A summary of key legal updates for the Private Client industry over the past two weeks is as follows.
Contentious estates – beneficiary permitted to challenge solicitors' costs for administering estate
In Kenig v Thomson Snell & Passmore LLP (2023 EWHC 181 SCCO), the High Court allowed a beneficiary of an estate to challenge the fees levied by the solicitors administering the estate. The solicitors' costs (£54,410) had risen significantly from their original estimate (£10,000 to £15,000) but the executors had paid the bill and the beneficiary had approved the estate accounts. Despite this, the Costs Judge ordered a costs assessment finding there were special circumstances to justify it; including that the administration of the estate looked "relatively uncomplicated" and there may have been work which called for "little legal input and was administrative in nature - but which has been charged at substantial hourly rates and for lengthy periods". The case is significant because it follows the Court of Appeal judgment in Tim Martin Interiors Ltd v Akin Gump LLP  EWCA Civ 1574 which suggested that a third-party assessment of costs could only be brought in very limited circumstances; however, this decision was distinguished. It has been reported that Thomson Snell & Passmore have been granted permission to appeal. Beneficiary allowed to challenge firm's fees after fourfold rise | News | Law Gazette; Order for costs assessment underlines fiduciary relationship between PR and beneficiary (High Court) | Practical Law (thomsonreuters.com)
Trusts - Jersey property unit trusts caught by Trust Register rules
Following HMRC's recent update to its Trust Registration Service ("TRS") Manual (TRSM10030) to confirm that there is no specific exclusion from registration for unauthorised unit trusts, more analysis has now been published including how this development will affect Jersey property unit trusts (JPUTs). This is because JPUTs are likely to be liable to stamp duty land tax and are therefore taxable trusts for TRS purposes, and obliged to register; alternatively, if the JPUT does not yet have a liability to UK tax, it will be registrable as a non-taxable trust if the trustees have acquired UK land on or after 6 October 2020. HMRC's current guidance is that a penalty will not be applied unless the failure to register is due to the "deliberate" behaviour of the trustees. Whilst reliance on the previous guidance should indicate non-deliberate behaviour; now that the guidance has been changed, JPUT trustees should register their affected trusts as soon as possible to avoid a penalty of up to £5,000 per offence. UK TRS rules changed to include Jersey property unit trusts | STEP; EPrivateClient - HMRC updates its guidance on whether offshore unit trusts need to register on the TRS (paminsight.com)
Contentious estates – challenge to Will that passed estate along male line
In Kaur v Estate of Karnail Singh, 2023 EWHC 304 Fam, a widow successfully made a reasonable provision claim under the Inheritance (Provision for Family and Dependants) Act 1975 against her late husband's estate. The Will left the estate in equal shares to the two male children of the marriage, leaving nothing to the widow or the female children. As recorded in the judgment, the widow made a full and equal contribution to the 66-year marriage and "the divorce cross check points unerringly towards an equal division of assets." The widow's income consisted of state benefits of about £12,000; her age and ill-health were also factors in the decision. The court ordered that the widow be granted half the net value of the £2-million estate and legal costs, with Mr Justice Peel commenting that "this is the clearest possible case entitling me to conclude that reasonable provision has not been made… It is hard to see how any other conclusion can be reached." Kaur v Estate of Karnail Singh & Ors  EWHC 304 (Fam) (14 February 2023) (bailii.org); Widow wins right to share of husband's £1m-plus estate - BBC News
Mental capacity - new standards guidance for deputies
On 13 February, the Office of the Public Guardian ("OPG") published a collection of deputy standards documents setting out what is expected of lay, public authority and professional court appointed deputies. The documents are said to form a central part of the OPG’s approach to supervising all three types of deputies. Topics covered in the standards document for professional deputies include: awareness of the Mental Capacity Act 2005, the Code of Practice and guidance published by OPG; best interest decision-making; and financial management and record-keeping. OPG Deputy Standards documents - GOV.UK (www.gov.uk)
Offshore – ROE and HMRC tax evasion investigations
It is reported that HMRC will have access to beneficial owner information from the new register of overseas entities ("ROE") at Companies House by the end of February. HMRC is therefore urging affected taxpayers to come forward and declare any unpaid tax before it raises investigations. Disclosures should be made via the Worldwide Disclosure Facility. Any penalties may be higher if HMRC discovers any associated errors before the taxpayer discloses this voluntarily, so it is recommended that disclosures are made before the end of this month. HMRC targets offshore corporate property structures | ICAEW
Compliance – STEP guidance on the UK's ban on trust services to Russians
STEP has prepared a guidance note on the nature and scope of the prohibition on trust services to persons connected with Russia. The guidance note includes a number of examples/ case studies of how the rules apply to trust service providers. These include the application of the prohibition where a person connected to Russia is identified by description, rather than by name, in a class of beneficiaries under a trust deed.