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Inheritance and Trustees’ Powers Act 2014

Schedule 2: amendments of Inheritance (Provision for Family and Dependants) Act 1975

74.Section 6 and Schedule 2 make amendments to the Inheritance (Provision for Family and Dependants) Act 1975.

75.Paragraph 2 of Schedule 2 amends section 1(1) of the 1975 Act, which sets out the categories of relatives and dependants who can apply under the Act. These categories include, at section 1(1)(d), any person who was treated by the deceased as a “child of the family” in relation to a marriage or civil partnership to which the deceased was at any time a party. Paragraph 2 extends that category of applicant by amending section 1(1)(d) to include any person who was treated by the deceased as a child of the family, not in relation to a marriage or civil partnership, but in relation to any other family in which the deceased had a parental role. The requirement that the deceased stood in a parental role in that family clarifies that the relationship between the deceased and the applicant needs to have been akin to that between a parent and a child. Other family members who form part of the deceased’s family, but in relation to whom the deceased did not stand in a parental role, are not brought within the scope of the category.

76.Paragraph 2(3) inserts new subsection (2A) in section 1 of the 1975 Act. This provision establishes that an applicant can be treated as a child of the family (otherwise than in relation to the deceased’s marriage or civil partnership) even if that family only existed in the relationship between the deceased and the applicant. Thus, a “single parent family” is included within the scope of section 1(1)(d) as amended.

77.Paragraph 3 of Schedule 2 amends section 1(3) of the 1975 Act. That subsection qualifies the interpretation of section 1(1)(e), which permits a person to make an application under the Act if immediately before the death of the deceased he or she was being maintained, either wholly or partly, by the deceased. Such applicants are usually described as “dependants” and section 1(3), before it was amended by this Act, provided that a person shall be treated as being maintained by the deceased if the deceased was, otherwise than for full valuable consideration, making a substantial contribution towards that person’s reasonable needs.

78.The words “otherwise than for full valuable consideration” had been interpreted as requiring the court to balance the contribution made by the deceased towards the needs of the applicant against any benefits flowing the other way (from the applicant to the deceased). This was the case even if the applicant and the deceased were living in an interdependent domestic relationship with no commercial aspect. If the “balance sheet” showed that the applicant contributed more to the deceased than vice versa, then the applicant could not be said to have been maintained by the deceased and could not apply under section 1(1)(e).

79.The new wording of section 1(3) still requires the deceased to have been making a substantial contribution towards the reasonable needs of the applicant but the words “otherwise than for full valuable consideration” are omitted. Instead, there is a narrower exception for any contribution that was made for full valuable consideration pursuant to an arrangement of a commercial nature. This will mean that contributions made between people in a domestic context should not be weighed against one another for these purposes.

80.Paragraph 4 of Schedule 2 amends section 2 of the 1975 Act, which governs the court’s powers to make orders if it is satisfied that the deceased’s will or the intestacy rules (or a combination of both) did not make reasonable provision for the applicant.

81.Paragraph 4(2) inserts a new section 2(1)(h) into the 1975 Act, giving the court an express power to vary, for the applicant’s benefit, the trusts on which the deceased’s estate is held (whether these are trusts arising on intestacy or under a will or both). This provides a more direct way of achieving a result that under the current law may require the creation of a new trust or trusts to replace the existing trust or trusts under which the estate is held.

82.Paragraph 4(3) concerns the assessment of the net estate of the deceased. Under section 2 of the 1975 Act, the court may make various orders in relation to the net estate, such as the payment of a lump sum to the applicant. The net estate is defined at section 25(1) of the 1975 Act, which specifies the assets which are included and provides for the deduction of funeral, testamentary and administration expenses, debts and liabilities, including inheritance tax payable out of the estate. It is possible, under section 19(1) of the 1975 Act, for the calculation of such liabilities to be affected by the making of an order under section 2; for example, because changes in the way in which the estate is distributed affect the calculation of tax.

83.Paragraph 4(3) adds a new subsection (3A) to section 2 of the 1975 Act, confirming that in making an order under section 2 the court may assess the net estate on the assumption that the order has already been made. The court may therefore make an order which extends to the whole of the net estate after the liabilities have been recalculated in accordance with that order.

84.Paragraph 5 of Schedule 2 amends section 3 of the 1975 Act, which sets out matters to which the court is to have regard when exercising its order-making powers under section 2 of the Act. Where the applicant was the spouse or civil partner of the deceased, one of the matters to which the court is to have regard is the award that a court would have made in proceedings for “ancillary relief” had the marriage or civil partnership ended in divorce or dissolution: section 3(2) of the 1975 Act. The words added by paragraph 5(2) make clear, so as to avoid any uncertainty, that this exercise is not to be regarded as setting either a lower limit or an upper limit on the level of any award under the 1975 Act.

85.Paragraph 5(3) of Schedule 2 concerns matters to which the court is to have regard where the application is made by virtue of section 1(1)(d) of the 1975 Act, on the basis that the deceased treated the applicant as a child of the family. It amends paragraphs (a) and (b) of section 3(3) of the 1975 Act to clarify the matters which are there set out, in order to avoid any uncertainty consequent on the amendments also made to section 3(4) of the 1975 Act, discussed immediately below.

86.Paragraph (a) of section 3(3), as amended, directs the court to have regard to whether the deceased maintained the applicant; and if so, to the duration of that maintenance, the basis on which it was provided, and how much maintenance the deceased contributed. New paragraph (aa) of section 3(3) requires the court also to have regard to whether the deceased assumed responsibility for the applicant’s maintenance, and if so, to what extent. A necessary consequential amendment is made to paragraph (b) of section 3(3), which concerns the requirement for the court to have regard to whether – if the deceased maintained or assumed responsibility for maintaining the applicant – the deceased did so in the knowledge that the applicant was not his or her own child.

87.Paragraph 5(4) of Schedule 2 amends section 3(4) of the 1975 Act, which sets out matters to which the court is to have regard in relation to an application brought by a dependant: that is, on the basis that the applicant was maintained by the deceased, under section 1(1)(e) of the 1975 Act. The amendments separate two issues to which the court is to have regard. Under section 3(4)(a), the court must consider the duration of the maintenance provided, the basis on which it was provided, and the extent of the contribution thereby made by the deceased. Under section 3(4)(b), the court must also have regard to whether the deceased assumed responsibility for the applicant’s maintenance (beyond the actual provision of maintenance) and if so, the extent of that assumption of responsibility. The requirement in the case law as it currently stands that such an assumption of responsibility must be present in order for an applicant to qualify to apply for family provision as a dependant is thereby removed. An applicant qualifies to apply under the 1975 Act as a dependant if he or she satisfies the terms of section 1(1)(e), read with section 1(3); see paragraphs 77 to 79 above.

88.Paragraph 6 of Schedule 2 amends section 4 of the 1975 Act to expressly permit an application to be made under the Act before a grant of representation has been made in respect of the estate. A grant of representation is a grant of probate made to executors appointed under a will or a grant of letters of administration in other cases.

89.Paragraph 7 of Schedule 2 amends section 9 of the 1975 Act, which governs the way in which the court treats property which the deceased co-owned with others as a beneficial joint tenant immediately before his or her death. Under this form of co-ownership, the death of any one co-owner causes that co-owner’s undivided share of the property to pass automatically to the other co-owners. It does not therefore form part of the deceased co-owner’s estate. Section 9 permits the court to treat the deceased’s severable share of any such property as part of the deceased’s net estate to such extent as appears to the court to be just in all the circumstances of the case. Once included in the net estate for these purposes, the property can be the subject of an order under section 2 of the Act.

90.Paragraph 7 amends section 9 of the 1975 Act in two ways. First, it omits the words “before the end of the period of six months from the date on which representation with respect to the estate of the deceased was first taken out”. This permits the court to exercise the section 9 power even where the application had been made more than six months after a grant of representation was first taken out (if the court has given permission for the application to be made; see section 4 of the 1975 Act).

91.The second amendment removes the words “at the value thereof immediately before his death” and inserts a new subsection (1A). The current wording was considered by the Court of Appeal in Dingmar v Dingmar [2006] EWCA Civ 92 and its meaning was found to be unclear. The amendment is intended to make clear that when considering how to value the deceased’s severable share in a property, the court will, as a general rule, have regard to the value of the property at the date the claim is heard, but that the court retains the discretion to choose a different date if appropriate. The default position described here reflects the approach throughout the 1975 Act; but, for example, the property may have been sold, or other circumstances may make another valuation date more appropriate.

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