The key trust and estate issues from 2020 - Part III

 

Over the last two months we have considered some aspects of important issues from 2020: the new rules on will execution; the extension to the Trust Registration Service (TRS); electronic execution of trusts; and the online Lasting Power of Attorney (LPA) tool.

 

This month we will look at the introduction, or the expansion, of online probate processes and online process for land registration. Next, we will consider some significant 2020 court decisions relevant to financial services. This article is based on English law.

 

Online probate

Addressing problems caused by the pandemic

One of the areas hit by the Coronavirus pandemic has been the delays with obtaining probate, which is required in most cases before a personal representative can deal with the administration of an estate.

Amid growing delays, on 10 August 2020, the Government launched consultation and proposals requiring practitioners to use the online service when applying for non-contentious grants of probate or letters of administration in England and Wales. Responses had to be submitted by 10 September.

By way of background, the delays began in 2019 when a proposal to significantly increase probate fees led to a surge of applications in a short space of time. This coincided with the HM Court and Tribunal Service (HMCTS)’s modernisation programme, which saw 18 sub-registries being closed. There was a huge backlog as a result, meaning that applications took months to process, as opposed to weeks.

The knock-on effects were delays in submitting inheritance tax returns and tax payments.

Needless to say, the problems became even worse as the pandemic struck - with reduced staff, social-distancing and working from home.

In the height of lockdown, physical valuations of properties by agents and surveyors (necessary for some estates) were not available due to social distancing restrictions.

There were also obvious problems with registering deaths. While, before the pandemic, deaths had to be registered at the local registry office by someone physically attending the office, the Coronavirus Act 2020 allowed ‘remote registrations’ with GPs being able to certify a death without physically attending and able to send an electronic copy of the Medical Certificate Confirming cause of Death directly to the specified registrar, without the informant needing to collect it.

To address the difficulty with signing probate applications, especially where there were multiple personal representatives, HMCTS agreed to temporarily accept electronic signatures instead.

HMRC were also accepting electronic signatures on inheritance tax forms where previously ‘wet’ signatures were required.

Finally, the online probate service was also expanded and made compulsory in some cases.

 

Online probate service

The online probate application service has been available for personal applications since late 2016, and was extended to professionals in 2017, initially only on a pilot basis to specially invited law firms. It was made available to all practitioners in October 2019. As expected, there were numerous teething problems with the new service, mainly relating to the interaction between HMCTS and HMRC when IHT421 forms were issued.

Clearly, in principle, moving to an online process offers professional users cost and time savings and a more efficient and reliable system, along with a secure means of sending and immediate recording of receipt. Moreover, the system is accessible at any time. Applications can be tracked and monitored, and the risk of making errors on applications should be reduced. The process was made mandatory for professionals from 2 November 2020 although technical limitations, combined with the effects of the pandemic, forced the Ministry of Justice to extend the deadline into 2021.

The legislation is in the form of The Non-Contentious Probate (Amendment) Rules 2020, which came into force on 2 November 2020.

The relevant Rule is Rule 4, which now reads: 4.—(1) A person applying for a grant through a solicitor or probate practitioner, other than a grant listed in the Third Schedule, must apply using the online portal, unless invited to apply at a registry by that registry.

The above mentioned Third Schedule lists grant processes which are exempted from the mandatory online application process. These include applications for grant of administration (where there is no will), an application for a second grant of probate in respect of the same estate, certain cases where multiple applicants are entitled, grants to attorneys where the attorney is not already a registered probate professional and trust corporation applications and certain other more complex situations .

Following feedback from practitioners asking for improvements, in February 2021, HMCTS announced a series of new developments to improve the service including fixes to some existing problems and rewording of some confusing questions, as well as creating new supporting forms, with further improvements planned. In short, this is still work in progress.  

 

Online Land Registry

Following a blog from HM Land Registry (HMLR) Deputy Chief Land Registrar, in July 2020, that HMLR “will soon start accepting witnessed electronic signatures on things like a deed transferring land”, in August 2020, the Land Registry announced that, until further notice, it would accept electronic signatures generated by electronic signature platforms for certain registrable deeds.

Although digital signatures in land transactions have been enabled since the Land Registration Act 2002 and were endorsed by the Law Commission in 2019, Land Registry had held back from accepting the technology, i.e. it had required wet ink signed documents up until then. This meant that hard copy documents had to be circulated for registrable dispositions (primarily transfers, registrable leases and charges). HMLR had previously started accepting scanned copies of a wet ink signature in limited circumstances.

The details of the new policy were contained in Section 13 of the Land Registry Practice Guide (the first 12 Sections contain a summary of the legal principles relating to the execution of certain documents by various parties which practitioners may find useful anyway).

The Guidance was in fact updated in February 2021. The current guidance confirms that, until further notice, the Land Registry will accept registration transfers and certain other deeds that have been signed electronically, provided its requirements have been satisfied. In summary, it requires that:

• all the parties agree to the use of electronic signatures and a platform in relation to the deed;
• all the parties have conveyancers acting for them;
• a conveyancer is responsible for setting up and controlling the signing process through the platform;
• the required signing and dating process is followed;
• the conveyancer who lodges the application does so by electronic means and includes with the application a PDF of the completed deed. However, where the application is for first registration, a printout of the PDF, certified to be a true copy of the completed deed, can be lodged; and
• the conveyancer lodging the application provides the following certificate: “I certify that, to the best of my knowledge and belief, the requirements set out in practice guide 8 for the execution of deeds using electronic signatures have been satisfied.”

Where a witness is being used to execute a deed, the witness must be physically present when any authorised signatory signs the deed and the Land Registry has recommended that conveyancers include a statement to this effect where the witness is due to sign.

Conveyancers are also advised to retain with their conveyancing file a copy of the completion certificate or audit report produced by the electronic signature platform at the end of the signing process.

Where “mixed signing” needs to occur (one in wet ink, the other electronically), this can be done by way of counterpart deeds.

The Land Registry have also developed an execution toolkit specifically tailored for registered providers of social housing and their wider group structures, to enable organisations to ensure they have complied with statutory and regulatory requirements when executing legal documents (including deeds and contracts).

 

Comment

While the progress with online processes for probate and land registration (as well as, of course, the video witnessing of wills) is clearly welcome, the Government’s approach to technology is, to say the least, inconsistent and clearly piecemeal. While pushing through the online probate applications process with some haste, there is little sign that the promised review of the process of execution of deeds is making any progress. And, of course, the main issue as far as wills are concerned is that the legislation governing will execution is almost 200 years old. Despite various proposals by the Law Commission to modernise it, or at least allow judges some discretion to recognise the deceased’s intentions which have been expressed but without the strict formalities of the 1837 Act, no real progress in this area has been made.

As for land transactions, undoubtedly completion of house purchases should be significantly speeded-up with the introduction of online registration.

The move was most welcome by the real estate market, although it has to be said there are still some concerns amongst conveyancers about the risk of fraudulent transactions, despite this risk of potential fraud having been lessened by the requirement that both parties must be represented by a conveyancer and that it must be a conveyancer who controls the signing process.

 

Some important court decisions in the area of estate planning from 2020

2020 was undoubtedly rich in interesting decisions. We had numerous cases of claims for reasonable provision pursuant to the Inheritance (Provision for Family and Dependants) Act 1975; we had decisions on applications to remove a trustee, or to vary a trust; we had a number of cases where the court had to consider testamentary capacity following a challenge to a will; we had cases on breach of trust; we had cases on will rectification, on alleged fraudulent wills as well as domicile and on transactions involving property which may or may not have created trusts.  

We have also had a number of interesting tax avoidance cases, not least the much anticipated decision on the “home loan” inheritance tax avoidance scheme and the case on the deceased’s omission to draw lifetime benefits under her personal pension, both of which were of particular relevance to financial advisers. Some of the above cases were considered in the 2020 series of articles and others deserve more detailed consideration and so will be covered next month.