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| Article by Chris Lucas |
You may be interested to know that if you make a particular
type of gift to one or more of your children during your lifetime, this could
affect your children’s inheritance under the terms of your will.
The type of gift referred to here is known as a ‘portion’. A
portion can be described as a substantial gift (usually of money) from a parent
to a child which is made with the intention of establishing the child in life
or making permanent provision for them.
A typical example of a portion would be giving one of your
children a sum of money to be used as a deposit towards buying their first
home. Whatever the gift might be, the key requirements for it to be considered a
portion are as follows:
- The gift must be from a parent (or a person acting in loco parentis i.e. someone who has assumed parental responsibility) to a child.
- The gift must be substantial in value - what ‘substantial’ means will depend on the circumstances and can be open to interpretation, but generally speaking, any gift of £20,000 or more is most likely to be considered substantial.
- The gift must have the effect of establishing the child in life or making permanent provision for them e.g. deposit for a first home or sum of money to enable the child to start up their own business.
If you have already made a will, then it is important to be
aware of the potential effect of portions when you subsequently pass away.
Essentially, any portions made during your lifetime after you have made your
will can have the effect of ‘satisfying’ legacies left to your children under
the terms of your will. This is known as the presumption against double
portions.
For example: you have three children, Sam, Edward and Jane. You
make a will in April 2015 leaving your residuary estate to the three of them in
equal shares. In July 2016, you give Sam £30,000 as a gift for him to put
towards buying his first flat. You pass away May 2018, having made no other
gifts to your children, with a residuary estate worth £300,000.
Based on the terms of your will alone, your children would
be entitled to receive £100,000 each (£300,000 ÷
3 = £100,000). However, the gift of £30,000 is likely to be considered a
portion as it was a substantial sum of money which was gifted to Sam with the
purpose of establishing him in life etc. The portion would therefore be deemed
to satisfy part of the legacy to Sam under the will and this should be taken
into account when your estate is divided between your children.
To work out the amounts each of your children would receive,
your personal representatives would need to add the value of the portion to the
value of the estate (£30,000 + £300,000 = £330,000) then divide this sum
accordingly (£330,000 ÷ 3 = £110,000) to take
the portion into account, so each child in this scenario would be
entitled to £110,000. This would mean that Edward and Jane would each receive
the full sum of £110,000 and Sam would receive £80,000 (having already received
the gift of £30,000).
Unfortunately, it is not always as straightforward as the
above example, as it can sometimes be difficult to establish whether or not a
gift should be considered a portion. For example, there could be some disagreement
over whether a gift of £5,000 could be considered as ‘substantial’. Also, the
value of money changes over time with inflation so this may need to be taken
into account, particularly if the gift in question was made a very long time
ago.
It is important to note that the presumption against double
portions can be defeated if a contrary intention is expressed by the person
making the gift. For example, you could have a clause in your will stating that
any portions made in your lifetime following the making of your will are to be completely
disregarded. Alternatively, when making a gift to your child, you could express
at the time of the gift (preferably in writing) that the gift is not to be
taken into account for the purposes of their entitlement under your will. Of
course, whether you would want to do this would depend on the nature of the
gift, your individual circumstances and your wishes.
If you have made any significant gifts to your children
since last updating your will, it may be a good idea to consider reviewing your
will just to make sure that the position is clear. This is because if there are
any disputes over the gifts and whether they should be taken into account as
portions, this could potentially cause stress for your family and slow down the
administration of the estate.
At Garden House Solicitors, we offer a free will review
service for anybody wishing to review the terms of their will.
If you have any concerns about any of the above issues
and/or would like to discuss your will, feel free to contact Chris Lucas by
telephone on 01992 422 128 or by email at chris@ghslaw.co.uk.
Tel: 01992 422 128
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
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