CASE STUDY

Present value calculation of needs under the Inheritance (Provision for family and dependents) Act 1975
Other

Present value calculation of needs under the Inheritance (Provision for family and dependents) Act 1975 The expert was instructed to prepare a report quantifying the needs of two children in their early to mid-teens following the death of their father. Their father’s estate was substantial; however, there were claims on it from various relatives in addition to his immediate family. Additionally, there were several pecuniary bequests and a doubtful debt, which needed to be taken into account before arriving at a value of estate to be made available. The report prepared included a calculation of the children’s educational and maintenance needs to the age of 25 taking into consideration the fact that both children were exceptionally talented in both academic and extra-curricular fields. There were few precedents to be followed in computing the needs and a number of assumptions were required, such as: 1. The likely school and university fees and the cost of extra-curricular activities to continue fostering the children’s capabilities 2. Future levels of inflation 3. Interest rates and investment returns The final report took into account two possible means of supporting the children: 1. Using the father’s estate to cover future needs as they arose; or 2. Investing a sum that would return enough income annually to meet expected future costs The overall conclusion was that their combined needs amounted to just under £1 million over the next 10 to 12 years.

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