Property Passing Outside the Estate

Introduction

Not every asset in which the deceased had a beneficial interest during life falls into the **succession estate** on death. A number of well-established categories of property pass **outside the will and the intestacy rules** by reason of the legal mechanism under which they were held: **property held on a joint tenancy** (passing by survivorship); **proceeds of a life assurance policy written in trust**; **discretionary pension death benefits**; **statutory nominations**; and property the subject of a valid **donatio mortis causa**. This chapter explains the rules governing each category, the mechanics of **severance** of a joint tenancy, and the IHT consequences — including the **6 April 2027 IHT change** for pensions.

Assessment focus

For the SQE1 FLK2 assessment, you must be able to work through an estate **asset by asset** and decide, for each, whether it passes **under the will/intestacy** or **outside the estate**. The examiner repeatedly tests: that a **will cannot sever a joint tenancy** and that **separation does not sever** one; the requirements for **severance by written notice** under **s.36(2) LPA 1925** and the **Williams v Hensman** common-law methods; the destination of **life policy proceeds written in trust** (including where the named beneficiary predeceases); the succession and IHT treatment of **discretionary pension death benefits** (pre- and post-6 April 2027); and the **three conditions of a donatio mortis causa**. Questions are single best answer questions (SBAQs) set in realistic fact patterns; you must **apply** these rules, not merely recite them. This is a closed-book assessment.

Study tips

1) For every asset in a fact pattern, ask: **under the will/intestacy, or outside the estate?** 2) Remember the **traps**: a will cannot sever a joint tenancy (**s.24 Wills Act 1837** — a will speaks from death); separation does not sever; only a **positive act of severance** does. 3) **s.36(2) severance** = (i) notice **in writing**; (ii) served on **all** other joint tenants; (iii) **unambiguous immediate** intention — effective on **service**, not receipt (**Re 88 Berkeley Road**). 4) **Life policy in trust** — absolute beneficiary's interest **survives** their death (passes under **their** estate); discretionary trust — trustees select. 5) **Pensions** — discretionary death benefit is outside IHT for deaths **up to 5 April 2027**, **inside** IHT for deaths **on/after 6 April 2027** (Autumn Budget 2024); succession-law position unchanged. 6) **DMC** = (i) contemplation of impending death from a **specific cause**; (ii) **conditional** on death; (iii) **delivery** of subject-matter or means of dominion (**Cain v Moon**; **Sen v Headley** for land).