Hi all
I have an estate where my unmarried deceased left a LIT to her partner of their property, worth £225k. She was 94 and he is similarly aged and unlikely to stay there long.
They were not given advice on the IHT consequences of this gift and I have suggested a disclaimer. There is nothing stopping this on these facts as far as I can see. They both have valuable estates.
Can you please let know know if I’m missing anything obvious?
A disclaimer requires that the beneficiary has not accepted any benefit from the property; presumably, in the present case the beneficiary has presumably lived in the property and hence already had some benefit.
Malcolm Finney
Thank you for your reply.
This was my fear, but as the joint owner has a legal right to occupy anyway, could this not be argued against?
I think that as the survivor continues to live in the property in which he has an interest (giving a right to occupation) that this could constitute a strong argument that it did not follow that he had accepted the IPDI under the will and could therefore not disclaim.
It would still be important that he did not do anything else that might constitute acceptance.
Maybe someone has recent experience of HMRC’s attitude.
Malcolm Finney
I tend to agree with Malcolm’s revised view. The rights of a joint owner are very different to that of a sole owner. I think a co-owner’s right to disclaim an interest conferred on her by the other co-owner’s will should not prevent a disclaimer of that interest unless she has exercised any right of a sole owner. Strictly, the elapse of time should not of itself detract from that but in practical terms the longer it goes on the more difficult it will be to deflect the argument that the individual has exercised the rights of a sole owner. Who are the trustees of the IPDI trust? They should formally assert their rights to reinforce her argument.
The query does not make it clear whether the survivor was or was not a co-owner. If she was not and the IPDI is her only right to live in the property she cannot disclaim. “Their property” is ambiguous as we all tend to use “their” these days to as a singular alternative to his or hers as well as for the plural possessive.
Jack Harper
I must confess to a dislike of the apparent increase in use of the word “their” not least because, as Jack points out, it can be ambiguous. What was so bad in using “his” or “her” ?
Maybe this is the dinosaur coming out in me.
Malcolm Finney
I was going to clarify and apologise for the ambiguity a couple of messages ago, but then I re-read the title of the thread and thought it was pretty clear.
Thank you so much for your replies.
I am an analogue dinosaur and have a Ph.D in Pedantry. However I do try, despite myself, to avoid discouraging those who pose queries on here by nitpicking for the sake of it. The lawyer in me cannot help being a stickler for precision, often to the chagrin even of my family. So I apologise for any excess.
Last week in the supermarket I was sent off to procure “tomatoes and sweet corn in a tin”. I returned empty-handed to encounter disbelief and some fury. These items were in fact available and I would have been to find them if I had been asked to get “tomatoes and sweet corn in tins”.
As a student of Wittgenstein I learned early on that it is inaccurate to say “the ladies are wearing the same hat” instead of a similar hat. I once heard Lord Denning remark that there was a world of difference between “a woman and child” and a “woman with child”. I am afraid this psychopathology of mine is derived from a lifetime of drafting documents to avoid the minutest possibility of ambiguity (unless instructed to the contrary by the client, naturally!).
Jack
The life tenant could release the life interest by deed of release (there’s a precedent in Practical Wills). This would cancel the life interest and advance the remainder interest. Not great for the life tenant. If you’re within 2 years the life tenant should get IHT read-back under section 142. The remaindermen, who presumably aren’t occupying, won’t get PPR for CGT on their half.
As a release implies an acceptance of the life interest, will not s.102ZA FA 1986 be engaged, giving rise to a potential gift with reservation?
I say “potential” as the date for identifying if a GWR exists is the date of death.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
As always blown away by the knowledge of the forum, particularly Paul.
I am somewhat perplexed by a lawyer engaged by ‘the person in questions’ family, who suggests a simple deed of variation of the life interest quite confidently. This person is a HOD in their firm, but seemingly qualified only quite recently.
As far as I can tell, this is not possible using section 142. But sometimes the young and inexperienced cut through the fat to the heart of the issue so I’m never one to rush to a conclusion.
As much as I’ve read, it’s a disclaimer if HMRC accepts that the TIC did not receive a benefit from the life interest. Please do set me right if not as I have to have an awkward conversation.
A fundamental problem with the disclaimer and whether a benefit has been received, and a variation and whether consideration has been received, is that HMRC are not going to engage in negotiation/clarification ahead of the actual event taking place. So the clients must commit and learn their fate later, when the action may not be reversible subject to the dubious and in any event discretionary remedy of equitable mistake. HMRC will not concede it unless it is litigated, though the FTT thinks it can make decisions by reference to the availability of equitable remedies by predicting the likely view of the Chancery Division (Gary Hymanson [2018] FTT 667 which involved rescission).
In theory it is possible to seek a Non-Statutory Clearance after the event to cut down the waiting time but this will require a very full statement of the applicable facts, warts and all, or clearance might be revoked. It is not however necessary to coach HMRC on the contrary legal arguments.
At the very least an adviser should make clear what the probable downsides will be of a successful HMRC challenge and any reporting obligations must be scrupulously couched in terms that HMRC will not be hoodwinked or misled as to the facts.
When an adviser gives advice which seems patently wrong in technical terms a strategic dilemma arises. Do you seek a second opinion and act on it instead or follow his advice and bank the right to sue. In the latter case you must be able to show you relied solely on his advice and have not consulted anyone else including this Learned Forum. And is it worth the hassle and uncertainty?
This did happen to me once. Friends of mine were given advice, and an implementing document based on it, by a top firm. I pointed out, without advising, that the device in the document, designed to ensure the number of shares to be given away came within the NRB, risked being at best a postponement of the date of gift and at worst being void altogether for uncertainty. They decided to go ahead and bank the right of action. They clearly relied exclusively as it was the relevant firm’s very own invented device and document, which they confirmed in writing would have the effect claimed for it. I suggested that they should not seek another opinion because it might not be conclusive anyway. In the event the crunch point never came because the value of the shares given away fell by the time of the actual transfer to well within the NRB amount.
Jack Harper
Based upon the exchanges so far, provided death occurred within the last 2 years, I am not sure why a variation within s.142 IHTA might not be possible.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thank you.
I think my sticking point is when I asked this question before there was a long discussion about having received a benefit and therefore disclaiming not being possible, negotiating with HMRC etc.
I appreciate I asked about disclaimers specifically, but no one suggested a variation so I assumed that was not possible, as to vary an estate you are accepting it and then passing it on.
Seemed too simple a solution when disclaiming didn’t seem possible.