I am dealing with an estate where the Will gave the deceased’s property on a life interest trust to his spouse, who lived there with him prior to death and continued to thereafter. The property is now being sold at a gain. My initial thought is that full PPR is available.
However, the trust is actually coming to an end, as there was a dispute and wife made a claim on the estate. The agreement is that once property is sold and debts secured on property and sols costs paid, wife will receive a lump sum and the balance split between deceased’s 3 children. The agreement is not by way of DoV. However as the lump sum due to wife is unlikely to equate to 75% of the net sale proceeds, I am now thinking PPR not available.
Or is it possible to argue that as the property was bequeathed 100% to the wife PPR should still be available and that the agreement is a separate matter?
QS Rose & Rose
If the house remains an asset of the estate then I believe PPR will not be available, as it is being sold during the course of administering the estate.
Surely if the trust is coming to an end then the property is being sold by the trustees. They can claim PPR on the basis that the trust property is being occupied by a trust beneficiary…?
I hadn’t previously considered s.225A but it appears to come down to whether W has an entitlement, as legatee, to an interest in possession in the proceeds at the time of the disposal.
It’s an odd provision because, for example, an estate where the individual concerned held only a mere right to occupy, which they were content to release, does not appear to qualify unless the property were first assented to trustees so that s.225 applied in its place.
I think the answer must lie in the question: does she have a right to income arising from the proceeds immediately following the sale? (ie if the cash proceeds generate a week of interest, would she be entitled to it or would it pass directly to her step-children).
From what you have said, if the executors are party to the agreement and will be making all the payments out, it sounds as though she has effectively divested herself of her IinP from the moment of sale.
If the words of the agreement are more “rough and ready” and do not include a statement that she is divesting herself of her interest, there may still be an argument that the agreement operates separately from the will and therefore acceptable to claim the relief but making full disclosure in the white box.
Alternatively, as it is in the interests of the step children to maximise the residue, if the gain is substantial, it may be possible to amend the agreement to establish a better analysis (without of course tearing up and hiding the original). They could for example agree that her original IinP would continue for a fixed period following the sale.
Osborne Clarke LLP
Am I right in thinking that the property was specifically put into an IPDI (rather than forming part of the residue), and the ‘claim’ was dealt with by agreement between the collective beneficiaries of the trust?
If so, then it seems to me that there was a trust (arising under the will), but that trust was brought to an end by the joint instructions of the beneficiaries under the rule in Saunders v Vautier.
Presumably, at the point that the trust was brought to an end (with the trustees holding the trust assets for the beneficiaries in the proportions agreed), there was a disposal by the trustees for CGT purposes (and IHT purposes too, I imagine, which the trustees will want to consider carefully). At the time of that disposal the spouse had been living in the property, so PPR can validly be claimed.
Elliot, Bond & Banbury
My earlier reply assumed the life interest was in residue. If it was a legacy, then the trust was effective from the date of death and PPR should be available
That is a correct summary and one that I will be working on.
QS Rose & Rose