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What are Survivorship clauses and commorientes?

What are Survivorship clauses and commorientes?

What are Survivorship clauses and commorientes?

A survivorship clause is a clause that states that a gift will only be made where the beneficiary lives for a certain amount of time after the death of the testator.

These types of clauses are very common in modern Wills and it is often the case that when you are thinking about drawing up your own document this will be an issue that arises.

These can be used to make sure that assets don’t have to go through the probate and distribution process twice, for example where a married couple dies either at the same time or in quick succession.

When are survivorship clauses useful?

As we have already seen a survivorship clause is very useful for shortening the amount of time assets may spend in probate.

Someone may decide to include a beneficiary in their Will who is in poor health for example, and in this case, they may choose to include a survivorship clause to make sure that the gift is distributed differently in the case of the original beneficiaries’ death.

When partners make a Will, they might want to make sure that their children will receive the gifts as quickly as possible and so a survivorship clause may be appropriate.

Alternatively, spouses could make Wills where one partner dislikes the beneficiaries names in their partner’s Will and so inserts a survivorship clause that states the gifts would be distributed differently should they both die at the same time or close together.

If you would like to speak to a probate expert, call us free on 08001181603

Need to write a Will? Write your’s on the Smart Will App in 10 minutes for just £19 or £29 for couples.

What problems can there be with survivorship clauses?

Although they seem like an elegant solution to the problem there can be issues with survivorship clauses.

For example, where we are thinking about Inheritance Tax (IHT) a survivorship clause can result in unintended circumstances.

Everyone gets a Nil Rate Band (NRB) allowance of £325,000 for inheritance tax in the UK and gifts between spouses are IHT free. If the full NRB isn’t used then the unused amount can be passed to the surviving spouse.

Let’s imagine a lady who dies leaving her estate of £100,000 to her husband who has his own estate of £500,000 and both have a 28-day survivorship clause.

Her husband then dies a few days later and so the clause is invoked and her assets are left to her children.

The husband also leaves his estate to the children.

There is no IHT to be paid on the lady’s estate as it is below the NRB of £325,000 and the remainder of her allowance is lost.

The husband’s estate then has to pay IHT on the difference between his own allowance and the value of £500,000 which results in tax payable of £70,000.

If there was no survivorship clause then the remainder of the lady’s NRB would go to the husband meaning that he would have a total allowance of ££550,000 (His £325,000 plus her remainder £225,000) and no tax would be payable.

Bear in mind that the gifts have all gone to the same places in both of these examples but the difference in tax is significant.

If you would like to speak to a probate expert, call us free on 08001181603

Need to write a Will? Write your’s on the Smart Will App in 10 minutes for just £19 or £29 for couples.

What is the law of commorientes?

The Law of Property Act 1925 Section 184 says that where two people die and it is unclear who passed on first, that it is assumed that the older person died before the younger.

This can have a drastic effect on the distribution of the estate as a 2016 court case shows.

John and Ann Scarle married having had children by previous relationships. Deborah was the daughter of Ann and Anna was the daughter of John.

John’s estate would pass to Anna on his death that Ann’s to Deborah.

The couple passed away at home in October 2016 (although in different parts of the house) and a post mortem found that they both died of hypothermia but couldn’t say who departed first.

In this case, a legal challenge was issued with Deborah arguing that due to the decomposition of the bodies, Mrs Scarle was likely to have died before Mr Scarle.

However, there was an argument that this could have been down to the different temperatures in the house.

The judge presiding Mr Philip Kramer said that it was not possible to know beyond doubt who died first and so applied the law of commorientes meaning that the younger Mrs Scarle had outlived her husband.

With the advances in modern forensic science, the use of commorientes is now a rare thing indeed and this was the first time it had been relied upon since the blitz

That having been said though, in this case, a survivorship clause would have removed all doubt and saved their children a lot of money in legal fees.

Are survivorship clauses worth it?

We’d say yes, they can make a big difference, especially in the case of a dispute.

That having been said we can see that they need to be used wisely and all of the possible ramifications need to be thought about, especially in the case of inheritance tax.

If you’d like more information about this you can speak with one of our experienced advisors who would be only too happy to talk you through your particular situation.

If you would like to speak to a probate expert, call us free on 08001181603

Need to write a Will? Write your’s on the Smart Will App in 10 minutes for just £19 or £29 for couples.

 

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