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IHT Planning and the Larke v Nugus Statement

With recent high-profile cases about disputed wills placing emphasis on the ability of the solicitor who originally prepared the will, there is increased need for tax planners to work with solicitors on the provision of comprehensive IHT planning reports.

A ‘Larke v Nugus statement’ is prepared by the solicitor who originally prepared the disputed will or witnessed its execution. Such statements are frequently requested by the claimant’s solicitor as evidence against the validity of a will on the grounds of lack of testamentary capacity, undue influence, want of knowledge, concerns over approval or forgery. The solicitor’s knowledge of the client can be greatly improved by a full IHT planning report by the accountant or tax adviser.

The potential for dispute in farming families over ownership and succession is highlighted by the recent case of James v James [2018] EWHC 43 (Ch). This case emphasised how the actions of professionals bear significant weight in such disputes. For example, tax reports can be used as evidence to show the intention of farming partners. Matthews J stated: “I have already referred to the letter from Mr Hardy [the farm tax adviser] to the partners (the testator, Sam and Sandra) dated 20 January 2003, referring to a meeting the previous week. Mr Hardy had checked rates of agricultural property relief and taper relief on tax in relation to gifts of land.”

Such reference by the court shows the need for all farm accountants and advisers to keep excellent notes of all discussions with clients for fact-finding and tax planning. Given the importance of both the farm IHT relief and the size of the potential farm claims, everything discussed in the context of farm succession must be recorded with a high attention to detail, including the client’s motives. The same principle of quality applies to keeping notes at meetings to approve the accounts. Again in the James case, Matthews J, at para 102, stated: “In the present case I have had the benefit not only of a Larke v Nugus statement made by the drafting solicitor, Ms Thomas, but also of a lengthy and detailed attendance note of the signing meeting made shortly afterwards. She was also cross-examined on it during her evidence.”

While such procedures may seem to put greater pressure on tax advisers, they also provide increased protection.

Contributed by Julie Butler, Butler & Co

TAXline February 2019