A recent Court of Appeal case highlights the importance of keeping wills under review particularly following recent changes in the law relating to inheritance tax free nil-rate bang gifts made by couples.
Loring v Woodland Trust [2014] EWCA CIV 1314
Woodland Trust recently appealed against a decision concerning the construction of a clause in a will of which Woodland Trust and the Testatrix's family were beneficiaries.
The Testatrix made her will in 2001 and gave at Clause 5 "such sum as is at the date of my death the amount of my unused nil-rate bang for inheritance tax" to her family members and the residue of her estate (i.e. the remainder) to Woodland Trust.
The amount of the Testatrix's nil-rate band was £325,000. However, her executors claimed (under the Inheritance Tax Act 1984 s.8A) to transfer her late husband's unused nil-rate band to her estate, increasing the available nil-rate bank to £650,000.
The question was whether Clause 5 included only the Testatrix's nil-rate band (meaning a legacy of £325,000 would pass to her family and the remainder of her estate - £355,805- would pass to Woodland Trust) or whether Clause 5 included the Testatrix's nil-rate band plus her husband's unused nil-rate band that had been transferred (meaning a legacy of £650,000 would pass to her family and the remainder of her estate - £30,805- would pass to Woodland Trust)?
At first instance it was held that the latter was correct and the Court of Appeal agreed.
The Court of Appeal held that 'When the Testatrix made her will she plainly did not have in mind a specific amount that she intended to pass. She intended that the gift should fluctuate with changes in the legislation'.
This ruling made a big difference to the distribution of her estate with the family receiving a larger sum than was perhaps intended?
If you have any questions about your existing will, the administration of an estate or inheritance tax generally, please contact our experienced Wills, Trust and Probate team at Tolhurst Fisher LLP.
