The year to date has seen a number of changes affecting probate practitioners.Intestacy rulesTwo major changes to the intestacy rules contained in the Law Reform (Succession) Act 1995 apply where death occurs on or after 1 January 1996.

The first change provides that, if the spouse does not survive the intestate by 28 days, the intestacy rules apply as if the spouse had predeceased.

This will avoid the surviving spouse's family benefiting and ensure that the inheritance tax nil rate band can be used in both estates.

The second change removes the need for issue to bring into account gifts made by the intestate during his or her life or, on a partial intestacy, in his or her will.

This will simplify matters as most families do not maintain accurate records of gifts.GiftsThe Inheritance (Provision for Family and Dependants) Act 1975 now permits a person who was living with the deceased as husband or wife (but not actually married to them) to make a claim where death occurs on or after 1 January 1996.

The court may take into account the cohabitee's age, the length of the relationship and the contribution made by the cohabitee to the welfare of the deceased's family.

The cohabitee has to show that the financial provision is required for his or her maintenance.

The surviving spouse is still the only claimant who is not required to show this.'Excepted' estatesThe Inland Revenue introduced new rules for estates where death occurred on or after 6 April 1996.

The threshold for excepted estates has been raised from £145,000 to £180,000, and the rules relating to foreign assets and lifetime gifts have been relaxed.Personal representatives will not have to deliver an Inland Revenue account where :-- the deceased died domiciled in the UK;-- the total gross value of the estate (including the value of lifetime gifts) does not exceed £180,000;-- the estate consists only of property passing under the deceased's will or intestacy, or by nomination, or beneficially by survivorship (the deceased's beneficial interest in joint property counts for the purposes of the £180,000 limit);-- the value of foreign property does not exceed £30,000, and any taxable lifetime transfers made within seven years of the deceased's death consist only of cash, quoted shares or securities not exceeding £50,000 (previously such transfers would have ruled out the excepted estate procedure).Frankland v IRC [1996] STC 735A trap in the inheritance tax legislation was considered by the courts in Frankland v IRC [1996] STC 735.

Mrs Rawlinson died on 26 September 1987, leaving property on discretionary trusts for her husband and children.

On 22 December 1987, the trustees transferred this property to a trust in which Mr Rawlinson had a life interest.

The intention was that the transfer to the trust would attract the spouse exemption under s 144 of the IHTA 1984.

Where property is settled by will on discretionary trusts and an interest in possession is created within two years of the death, s 144 automatically applies and the interest is treated for tax purposes as if it had been created in the will.Unfortunately, the legislation is drafted so that the provisions deeming the disposition to have been contained in the will only apply where tax would (apart from this section) have been chargeable on the post-death disposition.

In the Rawlinsons' case, the creation of an interest in possession out of discretionary trusts in the first three months of the trusts' existence did not give rise to a tax charge and, therefore, s 144 could not apply.The High Court held that the conditions specified in s 144 were not satisfied.

The court conceded that there was no good reason why distributions made during the first three months should not fall within s 144, whereas those made within the following 21 months would.

However, the wording of the section was unambiguous and, although the result achieved was unusual, this did not make the rules absurd or cancel out the relief completely.It is, perhaps, unfortunate that the Inland Revenue should take this point.

Practitioners should give thought to providing that the trustees' power of appointment cannot be executed for three months after the testator's death, when a will creates discretionary trusts.Re Benham's Will TrustsThe dilemma and uncertainty caused by Re Benham's Will Trusts continues.

The case suggests that a grossing-up formula must be used where the residue of an estate is to be divided between beneficiaries, some of whom are exempt from inheritance tax and some of whom are not.

The Capital Taxes Office has stated that it views the Benham decision as confined to its own particular facts since 'the plain intention of the testatrix was, at the end of the day, that, after the payment of tax, each beneficiary, whether charitable or non-charitable, on the respective lists should receive the same amount as the other beneficiaries in that list', and because the court in that case was concerned to establish the intention of the testatrix from the wording of the will.

The Inland Revenue further said: 'If the will is drafted in common form with a direction to ascertain residue after payment of funeral and testamentary expenses and debts, followed by a bequest of that residue, then it is focusing on the ascertainment and division of disposable residue rather than on what each residuary beneficiary is to receive.

Accordingly, wills so drafted would not appear to involve Benham style grossing-up computations.'It is thought that the Capital Taxes Office is wrong to argue that Benham only applies to exceptional cases.

Executors find themselves in a difficult position.

If they distribute without grossing up, the chargeable beneficiaries might successfully sue them for a distribution along the lines of Benham.

If they distribute now on a Benham basis, and the case is subsequently overruled, the charitable beneficiaries could sue them for the balance of the gift they should have received.In cases of any doubt, executors are forced to be cautious and to make retentions of part of the residue until the position is resolved, or to make full distribution upon taking full indemnities from all of the beneficiaries.

It is understood that there are a number of cases in the pipeline that will resolve this dilemma.