17 May 2018

Aunt Hermione’s Will

By Fiona Hewitt, Director, Hayes + Storr.

Perhaps like me you enjoy finishing your weekend with an indulgent Sunday evening television drama. If so, you may be a fan of ‘The Durrells’, with its escapist mixture of sunshine, Corfu countryside, gentle comedy and (often) mildly unbelievable plot. The story-line in one recent episode drew my attention: following the recent death of her Aunt Hermione, Louisa’s cousin Bruce (who is a solicitor) arrived from London, ostensibly for a holiday in the sun, but in reality to convey bad news about the family’s expected inheritance. It transpired that as a result of bad investments (by Bruce himself) Aunt Hermione’s estate at her death was much smaller than initially supposed, and Louisa’s share would therefore amount to little or nothing.

With a solicitor’s natural caution I have to say that to comment in detail on the particulars of this sorry tale we would need to see the Will itself, and to have information about Aunt Hermione’s assets and liabilities. In general terms, though, it raises an interesting question:
What happens if there is much less in an estate than was envisaged when the Will was written?

This is a situation which does arise in practice from time to time. For instance it is common for a person (the ‘Testator) to make a number of generous gifts to friends in a Will, leaving the residue (everything remaining after any inheritance tax has been paid and debts and costs have been settled) to family. Over the next few years it could be that much of the money in the estate is needed to pay for the cost of residential care. By the time this becomes a significant issue, the Testator might be prevented by a lack of mental capacity from amending the Will. It may be possible for someone to apply to the Court of Protection for the Will to be changed, but this is a long and complicated process and depends on attorneys or others being aware of the Will’s contents in the first place.

The law dictates that any gifts included in the Will must be paid first from the money available for distribution, so a significant reduction in the estate overall can lead to the residuary beneficiaries (in this example the family) losing out while the legatees (the friends) still receive their gifts in full. If there is not sufficient in the residue to pay for all the debts and expenses, the gifts of money in the Will have to be reduced in proportion to each other – a process known as ‘abatement’. If there is still not enough, any gifts of specific items in the Will (such as jewellery or other personal possessions) are the final resort. The results can be far from what was originally intended.

What can be done? Comparatively small gifts in a Will are unlikely to cause problems, but if you are intending to make significant gifts, whether to family, friends or charities, your legal adviser will be able to suggest the best way to do this to avoid difficulty. One simple solution (although not the only one)  is to divide the residue of the estate between all the beneficiaries in percentage shares, which should ensure that your major beneficiaries receive the larger part of the estate.

And finally back to the Durrells. Of course, if Aunt Hermione had nothing at all left, everyone would lose out, thanks to Bruce.  In the 1950s it may have been commonplace for the family solicitor to invest a client’s money on his or her behalf, but rules relating to the giving of financial advice are rather more stringent in the 21st century. Please do use a firm of solicitors (regulated, qualified and insured) to write your Will, but you should use a qualified Independent Financial Adviser for your investment advice!

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