Nil-rate-band legacy cancelled out by definition clause, finds EWHC

Arkell's will left Beasant a number of specific legacies, namely an apartment worth GBP240,000, shares worth GBP218,256 and personal items worth GBP1,390, all specified to be free of tax. She also left GBP45,000 to other friends and relations. The residue was equally split between 21 charities.

The dispute was triggered by a fourth legacy set out in clause 4 of the will, which stated that Arkell gave the NRB sum to her trustees on trust for Beasant and added: ‘In this clause [4.1] “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.’

Beasant argued that this meant Arkell intended him to have an additional legacy of GBP325,000, that being the NRB at the time. However, the residuary beneficiaries countered that the practical effect of clause 4.1 was to make the gift equal to zero, since all the other legacies left to Beasant already exceeded the NRB and so nothing more could be left to him without inheritance tax (IHT) being incurred.

At the first hearing in 2021, Chief Master Shuman accepted the charities' arguments and rejected Beasant's objection that Arkell could not have intended to include a clause in her will that left him nothing. Shuman said that if the testatrix had intended to give Beasant another GBP325,000 free of IHT, it would have been easy to draft such a gift.

Beasant appealed, arguing that the will-writer's attendance notes suggested he had not understood how IHT worked. Moreover, the order of bequests in the will indicated that Arkell knew her other gifts to Beasant were worth more than GBP325,000. The will was thus ambiguous, said Beasant, and should be construed by the court according to evidence of the testatrix's intention under s.21 Administration of Justice Act 1982.

However, England and Wales High Court (EWHC) judge Anthony Mann dismissed his appeal. 'In my view 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', he said. 'More is required than that, otherwise the door to extrinsic evidence of intention would be opened much wider than s.21 can have intended.' (Beasant v Royal Commonwealth Society for the Blind, 2022 EWHC 1319 Ch).

Law firm Withersworldwide welcomed the decision as 'giving certainty to executors and those advising surviving widow(ers) and charities (who often benefit after a gift of the nil rate sum)'.

Sources

• BAILII
• Withersworldwide
• STEP UK News 19 August 2021: Nil-rate-band gift cancelled out by ambiguous will clause, finds EWHC
• BAILII (EWHC 2021 ruling)