When large sums of money are transferred between family members it is not always clear whether the money is a gift or a loan. In the family context it may not seem important or appropriate to confirm the matter in writing. But if a person dies, these ambiguous transfers can become the subject of costly court proceedings.
The current proceedings in Central London County Court relating to the estate of Dr Kun Liu illustrate the problem. His parents, proud of his academic achievements, sent him large amounts of money from China, amounting they say to £325,000. Now that Dr Liu has sadly died they say that they expected their money to be repaid or that they could come to the UK and make their home with Dr Liu.
Dr Liu's wife, who is the beneficiary of the estate, says the monies only amounted to £200,000 and were gifts to Dr Liu. Her position would be stronger if the presumption of advancement was of greater influence on the court's deliberations because a gift from father to son would be presumed in the circumstances. However, the presumption is due to be abolished when section 199 of the Equality Act 2010 eventually comes into force and the courts readily accept when the circumstances rebut the presumption.
It can also be a nightmare for executors in the administration of an estate where the deceased made ambiguous transfers to a family member. If gifts, then the transfers need to be recorded for inheritance tax purposes but otherwise the estate is not effected. If loans, the executor must ask for the monies to be repaid into the estate. If the family member refuses, the executor must decide whether it would be a reasonable use of estate funds to file a claim to recover the funds for the benefit of the estate. Whether it is reasonable for the executor to pursue the matter to court will depend on the value of the loans and whether the beneficiaries are supportive of taking action.
The parents of a Kings College London academic who died from cancer have contested his widow's inheritance because he 'promised' they could move in with him. Kings College London medical statistician Dr Kun Liu died aged 31 in 2015, leaving everything to his bride, Xuan Wu, having married her in hospital less than a month before his death. The frail Dr Liu signed a will by “marking a cross on a document prepared by a solicitor”, leaving his new wife their £430,000 home in south Croydon, the Central London county court heard.