A round-up of legal updates for the Wills and probate industry over the past month is as follows.
Will Trusts – Trust Register
The deadline for registering non-taxable trusts newly within scope of the Trust Register rules following the expansion of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017) was 1 September 2022. The new rules affect trusts set up under a Will subject to certain exclusions. These exclusions include Will trusts that are wound up within two years of death, trusts for “bereaved minors” and “age 18-to-25” trusts. HMRC has produced some brief “step by step” guidance to assist with registration. This can be requested by sending an email to trustenquiries@hmrc.gov.uk. HMRC has announced that there will be no penalty for failure to register or late registration unless that failure is due to deliberate behaviour. This leniency reflects the fact that registration is a new and unfamiliar obligation for many trustees. TRS: HMRC to provide step by step guidance on request | Practical Law (thomsonreuters.com); HMRC provides further last-minute assistance with TRS registration | STEP; Register a trust as a trustee – GOV.UK (www.gov.uk)
Contentious probate – testamentary capacity case
The appeal ruling has been published in Clitheroe v Bond (2022 EWHC 2203 Ch) with the High Court upholding the 2020 judgment that the deceased’s two Wills were invalid due to testamentary incapacity. The Wills disinherited the deceased’s daughter and left the whole estate to the deceased’s son. There were handwritten instructions from the deceased explaining the reasons for excluding her daughter; however, the daughter challenged the Wills and was able to produce enough evidence of testamentary incapacity to successfully make her case. This evidence showed the deceased was suffering from an affective disorder related to the death of the deceased’s eldest daughter and an insane delusion that the claimant daughter was lying about being abused by her father. The High Court found that the previous ruling had not correctly analysed the “insane delusions”, but nevertheless, the overall finding of lack of testamentary capacity should stand. The case is interesting for its analysis of the insane delusions and also for (again) confirming the correct test for capacity is that set out in Banks v Goodfellow rather than that in the Mental Capacity Act 2005. Sister defeats brother’s appeal in Banks v Goodfellow E&W estate dispute | STEP
Contentious probate – revocation of Will
Sangha v Sangha’s Estate [2022] EWHC 2157 (Ch) relates to the construction of a revocation clause in the Will of Diljit Kaur Sangha who died with assets in India and the UK. The deceased had made a UK Will in 2007 covering all his UK and Indian property. He then made a Will in 2016 dealing only with his property in India but the Will contained a revocation clause which provided: “this is my last and final Will and all such previous documents stand cancelled“. The issue was whether the phrase “all such previous documents” revoked all previous Wills, or just the Wills that dealt with the Indian property. The High Court took into account that the deceased did not demonstrate intention to revoke the provisions relating to his UK estate, as well as the fact that the 2016 Will was drafted in India and related to the deceased’s Indian property only. Accordingly, the High Court ruled that the 2007 Will had only been revoked insofar as it related to the Indian estate; the provisions relating to the UK estate remained valid. This was a complex case and also involved claims relating to the validity of the 2007 Will on attestation grounds and the marital status of the deceased’s two purported wives. EWHC rules revocation clause in will disposing of Indian assets did not apply to English estate | STEP
Vulnerable client – deprivation of capital guidance
The Local Government and Social Care Ombudsman (“LG&SCO“) has issued Deprivation of Capital: Guidance for practitioners (guidance) aimed at local authorities deciding whether someone has deliberately deprived themselves of assets to avoid paying residential care home fees. The guidance sets out the LG&SCO’s approach to investigating complaints and how local authorities should apply the relevant legislation. There are several key issues and learning points, one of which relates to the treatment of gifts. The guidance notes that some councils incorrectly treat all gifts as deprivation of capital and this blanket approach should be avoided. There needs to be intention on the part of the donor to deprive themselves of capital to avoid care costs, and there are a list of factors which councils need to take into account in analysing this. Local Government and Social Care Ombudsman issues deprivation of capital guidance for local authorities | Practical Law (thomsonreuters.com)
Tax – CGT gains must be reported twice
HMRC has confirmed that a capital gains tax (“CGT“) return on the sale of a UK property will usually have to be filed twice: once within 60 days of completion via the online UK property account and again when the taxpayer completes their annual self-assessment return. The Institute of Chartered Accountants in England and Wales comments that the decision was “inevitable” but the six-month delay in communicating it is “most unsatisfactory”. HMRC confirms that CGT property returns must be filed | ICAEW
Tax – interest rate on IHT paid in yearly instalments
As from 23 August 2022, HMRC have increased the rate of interest on late payments of inheritance tax from 3.75% to 4.25%. HMRC interest rates for late and early payments – GOV.UK (www.gov.uk)