Imagine this situation – a parent has written a Will leaving their estate to their 2 children in equal shares. Then after doing this, they make a gift of a substantial sum of money to the younger sibling to help them buy a house. If the parent then dies without making a similar gift to the older child, do we end up with an imbalance in the estate – would/should the older sibling expect to receive more from the estate to balance up the lifetime gift to their sibling?
This is where the double portions rule is likely to be effective.
What is the “double portions” rule?
Under common law there is a presumption that a person would not intend to give a gift twice. In a situation where two gifts are made to the same person, as long as both gifts can be described as a “portion” then the law assumes that the first gift was in effect part payment of the legacy. That presumption can however be rebutted.
What is a portion?
A portion is defined as an individual’s share/part of something received by gift or inheritance, with the intention of setting up a child in lifetime or to make substantial provision for them. If a substantial share of an estate has been left by a parent to their children in their Will and a parent then gifts a substantial gift during their lifetime, they could both be considered to be a ‘portion.’ If this is the case and both of those gifts have the character of a portion, it is assumed the lifetime gift is a payment towards the bequest in the will.
So, what is the character of a portion and how would you recognize one? There are 3 elements which must be in place:
1 The gift must be a gift in lifetime and be of a substantial sum (in its own right and not merely substantial in relation to the estate);
2 The gift must be made by a parent (or a person in loco parentis) to a child;
3 The gift must be made with the object of establishing the child in life or making provision for them – this is likely to be the key point of argument.
How to prevent the rule applying?
There are two things a testator can do to help in this situation – they can either make provision to prevent the rule applying, and/or keep careful records of any lifetime gifts made and the reasons for making them.
It is possible to include a clause in your Will which is known as a ‘hotchpot’ clause. This clause provides that any gifts made during the testator’s lifetime either should, or should not, be taken into account when calculating shares in the estate. This may need reviewing if the testator then goes on to make further gifts.
The other thing a testator can do is keep a careful record of any gifts made, the date they were made and the reasons for the gift. It would also be helpful if they make a note as to whether the gift is intended to be in addition to the gift under the Will, or a portion of that legacy. This will help to avoid arguments later!
Case example
Fred has 2 daughters. He becomes ill and requires care so sells his home and moves in with daughter 1. He pays for some adaptations to be made to her house to make him comfortable living there and give him some independence. Unfortunately Fred dies soon after this takes place. Under his Will daughters 1 and 2 receive equal shares, but daughter 2 argues that the money Fred invested in her sister’s house was intended to be part of her legacy – so that the shares of the estate should be recalculated to take account of the gift made to daughter 1.
This is where the rule of double portions comes in and we have to look carefully at Fred’s intention – was his investment in his daughter’s property intended to set her up in life or to make substantial provision for her? On these facts it seems unlikely because the adaptations were to benefit him. However if Fred had made a written note of his intentions concerning the gift at the time, it would have been much clearer.
Conclusion
Although this may appear a slightly esoteric legal issue, as property prices continue to increase, so does the likelihood of parents providing lifetime gifts to help their children buy their first home. If gifts are not made equally between the children, but the parents’ Wills provide for equal distribution, the likelihood is that we are going to start seeing an increase in claims in relation to the double portions rule.
For more information please contact Kathryn Caple on 01283 526200 or email Kathryn.caple@elselaw.co.uk.