This is the rule known as commorientes . It is all about survivorship where two or more people have died at the same time. The relevant legislation can be found in the Law of Property Act 1925, s 184:
In all cases where… two or more persons have died in circumstances rendering it uncertain which of them survived the other or others, such deaths shall (subject to any order of the court), for all purposes affecting the title to property, be presumed to have occurred in order of seniority, and accordingly the younger shall be deemed to have survived the elder.
A problem that could arise with Simultaneous Deaths is the potential for double (or multiple) IHT charges on these deaths. However the IHT legislation includes a provision to remedy this at IHTA 1984, s 4(2):
“…where it cannot be known which of two or more persons who have died survived the other or others they shall be assumed to have died at the same instant.”
More importantly for some people is the effect on inheritance provisions either under the will or subject to the intestacy rules. This can result in a fine analysis of the time of death to see if there is any indication that one deceased may in fact have died later – no matter how short a time is involved – which might impact on the way property passes under a will or intestacy. To investigate such matters would require expertise and, unfortunately, cost.
Many wills for married couples or civil partnerships contain survivorship clauses, which are typically for 30 days or even 3 months. There is no hard and fast rule to say whether survivorship clauses should be included in wills. However, as a general rule the modern facility to transfer IHT nil rate bands between spouses means that survivorship clauses are perhaps less important than before, particularly if the husband and wife each have assets that would utilise their nil rate bands.
The introduction of the transferable nil rate band in the Finance Act 2008 has potentially improved the IHT position even further in commorientes circumstances. HMRC have confirmed in the IHT manual that because the nil rate band of the elder spouse is effectively unused, the younger spouse’s estate can potentially benefit from it, assuming of course that it hasn’t been used up by lifetime transfers. In order to ensure that full advantage is taken of the rules for tax purposes it is likely that you will want to take expert advice. It is possible that the cost of this advice will be money well spent with savings that are very significant by comparison.
It is therefore clear that there has been significant effort put into the tax implications of simultaneous deaths but issues may still arise on the way in which an estate is divided up.
Contact Dennis Clarke by email or telephone him on 01732 360999. You should take advice early as there can be short time limits involved.