Trusts, Estates & Tax: what makes a winning team

In October 2023, the Berkshire, Buckinghamshire and Oxfordshire Law Society awarded me (Louise Lewis) “Lawyer of the Year” in recognition of my work with my team, with my community and with the legal profession, including my voluntary work with STEP. I was very quick to publish my thoughts to say that this was not my award, but my team’s award and that everything we do, we do as a team. I therefore wanted to take the opportunity this year to showcase the team and to let everyone know about the work that we do.

First to be highlighted from our highly regarded team are Saima Islam and Ella Weaving.

Saima joined us as a newly qualified solicitor who has quickly grown through the ranks. She combines fierce technical skill with a very human side, clients noting her empathy and compassion. Saima is a great motivator and works with Ella, specialising in enabling vulnerable clients to live their best lives.

Ella was part of my former team at Penningtons and has grown from a former role as a PA to a very successful executive. She manages probates and trusts for vulnerable people with a methodical and practical approach, and easily forms personal connections as clients can see how much she cares.

Below are some examples of the complex work they undertake which ranges from deducting a family loan from an estate, to dealing with complexities of overseas assets in an estate administration.

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Debt due back to a family member - vulnerable individual / estate administration case study

Saima is currently assisting an Executor with the administration of a family member’s estate. The Deceased owed in the region of £100,000 to a family member which she had treated as a loan that would be repaid on death. This raises an important legal point on whether the debt could be deducted from the estate as a liability which existed at the date of death. The loan would then reduce the overall value of the Deceased’s estate and therefore have an impact on the inheritance tax position.

The brief background to the loan was that the Deceased was quite unwell and her family members arranged for her to move in with them and they settled her day-to-day and care expenses from their own funds. The Deceased was a vulnerable individual and the family (who are also able to act under a Property & Financial Affairs LPA) decided that this arrangement would be in the Deceased’s best interest. Although the Deceased was unwell, she would regularly review her finances and the thought of funds being spent for care would cause the Deceased to become anxious. The family therefore settled all expenses to avoid causing the Deceased any further stress at the time. The Deceased was aware of this and did not want to become burdensome and asked for the amounts to be repaid on her death. 

Due to the nature of the family arrangement and vulnerability of the Deceased, there was no formal loan agreement in place. This is a technical area surrounding the law of contract, evidence and trusts. The fundamental point relates to whether the debt is legally enforceable and therefore deductible from the estate. Saima worked with the Executor and the family to establish whether there was an oral agreement at the time the debt was created and whether the Deceased intended to repay the amounts lent.

Saima prepared detailed witness statements to evidence the position at the time the loan was made and prepared a comprehensive schedule of expenses to form a record of the costs over time. Saima successfully assisted the Executor in establishing that the debt existed at the date of death and HMRC confirmed that they had no queries to raise and accepted the claim.

Non-domiciled deceased with multi-jurisdictional wills / domicile / international case study

Saima has recently submitted an application for a Grant of Probate on behalf of Wadham College as Executor.

The Deceased was born in the UK but immigrated to the USA for further studies until his return 4 years later. The Deceased worked in the UK for a couple of years before making the decision to then relocate to Canada. The decision to relocate was a significant life choice, driven by employment opportunities and other factors leading him to establish his roots in Canada. The Deceased and his companion shared a life and residence in Canada for almost four decades and had no plans to ever return to the UK.

The Deceased did inherit his parents’ home in the UK, but he gave no indication of intending to return to the UK and to live there. The Deceased died in Canada and the execution of funeral arrangements there aligns with his long-standing connection with the country.

This case demonstrates a very common and topical situation whereby individuals can find themselves immigrating to other countries and establishing a permanent base there. Underpinning the movement lies the law of domicile; Saima provided the Executor with technical advice so as to make the argument to HMRC that the Deceased was not UK domiciled at the date of death.

The Deceased would have had a UK domicile of origin at birth. He would have then acquired a new Canadian domicile of choice when he relocated there. Saima assisted the Executor in preparing a detailed statement and form IHT401 which argued that the Deceased had acquired a new domicile. All of the above mentioned factors together helped to establish that the Deceased considered Canada not only his place of permanent residence but also his final resting place.

Domicile is an important legal point as an individual’s domicile will influence how UK inheritance tax rules will apply. If an individual is domiciled in the UK, then the entirety of their worldwide estate is subject to UK inheritance tax. Whereas, if a Deceased is domiciled abroad, then only their UK situated assets are subject to UK inheritance tax rules.

The Deceased also held a Will in each jurisdiction, dealing with the assets situated in the respective countries. A further complexity in this case was that each Wills did not acknowledge the existence of the other. In situations where a Testator requires multiple Wills for different jurisdictions, it is vital that a bespoke clause is included which contains the appropriate revocation clause to acknowledge the other Will, but only seeks to revoke only the Wills that apply in that particular jurisdiction.

Saima obtained formal advice from Counsel and it was established that the UK Will was valid and application for the Grant of Probate could proceed on the basis that the UK Will had been executed in accordance with S.9 Wills Act 1837 – the Will is in English and duly executed while the Deceased was domiciled in Canada. Both Wills are valid in this case as:

1. The Wills are not inconsistent with each other because they dispose of different assets in different jurisdictions
2. They do not "cancel each other out" in the Re Howard way; and
3. There is evidence of the testator's intentions.

We are currently waiting to hear back from the Probate Registry with the Grant of Probate.

Property and financial affairs attorney for vulnerable clients

Ella is currently assisting on a number of cases whereby this firm’s trust corporation, Freeths Trustees Limited, have been appointed as a client’s Property and Financial Affairs Attorney.

Part of Ella’s role in assisting the Professional Attorney, is to build a good relationship with the client and understand their individual needs. Ella therefore carries out regular visits with her clients whether this be in their homes or local care homes in order to assure the client that their property and financial affairs are being dealt with effectively on their behalf. In doing so, Ella builds close relationships with her clients and is able to handle difficult situations with the upmost compassion and professionalism.

Ella also builds effective relationships with the clients’ families and Health and Welfare Attorneys so that there is constant communication and support for all those involved.

Additionally, Ella is also required to build good working relationships with local care homes where clients may reside and work together with the home to ensure that the client is well cared for and the appropriate safeguards are in place.

In addition to building strong relationships with her clients and third parties, Ella also works to gather a comprehensive list of the client’s assets and assist the Attorney in effectively investing client funds to ensure that the client is financially comfortable.

In instances where a client may be required to relocate from their home to a residential care home, Ella has been heavily involved in, sorting through and collecting personal items from the client’s home and sitting down with them to decide what they may like to keep in their new residence. Ella also been involved in discussing the need to sale a client’s property as they are no longer safe to return alone, as a result Ella has arranged the clearance of homes so that the same may be sold, the selling of vehicles that are no longer required and ordering personal items for the client that they may need on a regular basis and that the care home may not provide.

As part of working with vulnerable clients, Ella has also been involved in the Mental Capacity Assessment process sitting in to support client’s during the same. Ella understands that it can be upsetting and stressful for a client to have to undergo a capacity assessment with a third party and therefore Ella is present to ensure that they are comfortable at all times and that the assessment is thoroughly documented.

Estate administration - early distribution and deed of variation case study

Ella is currently undertaking an estate administration whereby the Deceased was originally born in Madras, India and had moved to England at the age of 18. However, due to the Deceased’s career they had to spend a substantial amount of time in both the United States and England, as such the Deceased obtained joint citizenship. It was critical to establish, at the outset, the deceased’s domiciled status as this could have affected the estate’s Inheritance Tax position. After discussions with the Deceased’s family members, it was determined that the Deceased was domiciled in the UK where they held their main residence.

The Deceased passed whilst in the UK and left a Will which stated that the Deceased’s residue was to split between their niece, nephew and a selected charity. The net value of the Deceased’s estate was just over £1.7 million which included assets situated in the United States, multiple UK bank accounts, chattels and a UK property amongst over things.

Due to the complexities of the oversea assets, Ella is working alongside the Deceased’s long-term Accountant to ensure that all U.S. tax returns are filed correctly. In addition to working together with a third-party overseas asset recovery company to collect in the assets still situated in the U.S.

As the estate is sizable and includes more complex matters such as the collection of overseas assets and the relevant tax implications, Ella is providing a more bespoke administration service to the Executors as the administration period is likely to be a lengthier one than that of a more straightforward estate administration. Such a service includes taking into account one of the beneficiary’s personal circumstances and, as result, advising the Executors in relation to making distributions prior to obtaining the Grant of Probate.

The Executors confirmed their wish to proceed in making the early distributions and therefore Ella advised that all beneficiaries who wished to receive an early interim distribution should sign a Deed of Indemnity indemnifying the Executors should a claim be brought against the estate under the Inheritance (Provision for Family and Dependants) Act 1975. Ella therefore advised all beneficiaries of the risks to the Executors in making a distribution prior to the 10 month deadline from date of the issue of Grant of Probate and explained why a signed Deed of Indemnity was required as a result.

Both individual beneficiaries, after having received Ella’s advice, agreed to signing the Deeds of Indemnity, however, the charitable beneficiary decided that they would prefer to wait until 10 months had passed from date of the Grant before they received their distribution. Ella has therefore made a separate provision for the charitable beneficiary so that they receive an interim distribution once the deadline has passed.

Ella has also advised the beneficiaries as to the value of a Deed of Variation.

A Deed of Variation is a way in which the distribution of the Deceased’s estate can be varied by the intended beneficiary, i.e. the beneficiary can redirect some or all of their interest to parties of their own choosing e.g. their own children, their spouse, a friend or selected charity, to name a few. In deciding to opt for a Deed of Variation, this can benefit the beneficiary in regards to their own estate planning. By redirecting some or all of their interest the gift to the beneficiary’s chosen parties is then treated as though it was made by the Deceased rather than the beneficiary. This means that, for Inheritance Tax purposes, the beneficiary would not have to survive seven years once the gift is made in order for that gift to fall outside of their estate.

However, in order for the Deed of Variation to be valid the Deed must be signed within two years of date of death. Ella therefore advised both individual beneficiaries of their right to vary on multiple occasions, this resulted in one of the individual beneficiaries deciding to vary their inheritance and a Deed of Variation was therefore prepared separately.

Although the administration of the estate is ongoing, Ella has already collected in all of the Deceased’s UK assets, arranged clearance of the UK property and placed the same on the market for sale. We are currently waiting on a substantive offer for the UK property and a response from the U.S. asset holders as to the release of the assets.