In Royal Commonwealth Society for the Blind v John Wayland Beasant and Benjamin How Davies (as personal representative of the Estate of Audrey Arkell deceased) [2021] EWHC 2315, the High Court interpreted a nil rate band clause in a will so as to cancel a gift to an individual and increase the amount left to charity.
Audrey Arkell had made a will which stated:
"4. I give the Nil Rate Sum to my Trustees on trust for my said friend John Wayland Beasant
4.1 In this clause 'the Nil Rate Sum' means the largest sum of cash which could be given on the trusts of this clause without any inheritance tax becoming due in respect of the transfer of the value of my estate which I am deemed to make immediately before my death."
She died in 2017 when the Nil Rate Band (NRB) was £325,000. Her estate was valued at £3.1 million.
- Other clauses in the will left specific items to Mr Beasant, including her Main residence and shares worth nearly £460,000, plus cash gifts to six other individuals totalling £45,000. The total value of these gifts exceeded the NRB.
- The will expressed that all of these Gifts were to be free of Inheritance Tax (IHT).
- The remainder of the estate after costs and tax was to be divided amongst twenty-one charities.
Mr Beasant claimed that other legacies did not have to be taken into account in interpreting clause 4, and so he should be entitled to a tax-free amount of £325,000 in addition to the other specific gifts made to him under the will.
The Royal Commonwealth Society for the Blind, on behalf of all of the legatee charities, disagreed arguing that clause 4.1 cancelled out clause 4. They said that clause 4 read on its own provided that the legacy payable to Mr Beasant was the amount left within the NRB after the deduction of all other legacies, and in this case that was zero as the other legacies exceeded £325,000.
The High Court agreed with the charities, Mr Beasant was entitled to nothing under clause 4 of the will:
- If the deceased had intended clause 4 to leave Mr Beasant £325,000 IHT free regardless of the other legacies, her will would have specifically provided for this and it did not. Clause 4.1 would then not have been necessary.
- Clause 4 clearly envisaged that the 'nil rate sum' was to be calculated by reference to the operation of IHT across the whole of the estate, with it being irrelevant in which order the gifts under the will were made.
The net result was that the residue left to the charities could not be reduced by a gift of £325,000 to Mr Beasant under clause 4.
Comment
It is not uncommon for the wording of clauses in a will to cause confusion. The language used is often 'flowery' or laden with ‘legalese’ forcing the courts to try and interpret what the deceased intended when faced with a dispute between the beneficiaries. For the avoidance of doubt individuals making a will should ensure that they fully understand the meaning of the document themselves in the hope that their friends and family will also understand its meaning and what that means for them, without the need for a costly court case.
Update: June 2022
This decision was appealed by Mr Beasant, who argued that the will was ambiguous:
- The order of bequests in the will indicated that Ms Arkell knew her other gifts to Mr Beasant were worth more than £325,000.
- The attendance notes taken by the will-writer indicated they were not aware of how IHT worked.
The High Court dismissed this appeal stating that “a clause is not ambiguous merely because clever lawyers can look at it for long enough to be able to extract more than one potential meaning”
Useful guides on this topic
IHT: Main Residence Nil Rate Band (RNRB)
What is the Main Residence Nil Rate band? When was it introduced? How does it work? Who can claim it?
IHT: Transferable Nil Rate Band
What is the Transferable Nil Rate Band? Who does it apply to? How do I claim it?
IHT: Estate planning checklist
This checklist covers some of the essential planning points that taxpayers should know when planning for their estate and Inheritance Tax (IHT).
IHT relief: 10% discount for charitable bequests on death
This is a freeview 'At a glance' guide to Inheritance tax (IHT) relief for charitable bequests on death.
Client Briefing: Making gifts & IHT
What gifts can you make without triggering Inheritance Tax (IHT)? What are the rules on making tax-effective gifts for IHT purposes?
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