A grandfather passed away in February 2021 leaving virtually his entire £1M estate to his sole son.
Due to RNRB & TNRB there was no liability to IHT
The son passed away in April 2021, a couple of weeks after signing a new will, leaving everything in his will [ which actually was simply just his inheritance ] to his daughter from a first marriage ignoring , against advice, providing for his 2nd wife, whom he was planning to divorce.
The granddaughter then created a DoV bypassing her father thereby avoiding substantial IHT as he would not have been entitled to RNRB relief.
2nd wife has claimed against the executor of the grandfather’s estate who understandably is reluctant to release the assets to the granddaughter, but technically is there an issue against him doing so?
The 2nd wife understandably potentially has a claim against the father’s estate and accordingly the daughter, but does she have the ability to stop the grandfather’s executor from distributing in accordance with the DoV to the granddaughter?
Is it known whether the wife has lodged a claim under I(PFD) 1975 against the deceased husband’s estate? The deadline (subject to possible extension) is six months from the date probate is granted.
In the absence of an application the PRs are able to distribute the estate (whether or not the court may extend the time limit beyond six months). Even before the expiry of the six month period some distributions may still be made depending upon the facts.
S20(1) provide for recovery of distributed estate property.
For I(PFD) purposes the relevant estate is that of the husband at the date of death. So I do not think that the DoV redirecting inheritance by father from grand-father to grand-daughter in any diminishes the estate of the father against which the wife may claim.
In short, after the six months period the wife has lodged no claim then distribution by the PRs can safely be made (whether PRs of father or grandfather). If a claim has been lodged, other things being equal, it would seem unwise in practice for any distributions to be made until matters become clearer.
I agree with Malcolm that the daughter’s entitlement under the DoV will be subject to the IPFDA claim.
I would be wary, though, of considering distributing the estate once 6 months has elapsed from the date of the grant, even if no claim has been served. Once issued, a claim is valid for service for 4 months from the date of issue. Accordingly, I would usually recommend that a period of 10 months (plus a day) from the date of the grant before considering a distribution. However, once the 6 month window has closed consideration might also be given to asking the potential claimant if a claim has been issued, although they are not obliged to answer such a question.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Is there any way of finding out by an application to the court whether a claim has been made? I must confess having to wait a further four months can be very frustrating for beneficiaries as well as executors and their advisors.
I think as Patrick says an extra four months on top of the six months may be unattractive to all parties in particular given the PRs are effectively protected after waiting the six months.
I’m sorry, Malcolm, but I disagree with you on the suggestion that PRs are effectively protected after waiting 6 months.
The protection of s.20 IPFDA applies where the particular circumstances apply, which does not include the possibility that a claim has been issued within the 6 month window but not served before the date of any distribution.
This aspect was flagged to me by counsel many years ago and litigation lawyers I have spoken with since have endorsed that view.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Paul, what I would like to ask is where is the clear authority to support the view that PRs are not protected once the six month period has expired. S20 offers protection as stated therein but does it then follow that protection is lost in any other set of circumstances eg distributions are made post the six mother period but prior to receipt of service?
When looking I agree somewhat superficially at this matter in the past, every now and again, I don’t recall every reading that the PRs would be exposed if distributions were made after six months but prior to receipt of service.
If you are correct as I suspect you are given your expertise in this area, I’m surprised that I haven’t come across the point before in any of the literature.
Thank you all so much for your input and advice. The scenario is actually even more complicated. The son was living and died in Cyprus. The widow has put the UK executors on notice re not distributing via a letter [ not a formal IPFDA claim ] from her Cypriot lawyer. She is currently processing a claim in the Cypriot courts that if he is deemed Cypriot domiciled (from a Cypriot perspective), she could be entitled to between 35-50% of the estate.
If she fails with that claim, then she will make a formal claim under I(PFD).
Both caution against a distribution within 10 months of the date of the grant on the basis that a PR is not protected by s.20 in respect of a claim issued, say, at the end of the 6 month window and served at any time within the 4 month window during which it is valid for service.
Allardice states (in respect to distributions): the recommended practice is for personal representatives to wait for 10 months from the date of representation on the basis that a claimant may have issued but not served.
Mindful of the standing of the authors, I would be reluctant to go against their recommendation other than in exceptional circumstances, which would include written confirmation from the potential claimant’s advisers that no claim has been issued within the 6 month window.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I thank Paul for responding to one of my earlier posts and it would seem I read the wrong books!
It does surprise me though that many texts seem to make no reference to the “4 months service period” only to the 6 months within which a claim must be made. Interestingly, Penelope Reed in the commentary to s20 in her book “Trusts and Estates Law Handbook” makes no reference to the period of service.
Depending upon the precise circumstances it would therefore seem that PRs should simply be advised not to distribute until the ten month period has expired (perhaps subject to Paul’s comment in his final paragraph).
Clearly 10 months, it must be before the PR can safely distribute the estate. However, I come back to my question 3 days ago, namely, is there any machinery which enables one to find out if a claim has been issued? Surely, in order to issue a claim, the claimant must submit it to the court and if that is the case, what is the procedure for applying to the court to find out if a claim has been made? If the application is made after 6 months and the answer from the court is No, then I presume the PR could safely distribute. Perhaps I am looking at this in a too simplistic manner, but I would love to know the answer as I am sure others would.
“Subject to the foregoing provisions of this Act, a personal representative is not bound to distribute the estate of the deceased before the expiration of one year from the death”:s44AEA 1925
This applies notwithstanding any contrary provision in a will requiring distribution within a shorter period. So a PR cannot be forced to distribute before the executor’s year is up and, even after the year’s end, a court will not order distribution if the PR can show that there are good reasons for retention and the PR is acting honestly.
This does not put an obligation on a PR to retain assets needlessly just because the year has not expired. If the estate is ready to be distributed, the sums remaining can be paid out to the beneficiaries. Under the 1975 Act, if a PR distributes after six months in the absence of a claim, they will not be personally liable for doing so:20(1). The same protection is afforded for rectification claims brought after six months from the date of the grant: s.20(3)Administration of Justice Act 1982.
The Law Society Wills and Inheritance Quality Scheme Protocol states that, for absolute protection, PRs should wait a further four months before distributing (that is, ten months from the issue of a grant) because those making a claim under the Inheritance Act 1975 have four months to serve a claim after the six month period for bringing proceedings has elapsed: para 33.2
So far as I am aware, there is no central database of claims - it would require a search of each court from which the claim might have issued.
I suspect, but cannot say for certain, that the details of any claim might not be publicly available, even to a potential defendant, unless actually served and, even then , perhaps not until a hearing or the matter has been disposed of.
Perhaps one of the contributors more knowledgeable of court procedures might be willing to enlighten the rest of us on this aspect.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals