Maintaining a reliable filing system can be vitally important, as one family discovered when a crucial document could not be found following a couple’s death. The missing document triggered a costly dispute in respect of Inheritance Tax (IHT) liabilities which took more than seven years to resolve in the family’s favour.
The couple were anxious to leave as much as possible to their children, particularly as one of their daughters was severely disabled and in need of constant care. With that objective in mind, they had each signed wills towards the end of their lives which were designed to take maximum advantage of the nil rate band of IHT.
In order to achieve that, the couple had to sign a document which severed their joint tenancy of their home – their principal asset – so that they would become tenants in common. Following the wife’s death, her husband having pre-deceased her, a frantic search failed to uncover the document. In its absence, HM Revenue and Customs took the view that the wife was beneficially entitled to the property’s entire value when she died. That had the grave consequence of greatly increasing the amount of IHT chargeable on her estate.
In allowing the family’s appeal, the First-tier Tribunal found on the evidence – which included a draft of the document which had been kept on file – that the original had existed and had been duly executed by the couple. On the balance of probabilities, they had mutually agreed to sever their joint tenancy as that was the only way in which their objective could be fulfilled.