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Practice Area: Power of Attorney, Wills, Trusts & Estate

Estate Planning and Presumption of Advancement (or making sure your intentions are upheld)

Posted on by Wellers

Advancement, as a legal principle, is a gift given during an owner’s lifetime, typically referring to real estate or large assets gifted by the transferor (title holder) to a transferee – “one day, this will all be yours” is the phrase that springs to mind.

Presumption of advancement occurs within specific relationships and the principle originally arose because wives could not hold legal title and fathers were morally predisposed to “advance” the prospects of their children. In English and Welsh law presumption of advancement occurs only between fathers and children, husbands and wives, a man and his fiancée

All other circumstances involving transfer of property are treated as resulting trusts (in the case of property) and resulting loans (for money).

Presumption of advancement was set to be abolished under section 199 of the Equality Act 2010, but has yet to be ratified and further attempts to end the legal principle, such as in 2016 when the private member’s bill entitled Family Law (Property and Maintenance) was entered into parliament, have failed.

But the issue of presumption of advancement and resulting trusts are knotty legal issues which can lead to acrimonious legal disagreements between families, so it’s always best to understand the ramifications and do as much as you can to prevent misunderstandings regarding money and property.

Presumption of advancement and resulting trust in English courts

In English law, it is presumed that when property is passed between individuals it is a gift – there is a presumption of advancement. In the event of a failure of the transfer (in cases of relationship breakdown and intestacy, for example) and where there is no evidence to support that the transfer was intended as a gift, the principle of a presumed resulting trust will be applied. Any litigation which takes place to restore the property to the transferee will need to clearly demonstrate evidence of advancement (it was given as a gift) or a court might rebut the principle if evidence is provided to show that no such gift was intended.

In some jurisdictions, for instance Canada, courts have been reluctant to uphold the presumption of advancement, particularly in cases relating to adult children. In Pecore v Pecore  2007 SCC 17 the court held that the presumption should not apply because the obligations of parental support typically end when the child is no longer a minor. The case created a principle in Canada in respect of gratuitous transfers to children being a presumption of advancement only if the transfer was made by a parent to a minor child.

Conversely, English courts are perhaps more likely to uphold the principle. In Wood v Watkin [2019] EWHC 1311 (Ch) it was found that although the transferee was an adult child, a presumption of advancement could arise. And in Kelly v Kelly [2020] 3 WLUK 94, a lack of documentary evidence to support the father’s claim that the purchase of a property for his son was a loan led to the court being unable to rebut the presumption of advancement. The father’s evidence was found to be inconsistent, with no mention of the purchase being a loan in any documentation that could be provided to the court. Witnesses gave evidence in support of the father’s claim that the purchase had been a loan, but the court found that this was after the fact

Documenting gifts and transfers

What the above cases highlight is that despite some solicitors suggesting that presumption of advancement can easily be disproved in English courts, a court is unlikely to rebut the principle without clear documentary evidence.

Ensuring that the intention behind any transfer of property or money is recorded accurately and adequately may not sound like a difficult thing to do, but it can be an emotionally fraught act. You may feel that your situation is clear, but in many a lawyer’s experience, these things are not always as straightforward as you would believe.

Loans and property transfers between family members can quickly result in differing opinions about the initial intentions and it is a surprisingly familiar story that a parent considered a money transfer a loan, while the child believed wholeheartedly that it was a gift. If evidence cannot be supplied to support the express intention of a transfer, litigation can be drawn out, complex and ultimately extremely costly both emotionally and financially.

Our tip: always document any transfer of money or property, especially if you cannot afford to lose the funds. If you are letting your child live in a property that you own, but that you fully intend to sell in order to fund your retirement, then this needs to be documented. If you are lending your child a sum of money so they can buy a house, but you cannot afford to gift them the money, you should draw up an agreement which sets out the terms of repayment.

How Wellers Can Help

Our website section on the Bank of Mum and Dad contains lots of information on how to go about drawing up a legally binding agreement, such as a declaration of trust and a family loan agreement. We also look at the choices you have in respect of gifts and loans and other ways you can help your children to get on the property ladder.

In circumstances where you wish to ensure that money or property is divided fairly after your death and you have allowed one child to borrow money or live in your home during your lifetime, your Will is the main document that will ensure this happens after your death. Drawing up a Will that is appropriate for your needs and wishes is a crucial estate planning tool in such circumstances. Wellers Will writing service provides a range of Wills suitable for complex family situations and we are able to tailor each type to your specific needs.

If you find yourself in a position where you believe assets or property, promised to you have been left to a third party, our litigation team will be able to help you understand your options. Please call on 0208 464 4242 for our Bromley office, 020 7481 2422 for London and 01372 750100 for our Surrey offices.

Family Dispute Underlines Wisdom of Making a Professionally Drafted Will

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Family disputes frequently focus on inheritance and can inflict immense anxiety and pain on all concerned. A case concerning a young man who died tragically when he stepped in front of a train, however, showed that the best way to avoid such conflict is to make a professionally drafted will.

The deceased, who had learning disabilities and mental health issues, was aged just 35 when he died but was a wealthy man due to an inheritance from his grandfather. An inquest resulted in a verdict of accidental death. Following his death, his mother was granted letters of administration on the basis that he had died intestate – without making a valid will.

However, his uncle by marriage, with whom he had had a close relationship while he was growing up, subsequently launched a probate claim on the basis that he had in fact made two duplicate wills prior to his death. The wills, under which the uncle stood to inherit cash and property, were in identical terms and were apparently executed on the same day.

The deceased’s mother claimed that the wills were forgeries which had been created several years after his death. She pointed to the fact that they had been signed on his behalf by a man who was later convicted of an unrelated fraud and jailed. The man, who signed the wills in exercise of an enduring power of attorney granted to him by the deceased, was not a solicitor but was on occasions willing to let others think he was. He had since died.

In ruling on the matter, the High Court acknowledged that the involvement of a fraudster in the wills’ execution created a potential for forgery. However, in finding that they were genuine, the Court could detect nothing in their contents to arouse suspicion. The fraudster gained nothing from the wills and, under their terms, the deceased’s mother and brother remained his principal beneficiaries.

After hearing evidence from handwriting experts, the two witnesses to the wills and others, the Court found that they were duly executed. They had been signed in the presence of the witnesses and the deceased, at the latter’s direction. The Court was also satisfied that the deceased understood and approved their contents.

The grant of letters of administration to the deceased’s mother was revoked and the Court pronounced in favour of the duplicate wills. Given the long history of dispute between members of the family, the Court also ruled it appropriate and necessary to appoint, in the mother’s place, an independent professional as executor of the estate.

It Always Makes Good Sense to Appoint a Professional Executor

Posted on by Wellers

Most people would consider it an honour to be chosen as executor of a friend’s or relative’s will. However, as a High Court ruling showed, the legal responsibilities that go with such a role can be extremely onerous and it usually makes better sense to appoint an experienced professional to assume the burden.

The case concerned a businessman who died in 2007, leaving an estate which was at the time valued at about £18.5 million before tax. It had since emerged, however, that it might be worth up to £118 million. By his will, he appointed his younger brother and a more distant relative by marriage as his executors.

More than a decade after probate was granted in respect of the will, his widow and three children by his first marriage, who were beneficiaries of his estate, remained dissatisfied with the executors’ performance of their duties. After they claimed to have been kept in the dark as to the extent of their inheritance, they were granted an order requiring the executors to submit on oath a full inventory of the estate and to give a true and just account of steps they had taken to administer it.

In challenging that order, one of the executors contended that the administration of the estate had been drawn out largely as a result of an extensive investigation by HM Revenue and Customs into the affairs of the deceased. Given the continuing issues surrounding the estate, including the discovery of offshore companies which had greatly increased its value, an inventory and account would be meaningless and their preparation a waste of money.

In dismissing the appeal, however, the Court noted that executors are under a cardinal duty, enshrined in Section 25 of the Administration of Estates Act 1925, to keep accounts and records relating to the administration of an estate and to stand ready with an inventory and account of their dealings when called for. The executors had had a number of years in which to resolve the practical difficulties of administering the estate and their unconscionable delay in doing so amounted to a dereliction of duty.

Although there were procedural flaws in the way in which the widow and children had launched the proceedings, they had been remedied by the Court looking at the matter afresh. As they had been without a proper understanding of their inheritance for more than 10 years, that situation could not be allowed to continue and it was high time that the executors performed their duty to illuminate them.

If you need advice on making a will or on legal issues relating to executors or their role, please do get on contact.

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