Here is a link to a case from 2008 which illustrates when the doctrine of election might be relevant to executors distributing an estate.
It is not uncommon nowadays for the ownership of houses and flats to be more complicated than in the past. Perhaps parents might help out their children with the ‘deposit’ on their house or children might help their widowed mum pay off her mortgage in the knowledge that the house will eventually be passed to them.
However the issue does throw up a problem. What happens if someone who writes a will (the testator) purports to give away something which isn’t theirs? If the property is simply not theirs – perhaps they sold it – then who this affects depends on how the gift is worded (I will explain another time about ademption).
Where the will purports to give away property which is owned by one of the beneficiaries there is a bigger problem, as the beneficiary simply cannot withdraw their property and accept the bequest(s). He must choose between keeping his property and reducing the amount he is given or simply allowing his own property to be divided by the will. Depending on the will, this may be irrelevant to what the beneficiary gets or it may appear deeply unfair.
For example (which is fairly close to the one in the case above):
Joan has three adult children. Her youngest son, Jim, has a decent job but no wife and kids and so has money to invest. Believing property to be a good investment, he pays off Joan’s mortgage in return for a half share in the house; this benefits her because they have no mortgage repayments and it benefits Jim because the money he paid for the half-share was a good deal and, in the long run, he thinks the house value will appreciate. But Joan don’t change her will, and she dies.
Her will gives a few cash gifts to various people but her main asset, the house, is to be divided between their three children. Joan obviously now only owns half of the house but the will specifically states that the house is to be divided between the three of them. Jim now has a problem because he cannot claim that he owns half the house and claim a third of the other half. He has to decide whether to keep his share and allow the other half to go to his siblings or settle for a one third share of the entire house. Unless he is unusually altruistic, the first is the better choice but John will probably still feel he got a raw deal.
The trouble with probate – and in particular inheritance tax – is that, whilst a will may appear very straightforward, there are small slip-ups like this which can leave an executor vulnerable to subsequent claims from beneficiaries. That’s why I believe a fixed fee probate service such as ours is always good value (as long as the price is right!)