The following Trusts and Inheritance Tax guidance note by Tolley in association with Peter Gausden, Consultant Solicitor at Rowlinsons provides comprehensive and up to date tax information covering:
The Inheritance (Provision for Family and Dependants) Act 1975 (1975 Act), allows certain categories of applicant to make a claim for financial provision from a deceased estate. In England and Wales there are no restrictions on a testator on the disposition of his assets by Will, but the 1975 Act provides a fallback option for partners and dependants who feel that they have not been given adequate financial provision.
The detailed conditions which apply to such a claim and its likelihood of success is outside the scope of this guidance note. For more information on this aspect see Simon’s Taxes I4.441–I4.446 (subscription sensitive). This guidance note describes the inheritance tax consequences which follow when the court makes an order under the 1975 Act to change the distribution of the estate as originally provided for by the Will or intestacy.
Most orders are made under section 2 of the 1975 Act to award reasonable financial provision out of the net estate to the successful applicant.
The court has wide powers as to the type of provision it may award and the form it can take. The standard of provision will depend on whether the successful applicant is the spouse / civil partner of the deceased or a person in another category of applicant.
In the former case, the provision is likely to be relatively substantial while in other cases it will be limited to the ‘maintenance standard’. A court order is not only likely to alter the destination of property as initially prescribed by the deceased’s will or intestacy, but it might also create different interests, eg settlements, from those that would otherwise have taken effect.
Two overlapping rules determine the tax position in so far as the order affects the deceased’s net estate:
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