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The Law Society - Conveyancing

14

Jan

2014

Lifetime and Testamentary Gifting to Children – the Rules on ‘Portion Size’

Have you made lifetime gifts to one or more of your children? The legal rule against “double portions” could mean that the amounts given are treated as payments on account of that child’s entitlement under your Will rather than outright gifts.

A recent case (Kloosman v Aylen & Frost [2013] EWHC 435 Ch) has highlighted the need to take advice before making lifetime gifts to children.

Basically the rule against “double portions” applies where a parent leaves a child a gift in their Will and then makes a lifetime gift to that child.  If children are not treated equally in all respects, then issues may arise unless the reasoning behind the different treatment is clearly and formally laid-out.

There is a legal presumption that the parent would not intend to treat one child preferentially to the other children.  The lifetime gift may therefore be regarded as a payment on account of that child’s entitlement under the Will.  The rule does not apply in certain cases and one example of where it will not apply is where a gift is being made to meet a particular moral obligation.

In the above case, the deceased left one third to his daughter, Linda, one third to his daughter, Susan, and the final one third between his estranged son, Andrew, and Andrew’s two children.  After making the Will the deceased made a gift of £100,000 to Linda and £100,000 to Susan.  As Linda and Susan had taken care of their father, including financial assistance and modifications to his home, the Court found that the lifetime gifts were not intended to be payments on account.  The intention was that the gifts would repay Linda and Susan for the costs that they had incurred in caring for their father and would assist with the future costs of their father’s care and housing.  The gifts were not therefore treated as payments on account of their entitlement under their father’s Will.

Following this case it is vital for any parent considering a lifetime gift to make clear whether or not the gift is to be treated as a part payment.  If this is not done a costly dispute could ensue between the parties, as in the above case.  We would advise that the parent makes a statement, or alters their Will, to make the position clear.  It is also important for Executors to consider this rule when they are dealing with the administration of an estate where there have been lifetime gifts to one or more of the deceased’s children

We would be happy to advise further in relation to either issue.

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