CLAIMS UNDER THE INHERITANCE (PROVISION FOR FAMILY AND DEPENDANTS) ACT 1975 AND DOMICILE

2hwealthcare-30.jpg

High Court decides on domicile of the deceased for the purposes of the 1975 Act claim against his estate (Proles v Kohli, 2018 EWHC 767 Ch).

The issue of a person’s domicile is usually discussed in the context of taxation, However, there is one  aspect of domicile not related to taxation  that is often overlooked but is important to estate planning and wills, namely in relation to claims under the Inheritance (Provision for Family And Dependants) Act 1975.

If a person who has not been provided for under a will is within the category of people eligible to make a claim for ‘reasonable financial provision’ under this Act they can only do so if the deceased died domiciled in the UK.

This issue was the subject of the preliminary hearing in the case of  Proles v Kohli Deceased and has recently been determined (Proles v Kohli, 2018 EWHC 767 Ch). Whilst each case will always be determined on its own facts, the decision in this particular case is interesting as it illustrates the factors the Court will take into account when considering whether the individual is domiciled in the UK or not.

This is the well-publicised case of the mistress of the late millionaire Baldhev Kohli who is challenging his will on behalf of their young daughter for whom the deceased made no provision in his will. The claim would fail if the judge ruled that Mr Kohli was not UK domiciled, so following the finding that Mr Kohli was indeed domiciled in the UK the claim can now proceed.

The circumstances of Mr Kohli relevant to the decision were as follows. He was born in India where he lived and worked for nearly 40 years. He had a wife and two sons, all of whom were based in India. In 2002 he moved to London with his son when his son started university in the UK. Mr Kohli purchased commercial and residential properties in London and established a small chain of restaurants in various suburbs. He registered his businesses to pay VAT, opened a UK bank account and registered with his local GP. A year later his second son joined him. Whilst Mr Kohli was in the UK it is alleged that he had an extra marital relationship which resulted in a daughter.

He gradually built up his property letting and restaurant business with the help of his family, until 2014 when his health declined seriously, for which he received hospital treatment.

Five years after the birth of his daughter, in late 2015, he organised a trip to India. He spent 35 days there before his unexpected death, on 8 December 2015. The fact that he died while apparently living outside of the UK led his widow, based in India – who is his executor and beneficiary and is defending the claim in the UK – to claim he was not domiciled in England.

The court found that there was a considerable amount of third party evidence that Mr Kohli had not intended his final trip to India to be a one way trip. The court heard evidence from his doctor to whom Mr Kohli had told him he was travelling to India for ‘rest and recuperation’ and that he would be returning to the UK in a few weeks to complete his medical treatment.

Additionally the court was presented with evidence that Mr Kohli was in the process of attempting to persuade HMRC that he should be treated for tax purposes as if he resided in the UK.

Having considered all the evidence the court concluded that Mr Kohli should be treated as domiciled in the UK and as such his daughter’s claim under the 1975 Act could proceed.

The issue of domicile is topical nowadays due to changes to the deemed domicile rules which came into effect last year and is therefore one that all professional advisers ought to be familiar with. The aforementioned case illustrates another aspect of domicile which is relevant to estate planning and something that will be relevant to any will planning, especially if any potential beneficiary is to be excluded from a will.