Property Passing Outside the Estate
Wills and Administration of Estates > Property Passing Outside the Estate
What is Property Passing Outside the Estate in SQE1?
What Is Property Passing Outside the Estate?
Candidates commonly confuse succession treatment with IHT treatment on SQE1 — property may pass outside the estate for succession but still form part of the IHT estate. Certain types of property pass directly to a named beneficiary or surviving co-owner on death without forming part of the deceased's estate for succession purposes. These assets are not governed by the will or the intestacy rules. However, many of them are still relevant for IHT purposes - a crucial distinction for SQE1.
Key Principles for SQE1
- Joint tenancies: survivorship: property held as joint tenants passes automatically to the surviving joint tenant(s). It does not form part of the estate for succession but the deceased's share is included for IHT purposes. Understanding inheritance tax rules and the interaction with intestacy is crucial. These rules also fit within the wills and administration of estates framework.
- Tenancies in common: property held as tenants in common does form part of the estate. Their share passes under the will or intestacy rules - there is no automatic survivorship.
- Life insurance policies written in trust: where a policy is written in trust for named beneficiaries, the proceeds pass directly to the beneficiaries and do not form part of the estate for succession. If properly structured, they may also fall outside the IHT estate.
- Pension death benefits: typically paid at the discretion of the scheme trustees. The member usually completes a nomination form, but the trustees have the final say. Benefits generally do not form part of the estate.
- Statutory nominations: certain assets (e.g., some National Savings products) allow the holder to nominate a person to receive the asset on death, up to a specified limit.
- Donatio mortis causa (DMC): a gift made in contemplation of impending death, conditional on death, with delivery of the property or a means of control. If valid, the gift passes outside the will.
- IHT treatment: even though these assets may pass outside the estate for succession, many are still included in the IHT estate - particularly joint tenancy property and life policies not written in trust.
How This Appears in SQE1 Questions
SQE1 questions test whether a particular asset forms part of the estate for succession purposes, for IHT purposes, or both. This is one of the most commonly tested areas in SQE1. The main trap is confusing the succession position with the IHT position. Questions may also test the requirements for a valid donatio mortis causa.
Quick Example Scenario
Robert and his sister, Angela, own a house as joint tenants. Robert dies leaving a will that leaves 'all my property' to his wife, Claire. Angela claims the house passes to her by survivorship. Angela is correct. As joint tenants, the right of survivorship means the house passes automatically to Angela. It does not form part of Robert's estate for succession and is not governed by his will. However, Robert's share is included in his IHT estate. Claire takes the rest of the estate under the will.
Common Mistakes Students Make
Confusing joint tenancies with tenancies in common - only joint tenancies pass by survivorship.
- Assuming property passing outside the estate is also exempt from IHT - many such assets are still chargeable.
- Forgetting the requirements for a valid donatio mortis causa - contemplation of death, conditionality, and delivery.
- Overlooking that pension death benefits are typically discretionary and do not automatically follow the nomination.
Exam tip
Joint tenancy property passes by survivorship and does NOT form part of the estate for succession — the right of survivorship cannot be overridden by a will. However, it IS included in the IHT estate. Distinguish this from tenancies in common, which form part of the estate. Life insurance written in trust and pension death benefits may pass outside both succession and the IHT estate if properly structured. Remember the requirements for a valid donatio mortis causa: contemplation of death, conditional delivery, and the donor must be gravely ill.
Quick Summary
- This topic combines statutory knowledge with practical application.
- Master the key principles, understand the statutory framework, and practise applying these rules to realistic client scenarios.
Want to test this now? Try a few SQE1-style questions below before moving on.
Test Yourself
Test yourself
Quick check questions based on this article.
Question 1
Scenario
A woman dies leaving a valid will which states: 'I leave my entire estate including all property in which I have an interest to my daughter.' At the date of death the woman owned a house jointly with her husband as beneficial joint tenants. The house is valued at £400,000. The woman also held a bank account in her sole name containing £80,000. She had a life insurance policy with her husband named as the beneficiary, with a payout of £150,000. The woman had recently volunteered at a local food bank on Saturday mornings. The woman's pension scheme, which has a death-in-service benefit of £200,000, names the woman's husband as the nominated beneficiary. The daughter claims she is entitled to the house, the bank account, the life insurance proceeds, and the pension benefit under the will. The husband argues that certain assets pass to him outside the will. The daughter instructs a solicitor to advise on which assets form part of the estate. The estate also includes personal chattels valued at £12,000.
Which of the following correctly identifies the assets that form part of the woman's estate and pass under her will?
Question 2
Scenario
A woman dies leaving a valid will that gives her entire estate to her brother. At the date of death, the woman owns the following assets: a residential property held as joint tenants with her partner, a bank account in her sole name containing £85,000, a personal pension with a death benefit of £200,000 for which she had completed a nomination form in favour of her mother, and a collection of jewellery valued at £15,000. The woman's partner and brother are both alive at the date of death. The woman's mother predeceased her by one year. The pension scheme trustees have discretion as to the payment of the death benefit but will consider the nomination form. The residential property is valued at £350,000 with no outstanding mortgage. The woman had no children and was not married. The brother instructs a solicitor to assist with the administration. The solicitor confirms the will is valid and advises on which assets form part of the estate for distribution purposes.
Which of the following assets will form part of the woman's estate for distribution under the will?
Question 3
Scenario
A woman dies in April 2023. Her will leaves her entire estate to her sister. At the date of death, the woman owned the following assets: a house held as joint tenants with her civil partner, valued at £300,000; a bank account in her sole name containing £50,000; a life insurance policy with her civil partner named as beneficiary, with a payout of £100,000; and personal effects valued at £10,000. The woman also held shares in a private company valued at £40,000 in her sole name. The woman had a pension with a death-in-service benefit of £75,000 where she had completed a nomination form naming her civil partner as the recipient. The woman's civil partner assumes that she is entitled to everything because they were in a civil partnership. The woman's sister believes the entire estate passes to her under the will. The woman had subscribed to a streaming service which was cancelled after her death. The woman and her civil partner had discussed making mutual wills but never did so.
Which assets pass to the sister under the will?
Practice with full exam-style questions
Related Topics
- Inheritance Tax for SQE1
- Claims Against Estates Under the Inheritance Act for SQE1
- Personal Representatives for SQE1
- SQE1 Wills and Administration of Estates: Complete Guide
Practise Property Passing Outside the Estate Questions for SQE1
Want to solidify your knowledge? ActusPrep provides realistic SQE1 questions tailored to this topic.
👉 Try our free demo: https://actusprep.com/demo 👉 View plans and pricing: https://actusprep.com/pricing