42 Provisions to apply where section 98 of Succession Act 1965 has effect

Summary

This section deals with benefits arising under section 98 of the Succession Act 1965. Under that section, a benefit by will to the testator’s child or other issue is (subject to any contrary intention in the will) preserved from lapse where the beneficiary predeceases the testator, if the beneficiary leaves issue living at the testator’s death. The benefit takes effect as if the beneficiary had died immediately after the testator and the property devolves under the beneficiary’s will or intestacy. This section prevents a double charge to tax in such cases. The person who actually takes the benefit is taxed as if he/she took that benefit from the testator.

Details

(1) Under the doctrine of lapse, if a beneficiary under a will dies before the testator, the gift to him/her lapses and falls into the residue. Section 98 of the Succession Act 1965 makes an exception in the following type of case:

A testator, by will, gives a legacy to his/her child or other issue. The legatee dies before the testator. The legatee leaves children who survive the testator. Section 98 provides (unless the will shows a contrary intention) that where that happens, the legacy does not lapse, but takes effect as if the death of the legatee had happened immediately after the death of the testator.

Section 98 ensures that the legacy goes to the legatee’s estate, so that it then passes under the legatee’s will or intestacy.

If no provision were made to the contrary, there would be 2 claims for tax arising in such a case, i.e.:

• tax on the benefit taken by the legatee from the testator, and
• tax on the benefit taken from the legatee by the beneficiaries under his/her will or intestacy.

This section provides that only one claim for tax will arise and that tax will be on a benefit taken by the ultimate beneficiaries from the original testator, as disponer.

(2) The person ultimately benefiting will be deemed to take an inheritance from the testator, as disponer, and not from the deceased child.

Relevant Date: Finance Act 2015