11 April 2013 by

Lifetime Gifts: Avoiding a Double Disaster

What are the considerations when making lifetime gifts…

There has been recent clarification of the law surrounding the making of lifetime gifts.

The case of Kloosman v Aylen and Frost has given Private Client practitioners further food for thought when drafting wills for individuals who have already made or are likely to make gifts during their lifetime.

The issue for consideration was ‘double portions’ and when these arise.

The rule against double portions applies where a person making a will leaves an inheritance to a child in their will and then makes a lifetime gift to that child. Should such a lifetime gift be off-set against the legacy in the will? The Kloosman case has established a presumption that a parent would not intend to benefit one child twice and therefore, the lifetime gift is regarded as payment of part of that legacy under the will. This means that the amount left to the child in the will is reduced by the amount of the lifetime legacy.

The facts were as follows:

Mr Frost had been diagnosed with cancer and on the sale of his property, he gifted £100,000 each to his daughters Susan and Linda, who cared for him throughout his illness. They were also beneficiaries of his will along with their estranged brother, Andrew, and his two children.

The Judge sought to differentiate between “a gift intended to set up a child in life or to make substantial provision for him or her”. She stated that unless there is evidence to the contrary, “where a parent leaves a substantial share of his estate in his will to his children and then gives a large gift to one of those children, and where both those gifts have the character of a gift then the presumption should be that the lifetime gift is a substitute for the bequest.”

In this case the judge ruled that it was clear that the gifts were not intended to be part payment but were to repay Linda and Susan for the sums of money that they had already spent taking care of their father. The lifetime gifts did not meet the test and the presumption against double portions did not arise. The estate was distributed in accordance with Mr Frost’s Will.

This case underlines the importance of structuring any lifetime gifts you may be considering against the provisions in your will to ensure fairness and avoid costly family disputes.

28 March 2013 by Yezdan Izzet

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