Lifetime gifting and the ‘presumption against double portions’

The rules around inheritance are highly complex, as many of those who have had to go through probate or deal with Inheritance Tax issues know all too well. Because so few people fully understand them, however, they may risk unintentionally jeopardising the inheritance they leave behind for their beneficiaries.

Lifetime gifting and ‘portions’

In this era of economic uncertainty, extortionate living costs and comparatively low salaries, it is understandable that parents with the means to do so want to assist their offspring financially, whether this be contributing towards a property purchase, paying for their wedding or perhaps for starting off an investment portfolio. However, those who gift substantial sums to their child(ren) during their lifetime risk inadvertently detracting from the legacy they wish to leave behind in their Will. This is due to a legal quirk known as the ‘presumption against double portions’.

Essentially, a ‘portion’ is a substantial lifetime gift made by a parent or guardian to a child with the intention of “establishing the child in life or to make what is called provision” for them. However, if the parent has also left their child a sum of money in their Will, it will be presumed that they did not intend to make the gift twice (i.e. to the detriment of other children) and that the value of the lifetime gift should therefore be deducted from the beneficiary’s inheritance.

It is important to note that a lifetime gift is not considered a portion if it isn’t given for the specific purpose outlined above – e.g., if it is a spontaneous gift or given in exchange for goods or services.

How this works in practice

To clarify how the rule works, here is an example:

Keen to assist their son onto the property ladder, his parents give him £70,000 for a deposit on a London flat. In their Will, they have also left a legacy of £300,000 to each of their children. When they pass away, the son finds he is only entitled to £230,000 of his inheritance due to the rule of double portions.

Evidence to the contrary

While many people are completely unaware of this rule, it can be overturned; a presumption can be rebutted with sufficient evidence of the testator’s intentions. This can be achieved by the testator themselves, e.g. by instructing a solicitor to help them draft a Will, or to update an existing one, so that it contains a clause stipulating that any lifetime gifts are intended separately and should not detract from the legacy they leave in their Will. Alternatively, the beneficiary may be able to provide an email, letter or other correspondence as evidence of the testator’s intentions.

For example, in the case of Kloosman v Aylen and Frost, the presumption of double portions was overturned by the judge. The deceased had made a Will leaving his three children a third of his remaining estate each. Prior to making the Will, he had sold his house and paid his two daughters, Linda and Susan, the sum of £100,000 each to compensate them for taking him in, supplementing his pension income and making accommodations to their homes after he was diagnosed with cancer. The judge stated it was clear the money was not intended as a portion as it was paid in recompense for the time and money his daughters had spent caring for him, so the presumption of double portions did not apply.

Take legal advice

Many people have understandably been tripped up by the complexities of inheritance law in the past, which is why it is so important to take legal advice to ensure your wishes and intentions are fully carried out. For expert guidance, please call our Wills, Trusts & Probate team on 0330 221 8855 or email enquiries@attwaters.co.uk

Source:

https://www.lawgazette.co.uk/law/probate-establishing-the-testators-intention/70075.article