Analysis
The testatrix, T, died on 1 September 2011 leaving an estate with a net value of £680,805. Her will, dated 2 February 2001, included provision for a nil rate band legacy for her children and grandchildren under clause 5 which stated:
‘MY TRUSTEES shall set aside out of my residuary estate assets or cash of an aggregate value equal to such sum as is at the date of my death the amount of my unused nil rate band for inheritance tax and to hold the same for such of the following as shall survive me.’
The residue was left to the first defendant, the Woodland Trust (WT). After the execution of the will, the transferable nil rate band was introduced and T’s executors were able to, and did in fact, claim her husband’s full nil rate band. The effect was that the residue was reduced by the amount of H’s nil rate band from £355,805 to £30,805. The executors applied for the construction of the will. By s8A(3) of the Inheritance Tax Act 1984 ‘where a claim is made under this section, the nil rate band maximum at the time of the survivor’s death is to be treated for the purposes of the charge to tax on the death of the survivor as increased by the percentage specified in subsection (4) below’ and subsection 7 provides that ‘in this act “nil rate band maximum” means the amount shown in the second column in the first row of the table in Sch 1 to this Act.’
Held
Clause 5 of the will should be construed to mean that the legacy which it carried amounted to £650,000 being the amount of T’s unused nil rate band for inheritance tax at the date of her death [31]. There was no doubt that the task was to determine the expressed intentions of T. The enactment of s8A after the execution of the will did not bring the Administration of Justice Act s21(1)(c) into play. That provision was aimed at circumstances where the provisions of the will were ambiguous rather than at a change in the applicable law [15]. There was no contemporaneous evidence of T’s intention save a letter written to the family by T’s bank manager which was ‘of little assistance in determining the intentions of T when the will was executed’. At best it evidenced the fact that advice was given as to the effect of the change in legislation brought about by the enactment of s8A. However, it was of little assistance in determining the intentions of the testatrix as to how her estate should be divided between clause 5 and the residuary gift.
Having considered the will as a whole and examined the language of clause 5 in that context, and giving those words their ordinary meaning and then taking account of the relevant background which informed the meaning of the words used, clause 5 should be construed as including the increase. Not only was the statute clear that the effect of a successful claim was retrospective, but also that the effect was that the nil rate band maximum at the time of the survivor’s death was treated as ‘increased’ as at that date [26]. It was of no consequence that the increase arose as a result of an election made at the discretion of the personal representatives after the death [27]. The use of ‘my’ was significant. It indicated T’s nil rate band or, to be precise, the nil rate band maximum which was increased from the date of her death and no one else’s.
JUDGMENT MRS ASPLIN J: [1] This claim relates to a construction of clause in the last will of Valery Joy Smith dated 2 February 2001 (the will). Mrs Smith, to whom I shall referred to as the testatrix, died on 1 September 2011. The claimants are the executors of the will, probate having been granted …Continue reading "Loring v Woodland Trust [2013] EWHC 4400 (Ch)"