Analysis
This was an application by Mr Ingrey, the proving executor of the estate of John Henry King (the deceased) seeking direction in relation to the distribution of Mr King’s estate (the estate). The defendant, Ashley King, is the deceased’s son and sole beneficiary of the estate following the compromise of a claim brought under the Inheritance (Provision for Family and Dependants) Act 1975 by the deceased’s widow and two young children.
The estate was sworn for probate with a gross value of c.£9.6m and a net value of c.£3.5m. The assets in the estate included a share of a partnership carried on with Ashley King and shares in various companies (in which Ashley King was the other shareholder).
Prior to his death, the deceased had entered three film partnership investment schemes with a view to mitigate his income tax liability. It is currently uncertain whether those schemes will be effective. The schemes were funded by way of loans, and at the date of the deceased’s death in October 2010, the capital outstanding was c.£5.4m. Although the schemes were designed such that the loans would be self-financing, the loans will not be fully repaid until 2019 in the case of one scheme and 2021 in the case of the other two schemes. The estate also has a potential lability to both historic tax as well as tax upon future income if the film schemes should prove ineffective.
There were therefore significant potential future liabilities in the estate. Accordingly Mr Ingrey sought the court’s directions as to how to proceed with the administration of the estate.
Held
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- 1) The duty of an executor is to distribute assets in order of priority so that debts and liabilities have to be met before distribution to beneficiaries. Where there is a possibility of some contingent debt, the executor can retain a sum out of the estate to meet the risk of a contingent debt or seek security from the prospective beneficiary. The court’s role when considering such an application is to seek to achieve a fair balance between the beneficiaries and the possible further creditors: Re Yorke, Re K (deceased) followed.
- 2) In the circumstances of this case, a charge over property for £2m, secured over property worth in excess of £5.6m expressed to be ‘security for all monies obligations and liabilities’, was an appropriate and proper charge to cover potential liabilities of the estate.
3) A cash sum of £90,000 should also be retained to cover the costs and other immediate liabilities the estate is likely to have.
JUDGMENT JUDGE WALDEN-SMITH: [1] This is an application by Nicholas Guy Ingrey as the proving executor of the estate of John Henry King who died on 16 October 2010 seeking directions committing the distribution of the estate. The first defendant, Ashley John King, is the deceased’s son and sole beneficiary of the estate after the …Continue reading "Ingrey v King & anr [2015] EWHC 2137 (Ch)"