Levelling Up - Will Gifting

CuttySark12

Hi Forumites...
My father unfortunately recently passed away - four children as Executors (incl myself - Child A) . Previously he gifted a plot of land (valued at appx £60k) to Child B on the understanding that once his estate was to be distributed then Child B's portion of £60k be deducted from their settlement amount as the will specifies that all children are ultimately to be made equal  . Question is as to how this is viewed in law - ie - do Child's A C and D get an addt £20k each in equal proportions to make up the £60k differential ? - however technically should this not be £60k each for Childs A C and D from the overall settlement amount as this is what Child B was solely gifted in the first place. There is no particular fall-out on this atm however we are anxious to avoid this moving forward and get an idea on concept asap to hopefully avoid any choppy waters that may ensue. Any one with similar experiences along these lines? Many thanks again.

bobster2

Was this understanding reflected in his will? Or was this just conveyed verbally and does his will say the estate should be divided equally about his 4 children?

How things are viewed in law depends on the wording of the will - and deviation from this would require agreement among the beneficiaries.

CuttySark12

Thanks Bobster.
The will effectively advises that previous gifting should be taken into account when ensuring that all children are made equal at the point estate funds are distributed. There is no mention of specific amounts going to A,B,C etc...just that things should be made equal. Bit woolly possibly but that's the gist of the wording.

silvercar

If B has had £60k, then A, C & D now get £60k from the first £180k. That puts everyone on an equal footing. Then divide up the rest equally. If the total remaining estate is less than £180k, divide equally between A, C and D and B gets nothing, I doubt you can retrospectively demand B relinquishes any of the £60k.

msb1234

It very much depends on the exact wording of the Will. If the wording is open to different interpretations, then you should first of all reach an agreement and then complete a Deed of Variation. That way it’s all legally documented. 
One thing to consider is the value of the gifted land at today’s rate. If it’s doubled in value without any input from the recipient, then one could argue that to ‘make it equal’ the current value should be taken into account! 

poseidon1

msb1234 said:

It very much depends on the exact wording of the Will. If the wording is open to different interpretations, then you should first of all reach an agreement and then complete a Deed of Variation. That way it’s all legally documented. 
One thing to consider is the value of the gifted land at today’s rate. If it’s doubled in value without any input from the recipient, then one could argue that to ‘make it equal’ the current value should be taken into account! 

Very good point!

Gifting assets during lifetime, rather than cash does complicates the equalisation excercise if the will does not precisely state how equalisation should be achieved - valuation point at date of gift or date of testator's death?

WYSPECIAL

CuttySark12 said:

Thanks Bobster.
The will effectively advises that previous gifting should be taken into account when ensuring that all children are made equal at the point estate funds are distributed. There is no mention of specific amounts going to A,B,C etc...just that things should be made equal. Bit woolly possibly but that's the gist of the wording.

If all things are to be made equal then perhaps you should use the current value of the land if it were still part of the estate.
Depending on how long ago it was gifted it might be worth substantially more than £60k now.

madbadrob

I am not sure that WYSPecials reply actually would be legally binding.  The deceased gave child B 60k pounds.  What that was given for as no bearing on the estate. The will says all should be equal meaning that children AC and D get 60k each before any share returns to child B.  The issue comes if the said estate does not reach 180k so the 3 can be equalled out (is that a correct word).  The will could get sticky here as it doesnyt make it clear if Child B should reliqnuish some of that 60k to make the others balanced.  

Im going to assume that as the parent was financially able to loan 60k that the estate is one of substantial balance and the estate is going to  be more than 180K.  Therefore for example if the estate is worth 200k I would word the final  bill something like this

Estate Net Value = 200k
Child A = 65k
Child B = 5k ( 60k having been gifted during the lifetime of the deceased as agreed and noted in the will)
Child C=65k
Child D= 65k

Total monies = 200k (with the addition of the previous loan prior to death)

Just remember that the 60k loan forms a part of the estate for IHT reasons

Rob

silvercar

madbadrob said:

I am not sure that WYSPecials reply actually would be legally binding.  The deceased gave child B 60k pounds.  What that was given for as no bearing on the estate. The will says all should be equal meaning that children AC and D get 60k each before any share returns to child B.  The issue comes if the said estate does not reach 180k so the 3 can be equalled out (is that a correct word).  The will could get sticky here as it doesnyt make it clear if Child B should reliqnuish some of that 60k to make the others balanced.  

Im going to assume that as the parent was financially able to loan 60k that the estate is one of substantial balance and the estate is going to  be more than 180K.  Therefore for example if the estate is worth 200k I would word the final  bill something like this

Estate Net Value = 200k
Child A = 65k
Child B = 5k ( 60k having been gifted during the lifetime of the deceased as agreed and noted in the will)
Child C=65k
Child D= 65k

Total monies = 200k (with the addition of the previous loan prior to death)

Just remember that the 60k loan forms a part of the estate for IHT reasons

Rob

OP said it was a gift not a loan, so it’s a PET, ie if it was made over 7 years ago it doesn’t form part of the estate. If earlier there is taper relief depending on when the gift was made.

bobster2

madbadrob said:

I am not sure that WYSPecials reply actually would be legally binding.  The deceased gave child B 60k pounds.  What that was given for as no bearing on the estate. The will says all should be equal meaning that children AC and D get 60k each before any share returns to child B.  The issue comes if the said estate does not reach 180k so the 3 can be equalled out (is that a correct word).  The will could get sticky here as it doesnyt make it clear if Child B should reliqnuish some of that 60k to make the others balanced.  

A will can spell out how an estate should be distributed.

It's not going to be able to compel someone to give away something they already own and is no longer part of the estate. If this really was a gift.

So even with a well-written and binding "levelling up" clause (known as a "hotchpot" clause) - you could end up with 3 siblings getting £50k each and the first sibling keeping their £60k land and getting nothing more.