Ask The Expert: Your succession questions answered.
“In my Will, I give the bulk of my estate to my three children equally. I have just given one of my children a cash lump sum to help him buy a house. Will this gift automatically get taken off the share he will receive under my Will so that overall, what my three children receive from me is equalised?“
This will depend on your intention. There is a presumption in law (known as the “presumption against double portions”) that a person would not intend to give a gift twice. Where a parent leaves a substantial share of their estate in their Will to their children, and then gives a large lifetime gift to one of those children, provided both gifts can be described as a “portion” then it can be presumed in law that the lifetime gift is a substitute for the bequest in the Will, and should be brought into account by the executors when distributing the parent’s estate. The lifetime gift must be a significant enough to be considered a “portion”.
It is not usually advisable to rely on the above presumption as it can be rebutted by evidence of the parent’s intention when making the lifetime gift, and therefore can be open to debate, which can lead to costly legal disputes.
To avoid disagreements, if it is your intention that lifetime gifts to your children should be brought into account, rather than rely on the legal presumption, you should keep careful written records of all lifetime gifts as well as making sure that your executors are clear on your intention in terms of whether or not this gift should be deducted from the recipient’s inheritance. This could be handled in two possible ways.
- If your Will specifies that your children have fixed shares of your estate, you can provide this evidence of intention by documenting it in a note, stored alongside your Will. For additional clarity, you can also update your Will to include a “hotchpot” clause to require your executors to take account of lifetime gifts you make to beneficiaries of your Will when calculating the amount they eventually receive. The clause can be drafted to apply to all lifetime gifts over a specified sum and/or after a certain date.
- A more flexible way of ensuring that the executors are clear on your intentions in respect of lifetime gifts is to consider leaving your estate on a flexible discretionary trust, with a letter of wishes to your trustees, directing them as to how to achieve equality between your children. You would then simply need to update your letter of wishes each time you make a lifetime gift, to make clear the extent to which you would like the executors to take it into account in the ultimate distribution. Your Will itself can remain unaltered. It is also worth mentioning that if you make a gift within seven years of your death that exceeds your available inheritance tax (“IHT“) nil-rate band (currently a maximum of £325,000), IHT on this gift may be payable by the recipient on your death, subject to any available IHT reliefs. If you wish your estate to pay the IHT, instead of the recipient, you should make provision for this in your Will or consider taking out life insurance policy in favour of the recipient to cover the expected IHT liability.
If you are interested in understanding more about lifetime gifts, or equally gifts in general including those out of excess income, please contact Emily Minett or your usual Wedlake Bell adviser.
This article is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases.
