in WM&S is not relevant as this is not a direction that all taxes be paid from residue nor a direction that testamentary expenses be paid out of residue, rather this is a direction that all debts be paid out of residue, which the testator considers includes inheritance tax. What are people’s thoughts?
Yours the ever faithful Legal Beagle