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Issue 20 - July 2007

Contents

Cases
Features
Articles

News

Events

Discounts (how to book and claim discounts)

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Cases

1. Barrett and another v Davies

Citation: [2007] All ER (D) 267 (Jun)
Hearing date: 22 June 2007
Court: Chancery Division
Judge: Judge Norris QC sitting as a judge of the High Court
Summary: will – forgery – evidence – claimant alleging will in favour of defendant forged – claimant seeking to revoke grant of probate – whether will genuine

The claimants were the brother and sister of the deceased. The defendant was the niece of the deceased. Following the deceased's death, a will was produced by the defendant, dated 11 May 1999, purportedly being the deceased's last will and testament. The defendant claimed that it had been witnessed by her partner and her mother and that the deceased had signed it. The will named the defendant as sole executrix and principal beneficiary of the estate of the deceased. The defendant subsequently obtained a grant of probate. The claimants issued the instant proceedings seeking a declaration that the grant of probate should be revoked; that the deceased died intestate; and that the will be revoked on the grounds that the will had been forged in that it did not bear the genuine signature of the deceased.

The claimants relied on various factors in support of their claim, including the evidence of a registered forensic practitioner who examined the signature of the deceased on the purported will and compared it to available signatures of the deceased.

The claim would be dismissed.

In the instant case, although proper weight had been given to the evidence of the registered forensic practitioner, the evidence of the defence witnesses had been compelling. Therefore, the claim that the deceased's signature had been forged and that the probate had to be revoked would be dismissed. The will had been duly executed and the deceased had not died intestate.

Fuller v Strum [2002] 2 All ER 87 considered.

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2. Fraser v Lee

Citation: [2007] All ER (D) 203 (Jun)
Court: Chancery Division
Judge: Blackburne J
Hearing date: 20 June 2007
Summary: will – validity – capacity of testatrix – burden of proof – executor contending testatrix's mental illness having no effect on testamentary capacity – executor further contending testatrix having knowledge and approving contents of will – whether executor proving case

The deceased was an elderly lady who had been diagnosed with moderate to severe dementia. In February 2002, she vacated her flat to reside at a nursing home. In December 2003, she died at that home. It was believed that she had died intestate. The defendant, who was appointed the deceased's sole executor, claimed that a document signed by the deceased and evidenced by witnesses (the purported last will) was sufficient without anything further, to give him the right to manage the deceased's estate. The claimant, an attorney for one of the intestacy beneficiaries of the deceased, subsequently made attempts to establish the circumstances in which the will had been made. Without having made any progress in that respect, he sought a declaration in relation to the validity of the deceased's purported last will, and in addition to that, the grant of letters of administration to be limited until further order. The executor filed an acknowledgement of service to the claimant's particulars of claim. In that acknowledgement, an intention to defend the claim had been indicated; however, no defence was submitted.

The claimant contended that it fell upon the executor to prove, first, that the deceased had possessed the required testamentary capacity at the time the purported last will was made, and secondly, if that element was satisfied, that the deceased had knowledge of and had approved the contents of that will.

The court ruled:

In the circumstances, the claim had to succeed in light of the fact that the executor had not produced any affirmative evidence to prove his case.

It followed that a declaration against the validity of the purported last will of the deceased would be made, and further, letters of administration would be granted, in the terms which had been requested.

Symes v Green (1859) 28 LJP & M 83 and Banks v Goodfellow [1861-73] All ER Rep 47 applied.

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3. Thomas & Agnes Carvel Foundation v Carvel & another

Citation: [2007] All ER (D) 76 (Jun)
Court: Chancery Division
Judge: Lewison J
Hearing date: 11 June 2007
Summary: administration of estates – personal representatives – removal – power of High Court to remove personal representative – claimant applying to remove first defendant based on her conduct of proceedings – claimant claiming beneficial entitlement under doctrine of mutual wills – whether claimant entitled to make claim – Judicial Trustees Act 1896, section 1 – Administration of Justice Act 1985, section 50

Section 50 of the Administration of Justice Act 1985 provides, “Where an application relating to the estate of a deceased person is made to the High Court under this subsection by or on behalf of a personal representative of the deceased or a beneficiary of the estate, the court may in its discretion – (a) appoint a person (in this section called a substituted personal representative) to act as personal representative of the deceased in place of the existing personal representative or representatives of the deceased or any of them. (4) Where an application relating to the estate of the deceased person is made to the court under subsection (1), the court may if it thinks fit, proceed as if the application were, or included, an application for the appointment under the Judicial Trustees Act 1896 of a judicial trustee in relation to that estate. (5) In this section ‘beneficiary’, in relation to the estate of a deceased person, means a person who under the will of the deceased […] is beneficially interested in the estate.”

The first defendant was the niece of Thomas and Agnes. In 1988 Thomas and Agnes executed mutual, mirror-image wills. By her will Agnes left her estate on trust for Thomas if surviving for life with remainder on trust for the claimant (the foundation). Thomas' will was in similar form. He died in 1990 and his 1998 will was admitted in probate in New York by the Surrogate's Court. In July 1995 Agnes made a new will revoking all former wills, appointing the first defendant her sole executrix and bequeathing her residuary estate to the second defendant. Agnes died in London in 1998 and the first defendant obtained probate of the 1995 will from the Principal Probate Registry. The foundation instituted proceedings in the Surrogate's Court to enforce the reciprocal will agreement. The first defendant was a party to the action. The Surrogate's Court held that the reciprocal will agreement was enforceable, that the 1995 will was a breach of that agreement and that the foundation was entitled to receive the assets' of Agnes' estate. The first defendant, in her personal capacity, then issued a claim form in the Chancery Division against herself as sole defendant in her capacity as executor, claiming the sum of £6,640,879.79 plus interest. The second defendant was ordered to be joined as defendant in the first defendant's place. The master ordered the second defendant, on its own admission of the full amount of the sum claimed, to pay the first defendant over £8 million. The first defendant subsequently applied, without notice to the foundation, for an order “domesticating” (or registering) the Chancery order in the Florida Circuit Court for the County of Broward and she obtained an order in favour of her personally that the Chancery order be treated as a judgment of the court. She registered the domestication order with the Supreme Court of New York for Nassau County and a writ of execution against the estate of Agnes in the dollar equivalent of the sum payable under the Chancery order was subsequently issued. The Court for Nassau County issued a temporary restraining order prohibiting the first defendant from enforcing the Chancery order and transferred the proceedings to the Surrogate's Court, which issued a temporary injunction in similar terms. The foundation intervened in the proceedings in the Court for Broward County and obtained a stay of the domestication order. Based on the first defendant's conduct of the proceedings, the foundation applied for a summary order (a) replacing the first defendant with a neutral, independent professional person pursuant to s 50 of the Administration of Justice Act 1985 or section 1 of the Judicial Trustees Act 1896 and (b) setting aside the Chancery order. The foundation claimed its beneficial entitlement under the doctrine of mutual wills.

The court ruled:

(1) Although a person claiming under the doctrine of mutual wills was not entitled to make an application under section 50 of the 1985 Act he was entitled to apply under section 1 of the 1896 Act.

The trust did not arise under the will of the surviving testator; nor did it arise under any previous will of the surviving testator. It arose out of the agreement between the two testators not to revoke their wills, and the trust arose when the first of the two died without having revoked his will. In so far as there was an operative will, it was the will of the first testator (and his death with that will unrevoked) which brought the trust into effect. That being so, a person who claimed under the doctrine of mutual wills was not a person beneficially interested in the estate under the will of the deceased. It followed that no valid application could be made by such a person under section 50 of the 1985 Act. The survivor of two persons who made mutual wills was treated as a trustee and the trust bound those who claimed under him. Accordingly, the survivor and his executor were trustees in the usual sense of that word and a person entitled to enforce the trust imposed by law was a beneficiary.

The foundation was entitled to make its application under the Judicial Trustees Act 1896.

Exercising its discretion the court would remove the first defendant as personal representative and set aside the Chancery order.

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Features

1. Can you trust trusts? Seek professional advice, says ACCA

Trusts can be a good way of managing money and or property, especially for people who want to pass on their assets while still alive or for those who cannot manage assets themselves.

However, the Association of Chartered Certified Accountants (ACCA) is warning those thinking of setting up a trust to seek professional advice before they take the plunge into a very confusing system.

Head of taxation at ACCA, Chas Roy-Chowdhury said, "The rules regarding trusts are changed annually by the government in the Budget, and this makes it difficult to keep up with them. And the rule changes are becoming more and more complex as the government wants to make sure trusts are not being used to avoid tax - especially inheritance tax."

In the past, trusts have often been used as a legal way to limit inheritance tax duties, which used to be a tax for the wealthy. However, with most house prices rising over the inheritance tax (IHT) threshold, more and more homeowners are now liable to pay IHT on their death.

Mr Roy-Chowdhury added, "The inheritance tax threshold is failing to keep pace with house price inflation. This is seen by many as one of the greatest injustices in the tax system, and it motivates people to think about how they can protect the biggest financial asset they own – their home – when they die."

Given the complications inherent in establishing a trust and becoming a trustee, ACCA strongly advises that people who are thinking of doing this should discuss their options with an accountant who will be able to explain the best options.

Mr Roy-Chowdhury concluded, "Trusts may not be the best way to limit a tax liability. Beneficiaries have to pay tax on the income from a trust, so somewhere down the line, someone, somewhere will always end up paying what is owed."

There are five main types of trusts:

Accumulation and maintenance trust: This trust, usually in property, is applicable for grandparents who want to provide financially for their grandchildren when young. Income not spent is accumulated and added to the trust property. Later, this is then passed to the grandchildren as beneficiaries – in England and Wales from ages 18 to 25 and in Scotland when they reach age 16.

Bare trust: This is a popular type of trust and can be used by parents or grandparents while still alive to gift money or property to their children. This is held in the trustee's name, but the beneficiary – children, for example – who can take the money or property when they want.

Discretionary trust: As the name suggests, the trustee of this type of trust has discretion about how much income or capital is handed to the beneficiaries. With this trust, there is more control, and a Discretionary Trust can often be used to pass on property while still alive.

Interest in possession trust: With this type of trust, beneficiaries have a legal right to all income from it – after expenses and tax – but not to the property. Such a trust can be written into a will so that income from the property in trust can be left to a partner during their lifetime; the property is then passed on to the children when both parents have died.

Mixed trust: this is when one beneficiary of an accumulation and maintenance trust reaches age 18, and others are still minors. Part of the trust then becomes an interest in possession trust.

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Articles

1. A PE problem

Journal name: Taxation
Author: Owen Clutton
Citation: Taxation, 14 June 2007, 680
Issue date: 14 June 2007
Summary: This article considers whether the new “permanent establishment” test for trustee residence is too onerous. The adoption of the permanent establishment test is not appropriate in this context. It has been borrowed from the area of corporate tax where a non-UK company that carries on business in the UK through a permanent establishment here is taxable on the profits earned through the permanent establishment (but not its worldwide profits).

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2. I’m back; she’s not!

Journal name: Taxation
Author: Richard Curtis
Citation: Taxation, 14 June 2007, 662
Issue date: 14 June 2007
Summary: This article examines the opening sessions of the Public Bill Committee's review of the Finance Bill 2007. The reduction in the main rate or corporation tax and the reform of capital allowances is also considered. Future inheritance tax exemption increases are discussed.

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3. Trustees given guidance on risk

Journal name: Occupational Pensions
Author: Colin Sherwood
Citation: 241 OP 11
Issue date: 1 June 2007
Summary: The article makes the following key points.

  • Since December 2005 trustees of pension schemes have been required to establish and operate adequate internal controls for their schemes.
  • In its code of practice on internal controls, the Pensions Regulator recommends that trustees adopt a risk-based approach to determine the adequacy of their controls.
  • The regulator has published guidance to assist trustees who are unfamiliar with the concept of the risk management cycle to undertake risk assessment and introduce suitable controls.
  • Trustees can draw on the experience of company directors with the Turnbull guidance in order to carry out the process effectively.
  • Guidance on assurance reports for third-party service providers in the financial sector, including pension administrators, may also be of use to trustees.

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4. Offshore but unsure?

Journal name: Taxation
Author: Penny Bates
Citation: Taxation, 31 May 2007, 617
Issue date: 31 May 2007
Summary: This article examines the taxation of offshore trusts, which seems complicated and daunting to those who do not deal with them regularly. It gives an overview of the taxation of settlors and beneficiaries of offshore trusts. Non-resident trusts are subject to many special provisions aimed at eliminating or reducing the tax advantages that they have offered and HM Revenue and Customs have dealt with this by introducing a number of different anti-avoidance provisions aimed at settlors and beneficiaries.

Please note subscribers can go to LexisNexis Butterworths for further details about all the above articles. Non-subscribers can sign up for a free trial of the online service.

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Books

1. How to book and claim discounts
  • Law Society Publishing: quote “Probate Section” to receive a 20 per cent discount off all related titles (excluding directories) via Prolog at The Law Society, PO Box 99, Sudbury Suffolk CO10 2SN, telephone 0870 850 1422, fax 01787 313 995 or email lawsociety@prolog.uk.com.
  • LexisNexis Butterworths: quote “Law Society Section discount offer” when ordering via www.lexisnexis.co.uk, customer.services@lexisnexis.co.uk or 020 8662 2000.

This e-alert is not intended to provide comprehensive records of information concerning the probate sector. If you have any feedback or suggestions, please email probatesection@lawsociety.org.uk. This e-alert was created in conjunction with LexisNexis UK Legal Updater Service. For further information about any of the articles, please contact sabina.smith@lexisnexis.co.uk. The views expressed by the Legal Analysis interviewees are not necessarily those of the proprietor.

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