Making gifts for tax planning purposes on behalf of someone lacking capacity
The dispute over the estates of Leigh-on-Sea pensioners John and Marjorie Scarle was widely reported in the media this week. Both had children from a previous marriage and the question of who inherited was dependent on which of the couple died first.
In the absence of convincing evidence either way, the judge applied Section 184 of the Law of Property Act 1925 which says where one can’t determine who died first, the younger is deemed to have survived. This meant that, in particular, the couple’s jointly owned bungalow passed momentarily by survivorship to Marjorie (who was the younger) and therefore to Marjorie’s children under her will.
As a lawyer who prepares wills, often for couples in a second marriage, the case brought a double dose of (sadly familiar) disappointment:
Solicitors who prepare wills generally see a married couple together. Usually (but not always!) a married couple with children together want a will broadly along the lines of 'all goes to the survivor on the first death and to the children equally when we’ve both gone'. Often, the wills provide for 'catastrophe' beneficiaries in the event that (heaven forbid) the whole family dies together in a plane or car crash. The wills often provide that, in those very unlikely circumstances, half the joint estate passes to the husband’s side of the family and half to the wife’s, so both sides benefit equally regardless of which party to the marriage dies first.
With second marriages, one can’t always assume that both parties have the same agenda when it comes to wills. The monetary value brought to the marriage by each party might be wildly different, and coupled to a desire to preserve wealth for children of a first marriage, especially if much of that wealth stemmed from a former spouse.
Nevertheless, in my experience, couples in second-time-around relationships tend readily to find mutual understanding and acceptance of each other’s objectives. Where there is a huge disparity in wealth between the parties to a second marriage, the parties may, indeed, need to deal with their wills separately. The wealthier party might discuss with their solicitor a form of will that provides appropriately for the new spouse, while leaving/preserving assets to the children of the first marriage, without concern as to the contents of the will of their new, less wealthy, spouse.
In an ideal world, a couple in Mr and Mrs Scarle’s modest financial position would have sat down with their solicitor, agreed where they would like their joint estates to end up after they’d both died, and execute wills accordingly.
That solicitor would have been mindful of three basic truths:
A desired end result (perhaps) that ultimately both sets of children would share the joint estate equally would have involved wills based on 'trust'.
It’s never possible to completely guarantee that family members won’t fall out over your estate after you’ve gone. However, by making a will after careful consideration with your solicitor of all the options and their consequences, there’s a fair chance you can both achieve the desired result and minimise the risk of a family upset along with its associated legal costs.
Jim Sawer is a partner in our private client team. He has a broad private client practice and has advised families in the UK and overseas, including those with commercial and landed interests, for over 30 years. Clients appreciate his ability to identify the true crux of a matter promptly and his results-orientated approach to resolving private client issues in the family context.
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