I found this clause in a Practical Law precedent and the exact operation of it seems unclear:
[I give all my [CATEGORY OF PERSONAL POSSESSIONS] to [[NAMES AND ADDRESSES OF BENEFICIARIES] OR [DESCRIPTION OF CLASS OF BENEFICIARIES]] (Recipients) living at my death, to be divided among them as they agree. If, on the first anniversary of my death, the Recipients have not agreed on dividing the items, my Trustees must divide them among the Recipients, as near to equally by value as is practicable. My Trustees are free to value and divide the items as they think best. The Recipients must accept my Trustees’ decisions on the division.]
Am I correct in thinking that s.144 IHTA applies so that the tax is calculated as if the will had included a gift made directly to the Recipients in accordance with the agreed division, or if no agreed division has occurred within the year, in accordance with the near equal division.
Do you think it is necessary to make clear that the agreement can be made by the Recipient or their personal representatives (in the situation where they survive the testator but die before reaching agreement as to division) or does this go without saying?
S143 is the targeted facility. I think “living at my death” closes the class of “Recipients”. So excludes one who predeceases: not anyway a “legatee” per its technical meaning.
By the same token each member of the class as closed has the right to agree, in effect a temporary veto, vested in him or her at the death, if then living. The legacy of a legatee who dies after the deceased devolves on his PRs at general law, save as provided to the contrary by the Will.
A strictly personal power does not so devolve but this is a power coupled with an interest which does: a Recipient may benefit personally under a relevant agreement, so it devolves as a species of property right, a chose in action enforceable by a Court at the suit of its owner or their PR.
But I am firmly in favour of drafters anticipating specific questions, which may well arise a long time in the future, in order to head off reasonably foreseeable disputes (but no OTT paranoia). So perhaps: “as they or their personal representatives agree”.
The snag is that during the year after death a legatee who dies may not have PRs acting in time (though an executor can act before probate). You could extend the period to 23 months which does not preclude earlier action. In my experience a PR often finds on taking office that items have been already divided up and may need re-distributing! Telltale marks of missing paintings, empty jewellery box, etc etc!
Thanks, Jack. I considered s.143 but was unsure whether it would apply as it refers to a transfer by the legatee to other persons and the legatee in this case has a right to agree the division between himself and other persons. Any thoughts on this?
I have no doubts. The person or persons named or identifiable members of a class are legatees whether or not so described. This is emphasised by the risk that follows if the gift machinery is not carefully defined: the legatee(s) will take beneficially.