Why spend money on a “straightforward” Will?
The recent case of Margaret Vincent v HMRC highlighted the importance of carefully considering the impact drafting a Will can have.
In this case Mr and Mrs Hadden owned and lived in a house with Mrs Hadden’s brother Mr Thom. Mr and Mrs Hadden owned 3/8 of the property and Mr Thom owned 5/8. By their Wills Mr and Mrs Hadden granted Mr Thom a right to live in the house rent free as long as he paid the bills and maintained the property. The remainder of the estate went to their daughter (Mrs Vincent) and after Mr Thom had died, their property also passed to Mrs Vincent.
Mr and Mrs Hadden both died. Their estates included their share of the house but due to the values of their respective estate, there was no inheritance tax to pay.
Mr Thom continued living in the house until he died 12 years later. Mr Thom had also left his estate to Mrs Vincent (his niece).
The expectation of Mrs Vincent was that on her uncle’s death, she would pay inheritance tax on his estate including his share of the house (5/8). Unfortunately, the courts found that because Mr Thom had been granted an ‘interest in possession’ in Mr and Mrs Haddon’s 3/8 of the house, their share (in addition to his share) should be included in his estate for the purposes of the inheritance tax calculation. There was inheritance tax to pay based on the entire value of Mr Thom’s estate and as the entire value of the property was included, this increased the tax payable.
There were other arguments made in the case as to why Mr Thom should not have been considered to hold an interest in possession in the 3/8 share of the property, however these were unsuccessful.
The case highlights the importance of proper and full advice when considering Wills which, whilst sometimes appearing to be relatively straightforward documents, can have wide ranging and expensive consequences. Our fixed Wills allow for this and we asked detailed questions to establish your circumstances and allow us to properly advise you, including (where appropriate) advice on the impact of gifts to beneficiaries.
Rebecca Dixon is a solicitor in the private client department at Barker Gotelee, Ipswich solicitors.