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Bank of Mum and Dad: A Blessing or Inheritance Curse?
20 June, 2024 4 minutes reading time
The dream of homeownership is increasingly challenging, prompting many parents to become a “Bank of Mum and Dad” and offer financial support. While generous, these financial gifts can become an inheritance curse, leading to tax issues, family disputes, or resentment among siblings. This impacts not only future inheritance but also emotional well-being and fairness.
Presumption Against Double Portions
The “presumption against double portions” is a legal principle stemming from common law. It states that it’s unfair for a child to receive the same inheritance twice. If a parent gives a significant gift and then leaves a similar gift in their Will, others might challenge the Will.
The Potential Impact on Inheritance
Courts presume a parent wouldn’t favour one child, but this is rebuttable. The parent’s intention behind the gift is critical. Court cases illustrate this:
Case Law Examples
Phillips v Cameron [1999] Ch 386. In this case, the son received substantial sums from his mother during her lifetime. The court considered deducting these gifts from his share of her estate. Ultimately, the court decided that the gifts were not advancements but rather acts of “pure bounty” or spontaneous generosity from the mother. The court took several factors into account. Including the mother’s affection for her son, her financial circumstances at the time of the gifts, and the lack of evidence suggesting she intended them to be part of his inheritance.
In Race v Race [2002] EWHC 1868 (Ch), a father made a Will granting his daughter the right to live rent-free in a pub he owned. Later, he gifted her half the pub. The court ruled that this gift was an advancement of her inheritance, as it fulfilled part of the provision in the Will. This meant that the value of the half-share in the pub would be deducted from her overall inheritance upon the father’s death to prevent her from receiving a “double portion.”
Barraclough v Mell [2005] EWHC 3387 (Ch) involved a father who gifted his daughter £20,000 to help her buy out her husband’s share in their family home. The court ruled that this gift was a “portion” and should be considered an advancement of her inheritance. A document signed by the father two months after the gift confirmed his intention. This case shows that even gifts not explicitly linked to inheritance can be considered advancements if the giver’s intent is clear.
Kloosman v Aylen & Ors [2013] EWHC 435 (Ch). In this case, a testator had made lifetime gifts to two of his children. After he died, the court ruled that lifetime gifts to children did not need to be considered when distributing the remaining estate, as there was evidence that the gifts were intended to supplement their inheritance. This case demonstrates the importance of clearly documenting your intentions, such as through a detailed Will or other legal documents, to avoid ambiguity and potential disputes.
Protecting Your Intentions
Ensure your intentions are clear by:
- Talk openly with your children about your intentions regarding their inheritance. Being frank can help them understand your decisions, avoid misunderstandings, and potentially prevent disputes in the future.
- Clearly outline your wishes in your Will. Specify whether lifetime gifts are additional or part of their inheritance.
- Consult a legal professional specialising in estate planning. They can provide tailored advice and draft legally sound documents.
Our Advice
Don’t let a gift become a burden. The Bank of Mum and Dad can be a lifesaver, but navigating legal complexities is crucial. Understanding the presumption against double portions and taking steps to protect your intentions ensures your generosity is a blessing. Our experienced estate planning team can help you create a comprehensive estate plan. This will safeguard your assets and respect your wishes. Contact us today. We’re here to help.
Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.