Contentious Probate Dispute Surrounding Interpretation

Publication Date16 March 2022
SubjectTax, Family and Matrimonial, Inheritance Tax, Wills/ Intestacy/ Estate Planning
Law FirmOsbornes Law
AuthorKatie de Swarte

The 'nil rate band' offers an incentive to testators to make their will in a tax-efficient manner, maximising the amount available to beneficiaries. However, a recent ruling illustrates how the clear wording of a testator's will limiting the amount available under the nil rate band (NRB) will be interpreted.

The decision also demonstrates the importance of engaging specialist solicitors in drafting an effective will. Our contentious probate litigation solicitors are highly experienced in advising will dispute clients with sensitivity and precision.

What is the nil rate band?

The NRB is a threshold below which no inheritance tax is payable on death. The current NRB is '325,000 and will not change before April 2026. If a deceased estate is valued at more than '325,000, inheritance tax may be chargeable on the excess.

Individuals making a will can leave an amount equal to the NRB, or what is left of their NRB, to named beneficiaries.

Gifts made in the 7 years before death and gifts and legacies left under the terms of a will may reduce the NRB available.

It is also possible to transfer any unused amount of the NRB to a surviving spouse (or civil partner) with the effect of increasing the NRB available to the survivor.

Case Overview

The deceased (D) left a will appointing a friend as one of her executors and leaving him a Somerset apartment, shares worth '218,000 and a number of personal items. Under the will, D also left her friend (the first defendant in this case) the "nil-rate sum", i.e. the amount of the NRB ('325,000). However, a sub-clause read:

"4.1 In this clause 'the Nil-Rate Sum' means the largest sum of cash which could be given on the trusts of this clause without any inheritance tax becoming due in respect of the transfer of the value of my estate which I am deemed to make immediately before my death"

A dispute arose between the residuary beneficiaries - 21 named charities - and the first defendant as to how the gift of the nil-rate sum should be interpreted.

The charities argued he was entitled to nothing under the will because sub-clause...

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