Mr A’s parents settle their property on trust for themselves as tenants in common for life and then for Mr. A. His mother dies and A acquires her interest. A is given a terminal diagnosis and makes it clear he does not wish to inherit anything from his father’s will, which is changed, or anything else. A then dies and his father dies 2 years later. It is possible to disclaim by conduct. If it can be established that A disclaimed his interest in the Settlement by conduct, under S93, is that disclaimer valid for tax purposes or will it still be subject to s142 (ie and most importantly, does it have to be in writing? As if so, it will be of no help for tax purposes).
If the disclaimer by conduct is not valid for tax purposes, can A’s PRs disclaim in writing on his behalf retrospectively to the time of his conduct? There seems to be no clear answer to the point - any suggestions would be most welcome.
I would suggest IHTA 1984 ss93 and 142 are separate provisions ie the conditions of s142 do not apply to s93 (eg s93 does not require any disclaimer to be in writing).
What evidence is there that A did in fact disclaim his remainder interest under the settlement? There is no time limit to effect a disclaimer (cp s142) and any disclaimer doesn’t have to be in writing.
Presumably if A’s interest under the settlement had been disclaimed prior to Father’s death it would not pass under A’s will (or intestacy) on A’s death.
The reference to “… or anything else” is somewhat vague. To whom, if anyone, did A make this comment/declaration? If the trustees of the settlement, maybe this would be sufficient proof of a disclaimer by A.
Assuming that a disclaimer could be proved to have occurred then s93 provides that it is assumed that A never became entitled to the interest for all purposes of IHTA 1984; s142 being irrelevant.
I don’t wish to disagree with Malcolm, but I always thought that a disclaimer must be in writing and made within two years of death to be valid for IHT purposes. IHTM35162?
I find the scenario a little hard to follow, but either there was a valid disclaimer by conduct by A initially or not. Whilst it is possible for the PRs and beneficiaries of a deceased person to disclaim after their death, if disclaimer was already made, I don’t think this can be done again by the PRs to obtain the tax benefit (assuming there is one). If there was no disclaimer by conduct by A initially then I believe its too late for the PRs to do so for tax purposes, as it has been more than 2 years.
Unlike with s.142 IHTA 1984, there is no time limit for a disclaimer under s.93 IHTA 1984.
Even if the beneficiary had purported to disclaim by their action/inaction, I have seen a number of instances where their PR(s) have effected a post-death disclaimer. The main issue has been the PR’s ability to demonstrate that the beneficiary had received no benefit. Depending upon the nature of the benefit being disclaimed, in some cases this can be more easily evidenced than others.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
To clarify/elaborate on my earlier post and to answer Luigi’s original question - as I understand, a disclaimer by conduct does not have the IHT benefits so is essentially a PET by Mr A, which is now a failed PET as he has died.
Mr A’s PRs can disclaim in writing on behalf of Mr A, but if it has been more than 2 years since death, then this will not be read back for IHT purposes. I do not believe the PRs can disclaim in writing and say this is made retrospectively when Mr A disclaimed by conduct, but I stand to be corrected.
I note Ihsan’s latest post and have difficulty in agreeing with what he says.
Although there is a 2 year time limit on a disclaimer under s.142 IHTA 1984, there is no time limit for a disclaimer under s.93 IHTA 1984.
There is no restriction on PR’s disclaiming on behalf of a deceased beneficiary, and such disclaimer being effective for IHT, as mentioned in my previous post.
My comments are based upon the acceptance of such disclaimers by HMRC, including where they* have been executed by the PRs several years after the disclaimed interest would otherwise have vested.
(* The disclaimer that is, not HMRC)
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
A disclaimer is a disclaimer. It is either valid in law or not. Section 93 applies to all legally valid disclaimers. We have had this similar theological discussion here about declarations of trust. If a disclaimer or Dot which is not in writing is nonetheless legally valid it does not follow that to create is necessarily a good still less the best idea. But if faced with the validity argument, or wishing to make it oneself, it is important to identify the rules of intrinsic validity and not to conflate them with s93 or assume without any justification that s93 requires a disclaimer to be in writing where the law does not so require it and the statute does not say so.
I note Paul’s comments and agree. I believe my misunderstanding relates to the fact that Mr A’s disclaimer was in relation to an interest under settled property.