Property passing outside the will / succession estate

WAE.04 — Property passing outside the will / the succession estate

Core distinction. The succession estate is what passes under the will or intestacy and is administered by the PRs. Some assets pass independently of the will/intestacy and never reach the PRs to distribute. A gift in the will of such an asset is ineffective. Critically, the succession estate (what passes by will/intestacy) is not the same as the IHT estate (s.5 IHTA 1984) — several outside-the-will assets are still taxed.

Assets passing OUTSIDE the will/intestacy:

• Joint property held as beneficial joint tenants — passes by survivorship (the ius accrescendi), not by will. Trap: a tenancy in common share does pass under the will/intestacy. Check severance (notice in writing s.36(2) LPA 1925; act operating on own share — Williams v Hensman). Joint bank accounts usually pass by survivorship.
• Life policies written in trust / under MWPA 1882 s.11 — proceeds go to named beneficiaries, outside the estate. A policy not in trust pays into the estate.
• Discretionary pension lump sums / death-in-service benefits — paid at the trustees' discretion via a nomination; outside the estate (and usually outside IHT — but note pensions become IHT-chargeable from 6 April 2027, so flag the direction of reform).
• Donationes mortis causa (DMC) — deathbed gifts in contemplation of imminent death, conditional on death, with delivery/dominion handed over (Sen v Headley; King v Dubrey). Takes effect on death, outside the will.
• Statutory nominations (small friendly-society/savings accounts) — pass to the nominee directly.
• Beneficial interests under a trust / life interests — pass under the trust terms, not the deceased's will.

IHT overlap (key exam trap). Survivorship property, life policies, DMCs and the deceased's beneficial interest in trust property are outside the succession estate but inside the IHT estate and bear tax. PRs are liable for IHT on the free estate; trustees/donees may bear tax on the rest. Nil-rate band £325,000; residence NRB £175,000 (tapered above £2m); spouse/charity exemptions apply to qualifying transfers wherever the asset passes.

Intestacy contrast. Where the will/intestacy does govern: spouse + issue → spouse takes personal chattels, the £322,000 statutory legacy (plus interest) and half the residue; issue take the other half on statutory trusts. But survivorship and nominated assets bypass this entirely — a common SBAQ trap is applying intestacy to a jointly-held home.