When a person dies “intestate” (i.e. dies without leaving a valid Will that disposes of the deceased’s estate), the distribution of that person’s assets (or “estate”) among surviving family members is governed by the intestacy rules. However, the intestacy rules, which date back to 1925, have not been comprehensively reviewed for more than 20 years and the Inheritance (Provision for Family and Dependants) Act 1975 has not been vigorously reviewed since it was enacted, although it does now cover cohabitants, civil partners and same-sex cohabitants.

The Law Commission’s recommendations are included in two draft Bills: The draft Inheritance and Trustees’ Powers Bill and the draft Inheritance (Cohabitants) Bill.

The draft Inheritance and Trustees’ Powers Bill includes provisions that would do the following:  

1. Ensure that the assets of a married couple or a couple in a civil partnership will pass on intestacy to the surviving spouse in all cases where there are no children or other descendants;

2. Amend the legal rules which currently disadvantage unmarried fathers when a child dies intestate;

3. Simplify the sharing of assets on intestacy where the deceased person was survived by a spouse and children or other descendants;

4. Protect children, who lose a parent, from the risk of losing an inheritance from that parent if they are adopted after the parent’s death;

5. Remove obstacles to family provision claims by dependants of the deceased and anyone treated by the deceased as a child of his or her family outside the context of a marriage or civil partnership;

6. Permit a claim for family provision in certain circumstances where the deceased died “domiciled” outside of England and Wales, but left property and family members or dependants in the UK; and

7. Give all trustees more flexible statutory powers over the trust’s income and capital (subject to any express provisions in the trust instrument.)

The draft Inheritance (Cohabitants) Bill gives certain unmarried partners who have lived together for five years the right to inherit on each other’s death in the event that one of them dies intestate. In instances where the couple have a child together, this entitlement to inherit would accrue after just two years’ cohabitation, provided that the child was living with the couple when the deceased died. An application to the Court under the Inheritance (Provision for Family and Dependants) Act 1975 would therefore not be required.

This change, if implemented, would give unmarried couples similar rights to married couples in instances when one person dies without leaving a Will. With an estimated 2.3m unmarried couples living together (a figure expected to rise to 3.8m by 2033), the recommendations reflect the fact that cohabitation is much more prevalent in the UK than it was 25 years ago.

However, there is of course one easy solution to the problems of intestacy: make a Will and ensure that it is regularly updated.

This new Act repeals and consolidates all charity legislation: the Recreational Charities Act 1958, the Charities Act 1993 and many of the provisions of the Charities Act 2006. However, it does not change the law.

The reason for the consolidation is that charity legislation has long been criticised for being disparate and hard to understand; a new Act that consolidates charities legislation in one place was seen by the Government as a way of making charity law more accessible to the general public and third-sector organisations.

However, this is not the end of the story.

A review of the Charities Act 2006, led by Lord Hodgson, will also take place in 2012 and will consider substantive changes to the law. The review will look at a range of issues, including the definition of “charity” and the role and status of the Charity Commission as the sector’s regulator, and will consider whether the Act is still “fit for purpose” five years after it was passed. Click here for full details.

Any legislative change is likely to be some way off, with Lord Hodgson expected to complete his review by summer 2012 and then to submit a report on it to Parliament before the summer recess.

In March 2011, the Office of Tax Simplification (OTS) published its interim report on the simplification of the tax treatment of small businesses. In it, the OTS recommended that the income tax and NICs regimes should be amalgamated and that the Government should begin work towards this objective by the end of 2011.

Following the Government’s call for evidence on the matter in July 2011, it became obvious that there was a real desire for reform, with the majority of respondents stating that there are potential gains to be made from aligning income tax and NICs. Respondents recommended that (1) the system for calculating NICs should be altered to reflect how income tax is calculated, and that (2) the same employee earnings should be made subject to the calculations for both taxes.

However, any reform will take time (and will only happen if the benefits outweigh the costs of making the change.)

The Government intends to work with stakeholders over the next few months, with a view to identifying high level options for reform by Budget 2012. Even if this happens, the Government has predicted that, due to the number of consultations on reform that would have to take place and the need to give employers sufficient time to prepare for a new tax system, any reform would probably not take place until 2017. Also, it appears that any reform will focus on alignment, simplification or operational integration rather than a complete merger of the two regimes.

In the past, governments have steered away from merging or integrating income tax and NICs, so it is surprising that reform is now a real possibility. However, the Government has accepted that there could be winners and losers even if there is just an integration of income tax and NICs, so it will need to fully investigate the impact any reform could have on individuals before deciding to proceed.

The Government has also published a discussion paper that outlines its proposals for simplifying the administration of personal taxes, by making tax information more accessible to taxpayers. It believes that online and mobile technology can help to improve taxpayer awareness of their tax liabilities. The discussion paper looks at systems in other countries, where taxpayers are able to access (and input) their own tax information online throughout the tax year. HM Treasury’s view is that a system that encourages greater taxpayer engagement also encourages greater taxpayer compliance.

Interesting times…

The Bill was introduced into Parliament as a Private Members’ Bill, so its passage into law was uncertain. However, because the Bill more or less implemented the recommendations of the Law Commission, it was supported by the Government – a luxury most Private Members’ Bills do not receive. 

When I discussed this legislation back in February, the Act was only a Bill and at the time there was no guarantee that it would become law. Full details of it are here. As it turned out, the Bill received few amendments during its parliamentary progress and received Royal Assent relatively quickly.

The Act will amend the law in relation to who may inherit a beneficiary’s interest which is forfeited under the Forfeiture Act 1982. The forfeiture rule prevents a person from acquiring a benefit from unlawfully killing another person.

To summarise, the Act reforms the law of succession in the following two ways:

1. If a person either disclaims an inheritance or is disqualified from receiving an inheritance by the forfeiture rule, the inheritance rights of that person’s descendants will be maintained; and

2. The children of a minor (i.e. an individual under the age of 18) will be able to inherit their parent’s interest in an intestate person’s estate where that parent died before the age of 18 and was unmarried or had not entered a civil partnership.

For full details of the changes and further background information , please click here.

At the time of writing, there is no date for when the Act will come into force.

The key points are as follows:

•  The charitable legacy must be left to a body that is a charity for UK tax purposes, that is, a charity or other organisation in the UK, European Union Member State, Iceland or Norway that would be a charity under the law of England and Wales OR settled in trust to be used for charitable purposes only OR left to a Community Amateur Sports Club.
• Beneficiaries of a will or intestacy may execute a deed of variation to make a charitable legacy.
• A beneficiary inheriting joint property by survivorship may divert all or part of that property to charity and the estate will benefit from the IHT incentive. 
• Where a discretionary trust is set up by will and there are charitable beneficiaries, a distribution within 2 years of death to charity will be treated by HMRC as though it was a legacy made under the will.  

Points for Consultation

The Consultation Paper of 10 June 2011 “A new incentive for charitable legacies – A lower rate of inheritance tax when leaving 10% of an estate to charity” seeks views on a number of detailed issues including:

• Whether, for administrative convenience, only charitable gifts of easily realised assets such as cash, land, buildings or quoted shares should count towards the 10% limit.
• How assets that are charged to inheritance tax on the deceased’s death in addition to his or her own ‘free estate’ should be treated. These assets would include those that the deceased had given away with a reservation of benefit, particular life interests in settled property and any jointly-owned property that has passed outside of the deceased’s will or intestacy.

Comments are invited by 31 August 2011.

Below is an example given by HMRC of an estate which is valued at £850,000 and where the available nil-rate band is £325,000. The minimum charitable legacy to pass the 10% test would be calculated as follows:

Planning points

If you would like to include a charitable legacy in your will or to discuss the impact of the changes, please contact a member of our Wealth Management team on 01923 20 20 20.

For example, as is fairly well known by now, there was a deathly silence on the subject of Winter Fuel Payments.  In fact the payments stayed the same, however the extra top ups which had previously been given were stopped.  So whilst there was no cut per se, anyone receiving these payments will have felt the difference.

So, on to the news.  Panorama tonight will reveal how research it has carried out into salaries and inflation mean that the average worker takes home £1,088 less than two years ago – a reduction of 5%.  For the full story, click here.

And then there’s the rise in national insurance by 1% again, which failed to feature heavily.  That’s going to affect a lot more people than knocking a penny off petrol, and in a far more significant way!

Tax planning can help in some cases, especially if you are a business owner or earn enough to put you into the 50% tax band.  If you would like to discuss your options, please contact our wealth management team on 01923 20 20 20.

The Legal Services Board, the independent body responsible for overseeing the regulation of lawyers in England and Wales, had asked the LSCP to conduct this investigation, with a view to considering the possible regulation of the industry.

Will-writing in England and Wales is not currently a reserved legal activity under the Legal Services Act 2007, meaning that the writing of wills is not restricted to regulated lawyers, who are independently regulated by the Solicitors Regulation Authority and the Bar Standards Board respectively. Consequently, some consumers are unwittingly using unregulated private will-writing companies, whose will-writers may have had little training or have little expertise in putting together what is one of the most important legal documents a person will ever create. Concern about unregulated will-writers has grown so much that the BBC’s Panorama programme recently investigated the issue (click here.) Interestingly, across the border, will-writing in Scotland is expected to become a regulated activity very shortly, after the Legal Services (Scotland) Act 2010 received Royal Assent in November 2010.

The LSCP has received a lot of responses to its consultation, which closed on 15 December 2010, with both consumer bodies and the legal profession strongly supporting the regulation of will-writing. Full details of the responses are here.

The Law Society, which backs regulation, said that although will-writers should not have to have the same qualifications as solicitors, there should be a regulatory regime which has “minimum training requirements; compulsory insurance cover; a compulsory compensation fund; a code of conduct; a complaints management system; and a robust disciplinary mechanism.”

The Trades Union Congress, Remember a Charity, Citizens Advice and the National Consumer Federation, amongst many others, all called on will-writing to become a reserved activity. However, the Office of Fair Trading has said that it is yet to be convinced that regulation is required.

The LSCP will now report its findings back to the Legal Services Board, who will decide whether regulation should be introduced to the will-writing industry.

Matthew Arnold & Baldwin LLP is experienced in all matters relating to the preparation of wills. We offer quality tax, trusts and inheritance advice to ensure that your personal affairs are arranged as efficiently as possible, and that your assets are passed on to your heirs in the way you want them to be. If you would like to discuss writing a will, please contact me at iain.donaldson@mablaw.com, or my colleague Emma Alford at emma.alford@mablaw.com.

According to the research, in the past year more than 20,000 pensioners were forced to sell their houses to meet residential care home fees – a rise of more than 17 per cent in the past five years. When a person enters care, they are “means tested” and most of their assets, including their home, are taken into account. If that person has assets of more than £23,250, he or she is deemed to be able to meet the full cost of their care. With the average care home fee reported to be £470 per week (according to Age Concern and Help the Aged), it is no surprise that people are being forced to sell their homes to meet these growing fees – meaning they are unable to pass their most valuable asset to their children or other beneficiaries through their will.

However, it doesn’t have to be this way.

With careful estate and trust planning, it is possible to protect your home and other assets, so that on your death they can be passed down to family members through your will.

If you would like to discuss your options, please contact me at iain.donaldson@mablaw.com.

This continues the trend in recent years of grandparents picking up increasingly more of the burden, both financially and in terms of time.

Unless your kids are really demanding, you probably won’t need to consult your solicitor to get you out of babysitting for the little darlings.  However, if you are a grandparent providing financial support (for example, school fees) there are a number of steps you can take to reduce the cost of helping.

For example, many grandparents put money or investments on trust for their grandchildren.  Any growth in the fund gives rise to tax on the grandchildren (which in most cases will mean that there is effectively no tax).  This may also be effective inheritance tax planning.

If you would like to discuss tax planning to provide for your grandchildren, please contact me or any member of the Wealth Management team on 01923 20 20 20.

If you miss the deadline it could be costly, as paper returns filed after this date could mean a £100 penalty.

An alternative to paper-filing is to file your return online, which benefits from a January deadline.

If you would like assistance in preparing and filing your tax returns, please contact James Odds on 01923 202020 or james.odds@mablaw.com.

The government announced earlier this year that it was acquiring the Swiss bank account details of up to 6,600 wealthy Britons suspected of evading tax.

If you have received one of these letters and would like advice as to your next steps, please contact your normal MAB solicitor or ask for the Wealth Management team on 01923 202020.

It must also be filed when no tax is due as a result of the transferable nil rate band applying.  Essentially, this would be on the second death of a married couple or civil partnership where the first to die did not use all of their nil rate band.  This rule was introduced in late 2007 and is currently being used in 27,000 full estate returns each year.

HMRC now proposes to extend this exemption to some cases where the transferable nil rate band rule applies.  HMRC estimates this will apply in three out of every four cases where transferable nil rate band is invoked.  In all other more complex cases a full estate return will still have to be completed.

Not only will this save time and benefit probate practitioners, but it could lead to cost savings for clients and would be a most welcome change.

If you would like to speak to someone about probate, wills or estate planning please contact us on 01923 202020 and ask to speak with the Wealth Management team.

A statutory will is a will made on behalf of someone who lacks the necessary capacity to do so themselves by application to the Court of Protection.

In the case of Re D (statutory will), the Court of Protection considered what principles should be applied in determining whether to order the execution of a statutory will for and on behalf of a person who lacked the mental testamentary capacity to do so.

The Court of Protection held that under the Mental Capacity Act it can authorise a statutory will on the grounds that the validity of an earlier will is in dispute.  Decisions taken on behalf of a mentally incapacitated adult must be taken in his or her best interests.  This can include being remembered for having done the ‘right thing’ in his or her will.  In this case the judge ruled that the ‘right thing’ meant ensuring Mrs D’s memory was not ‘tainted by the bitterness of a contested probate dispute between her children’.

Comment

It is heartening to see the Court taking such a practical (and sensitive) approach.  The alternative would have been for the beneficiaries to have waited until Mrs D had died and to then contest her will in the courts.  This would have been far more stressful and expensive and would almost certainly not have been what Mrs D would have wanted.

If you would like advice on statutory wills or mental capacity please contact me on iain.donaldson@mablaw.com or 01923 202020.

A will is one of the most important documents you will ever write, so it is important to ensure that it is done properly.

Tonight’s Panorama on BBC 1 at 8:30 has a look at some of the issues involved with getting a will drafted and some of the pitfalls.  According to the report on this morning’s Today programme on Radio 4, will writers and banks get rather pummelled whilst the legal profession comes out on top.

The reasons for this are clear.  It boils down to professional standards. 

Customers of will writers and banks are enticed by slightly lower fees but often find themselves encouraged (and in some cases pressured) into appointing the will writers or the bank as executors without being fully informed of what this means in terms of fees (which can amount to about 4% of the estate).  Customers are often then charged to have their wills stored.  To add insult to injury the advice in preparing the will is not always correct with no legal redress against the will writers.

How can this happen?  Simply put, the will writing industry is unregulated and anyone with a PC and a desk can make themselves a will writer. 

Solicitors, conversely, are regulated by the Law Society and the Solicitors Regulation Authority.  We have a code of conduct which places the client first.   Whilst not all solicitors are experts in trusts and inheritance tax, one must have a certain level of expertise and training to be admitted as a solicitor.

I’m not saying that the legal profession is perfect.  There is a diverse range of solicitors from sole practitioners on the high street to the multi-nationals in the city.  But what using a solicitor offers is the security of a skilled professional, putting your interests first, backed up by the guarantee of insurance should something go wrong.  Because of this costs are sometimes higher, but at the end of the day you know what you are getting.

Matthew Arnold & Baldwin LLP does have a dedicated team of Wealth Management specialists with expertise in wills, tax, trusts and probate.

If you would like to speak to someone about making a will, please contact Suki Sandhu or Emma Alford on 01923 202020, or email info@mablaw.co.uk.

The case involved a deed of variation, which changed the terms of a will.  By way of background, it is possible for the effect of a will to be varied within two years of death, provided that various conditions are met, including the agreement of the affected beneficiaries.  In many cases wills are varied for tax reasons.

In the present case £10,000 plus some farmland of the £1.7m estate was to pass to the deceased’s husband and the rest was to pass to the deceased’s children.  The husband’s accountant suggested that the effect of the will should be varied to make it more tax efficient and a deed of variation was executed.  This was defective and led to an additional £33,000 of inheritance tax.  The parties attempted to rectify the deed of variation to the effect that the husband would not be liable to pay inheritance tax.  HMRC refused to accept the efficacy of the deed of rectification for tax purposes.  The claimant applied to the court seeking approval of the deed of rectification.

The court found in favour of the husband and allowed the deed of rectification.  The judge distinguished between a mistake as to the fiscal effect of the deed of variation and the document not giving effect to the true agreement or arrangement between the parties.  The court would not order rectification of a document if the parties’ rights would be unaffected, and if the only effect of the order would be to secure a fiscal benefit for one or more of them.  On the other hand, where the  mistake was as to the meaning or effect of a document, this might be amenable to rectification.

In many ways this case highlights just how flexible our legal system is.  The parties were not only able to amend the will, but when they got this wrong, they were then able to correct this mistake to give effect to their true intentions.

The case also highlights two other things.  First is the need for proper will planning – for if the deceased had received the correct advice while alive none of this would have needed to happen.  The other is the power of deeds of variation to create a much more favourable outcome for the beneficiaries.

If you would like to discuss any of the points raised here, please contact our Wealth Management team on 01923 202020.

Whilst this might seem surprising, this decision is actually based on case decided 127 years ago (Parker v Felgate). The court also confirmed that a testator can know and approve the contents of his will without having what is known as testamentary capacity.

The test for capacity for making a will can be summarised as:

• He understands the nature of making a will and its effects.
• He understands the extent of the property of which he is disposing.
• He is able to comprehend and appreciate the claims to which he ought to give  effect.
• For this last purpose, no disorder of the mind poisons his affections, perverts his sense of right or prevents the exercise of his natural faculties – no insane delusion influences his will in disposing of his property.

It is likely that the Mental Capacity Act 2005 may influence the Courts’ interpretation of the above test in the future.

Does capacity matter any more?

In short, yes.  For one thing, the testator needs to understand their instructions as to how their will is drafted.

Which is why, for many, this will seem a surprising decision.  However, it follows the tradition of testamentary freedom in English law.  In essence, the court prefers to give effect to decisions that the testator made when he did have testamentary capacity, provided that the testator himself intended to do this.

In practice if one uses a responsible solicitor to draft their will, they will ensure that they are satisfied of the testator’s capacity and ability to understand the consequences of what they are doing.  If there is doubt, their solicitor should obtain medical evidence of testamentary capacity, often from the testator’s GP.  This usually avoids cases such as this making it to court with the associated financial and emotional costs of doing so.

In cases where there is genuine doubt as to whether a testator has lost capacity before they sign a will, it will now be very important for their legal advisers to take full consideration of the facts of this case before suggesting a proper course of action.

Something else that will never change is politics.  Whatever party or parties are in power, election promises and campaigns remain, shall we say, subject to later interpretation.

A beautiful example of this was reported in yesterday’s press (see here for the Telegraph’s take) .  

During the election campaign Andrew Lansley, the new Health Secretary, attacked Labour plans to force people to provide money towards care whether they needed it or not.  This was emotively referred to as  Labour’s “death tax” with some of those famed Tory posters stating “Gordon Brown wants £20,000 when you die.”

We now learn that since coming into power Mr Lansley has set up a commission to report on how care for the elderly will be paid for in the future and that one of the options for them to consider is a compulsory levy.  Sound familiar?

There is no getting around the need for some kind of funding solution since the deficit for funding care for the elderly is expected to reach £6 billion by 2020, however the best and fairest route towards this remains unclear.  What seems clear to me is that it would be inequitable for someone to have to pay for care which they never intend to take up.

It is still early days for this story since the Commission has a while still before it reports, but we will report in the future once there is more detail.

If you would like to discuss care home planning or tax planning for retirement, please contact me on iain.donaldson@mablaw.com or on 01923 202020.

It was accepted that the trustees had a right of indemnity against the trust assets, but the trustees claimed that clause 17.6.1 of the debenture ensured that any assets which were needed to satisfy the right of indemnity were not trust assets, but belonged to the trustees and therefore would not be affected by the debenture.  The judge could not agree with the trustees’ construction of the clause.  There was no reference in the debenture to the expenses incurred by the trustees and by clause 12 the trustees covenanted to indemnify the lender and any receiver against all costs, expenses and liabilities.

Further, the court was not satisfied that such a term could be implied:

•  A term is to be implied to give effect to the meaning which the document would convey to a reasonable person having all the background knowledge reasonably available.
• It must be necessary to give effect to the presumed intentions of the parties. 
• It was not difficult to accept that the parties might have reasonably agreed that the trustees’ lien should rank ahead of the mortgage, but the circumstances were not such to require such a term to be implied.
• This was because it would contradict the terms of the debenture, which provided that at the point of sale, the receivers should apply the proceeds of sale after his own expenses and remuneration towards payment of the secured loan. 
• If there were to be protection, it was far from clear that it would be by giving priority to their lien. 
• The fact that there was no mention in the debenture for its priority was a significant factor against its implication.

This case provides a useful example of the court’s approach to (1) a claimant’s attempts to construe terms in a debenture which are not obvious and (2) the circumstances when it is possible to imply terms in a debenture.

 Dominion Corporate Trustees Ltd v Capmark Bank Europe Plc [2010] EWHC 1605

Shortly, these are the facts. Miss Jones, “a peripatetic hairdresser”,  was 26 when she met Mr Kernott in 1980 and 3 years later they were sharing her caravan,  a year before their first child was born in 1984. In 1985 Miss Jones sold her caravan and she and Mr Kernott jointly purchased a house for £30,000.  The purchase was funded by £6,000 of Miss Jones caravan sale proceeds and an interest only  mortgage in their joint names, backed by an endowment policy, also in their joint names. Mr Kernott was to do some repairs and refurbishment at the property, principally an extension, the size and effect of which was apparently to increase the value of the property by 50% on its purchase price.  In law,  although they clearly made different initial  financial contributions, they bought it as joint tenants, without specifying their respective interests, an ommission still depressingly common today. No declaration of trust was drawn up or any form of cohabitation agreement. The judgment makes no mention of whether the parties made wills or if they did what they provided, so it is probably fair to assume that they were “paperwork lite” in their arrangements, as is so often the case.

Miss Jones and Mr Kernott had a second child in 1986. Miss Jones continued as a home hairdresser and Mr Kernott was variously an ice cream salesman or a builder or on benefits. Mr Kernott gave Miss Jones £100 a week as housekeeping and that, with her earnings, met all the household outgoings, including the mortgage and endowment payments. Mr Kernott appears to have bought the extension materials and built it.

In 1993, 13 years after their relationship started and 8 years after their house purchase, Miss Jones and Mr Kernott parted. She stayed in the house with the children. The Court of Appeal don’t tell us where Mr Kernott then went, but by 1996 he was buying a property for himself.  From the time they separated, Mr Kernott paid nothing towards the house and gave nothing to Miss Jones for the children, although he saw them from time to time. Miss Jones redecorated several times over the following years, replaced the flat roof on Mr Kernott’s extension and added a gate and fences to the property.

In 1995, the property owned by Miss Jones and Mr Kernott was put on the market, but didn’t sell. In 1996 the joint names endowment policy was surrendered and divided equally, Mr Kernott using his share as the deposit on his new house. In 2006, once the property was no longer their children’s home, Mr Kernott asked Miss Jones for his share of the value of it. In 2007, Miss Jones launched an application under the Trusts of Land and Appointment of Trustees Act 1996 (often referred to as TLATA), seeking a declaration that she owned the entirety of the property, or that if she didn’t then she had an interest both in this property and the one that Mr Kernott had subsequently bought in his sole name using part of the joint endowment policy proceeds; Miss Jones later abandoned this alternative claim before the trial judge in Southend. In March 2008, Mr Kernott served a notice of severance of joint tenancy, ostensibly converting the joint ownership to a tenancy in common in equal shares. At the conclusion of that trial in April 2008, based on his analysis of their respective financial contributions to the property over the years, HHJ Dedman concluded that Miss Jones was entitled to 90% of the value in the property and Mr Kernott the remaining 10%, a conclusion he felt able to draw from the authorities of the House of Lords in Stack v Dowden (2007) and the Court of Appeal in Oxley v Hiscock (2004) and Goodman v Gallant (1986), the major decisions on beneficial interests in property. At that time the equity in the property was assessed to be £218,300; by comparison, Mr Kernott’s equity in the house he owned in his sole name stood at around £268,000.

Unfortunately for Miss Jones, two out of the three judges hearing Mr Kernott’s appeal in the Court of Appeal, saw it differently. On their analysis, a property bought in joint names, with no express indications to the contrary, is owned equally. On their view there had been no change to that ownership over the years, notwithstanding arguments that one had contributed more financially than the other, one had done more work on it than the other, or one had (and the other hadn’t) occupied it solely for some years.

In the leading judgment of Wall LJ, following Stack v Dowden “the conveyance into joint names…created joint beneficial interests and the parties agreed that when they separated they had equal interests. There has to be something to displace those interests, and I have come to the conclusion that the passage of time is insufficient to do so, even if, in the meantime, [Mr Kernott] has acquired alternative accommodation, and [Miss Jones] has paid all the outgoings.”  Consequently, Miss Jones owes Mr Kernott around £109,000.

Unless and until the Supreme Court see it differently, this remains the approach the Courts are required to apply in such cases. It can be avoided by evidence of an agreement to the contrary, either express or to be inferred. Rather than leave it to a judge to decide, best advice must be put such agreements in place, in writing, and compare periodically the arrangements the documents envisage with what is happening in fact.

I’ve just seen a great article in the Times here. Alice Thompson makes a strong case why Mr Osborne’s proposed rise in the rate of CGT is poorly judged and counter productive. It seems to me that it will be even more damaging if the increases take effect on 22 June as opposed to on 6 April next year, since this will not give people the chance to take steps to reduce their exposure and will be seen as incredibly unfair.

If you are concerned about the effects of the emergency budget on you, please contact one of our tax team who will be happy to discuss the options open to you.

Let’s be clear – there is nothing wrong per se with using offshore centres to hold your assets be they trusts or companies.  However, what is frowned upon is transferring assets offshore to evade tax or conceal your true wealth from creditors or governments.

Some countries have added very nicely to their GDP in past years by providing the “nudge, nudge, wink, wink” facility to hold assets through nominees and complex holding structures. Times are changing though, and it is becoming harder and harder to evade tax though taking such steps.

Legitimate tax avoidance and asset protection is always an option, with proper advice, and for those with an offshore presence or origin in particular there are quite valid and tax efficient ways to reduce your UK tax profile.

For more info – speak to our Wealth Management team.

Landlords of residential properties where the annual rent is more than £25,000 are not currently required to register a tenant’s deposit with a tenancy deposit scheme but they will  need to protect that deposit before 1 October 2010. Failure to do so will result in a Landlord falling foul of the requirement to protect a tenant’s deposit in accordance with the provisions of the Housing Act 2004, leaving them open to a claim by a tenant for failing to register the deposit.

For tenants this change means greater protection as they will be afforded the rights granted to them under the Housing Act 1988. Landlords face potential claims against them for failing to register a tenant’s deposit. The change will of course impact Landlords with expensive properties in London where rents are higher than the rest of the country as well as Landlords of larger properties which are occupied by multiple tenants such as student houses where the rent is more likely to exceed the current threshold.

The changes will increase the number of tenancies coming within the Assured Shorthold Tenancy regime which will standardise procedures for Landlords to gain possession and allow use of the accelerated possession route (only open to Landlords of Assured Shorthold Tenancy Agreements).  Landlords who do not and who are required to register a tenant’s deposit will be unable to get possession of a property on a “no fault” basis until the deposit is registered, causing unnecessary delay.

Landlords – review rental levels register your deposits without delay.

Managing Agents – notify your Landlord clients immediately of the impact of this change and the steps they need to take.

We are already seeing cases in the County Courts regarding non-registration of deposits and no doubt Court offices across the country will see further cases next year arising out of these changes.

George Key, an 89 year old farmer lost his wife of 65 years in December 2006. A week later he made a Will leaving his two daughters £300,000 each, the bulk of his estate,  unchanged at his death in August 2008. His previous Will in 2001, in the context that his wife Sybil survived him, made provision for his daughter Jane to receive £10,000, his daughter Mary £5,000 and his 2 sons, Richard and John, Hall Farm and the residue of his estate.

The sons contested the 2006 Will, maintaining, in effect, that the 2001 version should prevail. After hearing evidence from 20 factual witnesses, including 2 expert psychiatrists, the issue for Mr Justice Briggs to decide was whether George Key, elderly and grief-ridden, had testamentary capacity in 2006 when he made the last Will. In a conclusion extending the ambit of the traditional tests of capacity, based on comprehension, laid down so long ago as 1870 in Banks v Goodfellow, the Court decided that “Mr Key was simply unable during the week following his wife’s death to exercise the decision-making powers required of a testator ” which ..”compels a conclusion that he did not know and approve the contents of his will”. The sisters were therefore subtantially disentitled, as the greter part of the Estate passed under the 2001 Will to their brothers.

The case is of interest not just for the furious family dispute put in evidence to the Court, but for the wider approach to capacity promoted in Mr Justice Briggs words “by the greater understanding of the mind now available from modern psychiatric medicine, in particular as to affective disorder.” It is also interesting in that it highlights that where you might have thought that in the 20 months or so before he died, if he thought at any time his Will did not reflect his current wishes, George Key could have changed it (and didn’t), that of itself is irrelevant. The key consideration is the testator’s capacity at the time the will is entered into, a circumstance which the solicitor on the case, a Mr Cadge, failed to take into account. Had he done so, then he would have obeyed the Golden Rule, requiring him to satisy himself of mental capacity with the assistance of a suitably qualified medical practitioner, as near as possible to the signing of the Will itself.

Mr Justice Briggs felt that whilst he had dealt with the legal issues before him the family would remain divided. It remains to be seen whether that  results in an appeal, or perhaps consideration of action against the draftsman and overseer of the overturned Will in this case. Either way, in matters of this nature, it pays to take appropriate steps during the testator’s lifetime.

Judge Lush, the judge charged with running the Court at Archway, North London, believes the public would benefit from a better knowledge of the Court and its application of  the law and procedure relating to the affairs of the vulnerable, – those lacking mental capacity, with whose affairs the Court deals. He expresses his concern that media access should be subject to clear guidelines that would afford anonymity for the vulnerable, where appropriate.

The Judge’s response comes amid criticism of the Court of Protection and its administrative partner the Office of the Public Guardian, for secrecy and unnecessary bureaucracy.