Learning Outcomes
After reading this article, you will be able to identify what is meant by nominated property, explain how statutory nominations operate to pass assets outside the deceased’s estate, and distinguish the legal consequences of nominations from gifts by will or intestacy. You will also be able to apply the relevant statutory rules and advise on the effect of nominations for SQE1-style problem questions.
SQE1 Syllabus
For SQE1, you are required to understand the concept of nominated property and how it passes outside the estate. In your revision, focus on:
- the definition and operation of statutory nominations (especially in friendly societies, National Savings, and certain pension schemes)
- the legal effect of a valid nomination and how it differs from gifts by will or intestacy
- the requirements for making, revoking, or varying a nomination
- the treatment of nominated property for inheritance tax and estate administration purposes
- practical scenarios where nominations may conflict with a will or intestacy
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What is the effect of a valid statutory nomination on the distribution of the nominated asset after death?
- Can a nomination override a contrary provision in a later will?
- How can a nomination be revoked or changed during the nominor’s lifetime?
- Is nominated property included in the deceased’s estate for inheritance tax purposes?
Introduction
When a person dies, most of their assets pass according to their will or, if there is no will, under the intestacy rules. However, some assets are subject to a statutory nomination, which allows the owner to direct that a specific person will receive the asset on their death, regardless of the terms of any will or the intestacy rules. These assets are known as nominated property and pass outside the estate.
Key Term: nominated property Property that passes directly to a nominated beneficiary on death under a statutory nomination, rather than under a will or intestacy.
Statutory nominations: overview
Certain statutes allow the owner of specific assets to nominate a beneficiary to receive the asset on their death. The most common examples are:
- funds held with friendly societies
- National Savings Bank accounts and certificates
- some workplace pension schemes and death-in-service benefits
The effect of a valid nomination is that the nominated person is entitled to the asset on the owner’s death, and the asset does not fall into the estate for distribution by will or intestacy.
Key Term: statutory nomination A written direction made under statute by the owner of an asset, specifying who is to receive the asset on their death.
Requirements for a valid nomination
To be effective, a statutory nomination must comply with the requirements set out in the relevant statute or scheme rules. Typically, these include:
- the nomination must be in writing and signed by the owner (the nominor)
- the asset and the beneficiary must be clearly identified
- the nomination must be delivered to the society, bank, or scheme administrator (if required)
Nominations are usually revocable and can be changed at any time before death by making a new nomination or by written revocation.
Key Term: nominor The person who owns the asset and makes the nomination.
Legal effect of a nomination
A valid nomination takes effect on the death of the nominor. The nominated property passes directly to the nominated beneficiary, outside the estate. The personal representatives have no right to the asset, and it is not available for distribution under the will or intestacy rules.
Key Term: nominated beneficiary The person named in a statutory nomination to receive the nominated property on the nominor’s death.
If the nominated beneficiary dies before the nominor, the nomination usually lapses, and the asset will pass under the will or intestacy unless a new nomination is made.
Worked Example 1.1
Amira has £4,000 in a National Savings account and makes a valid statutory nomination in favour of her friend, Leo. Amira later dies, leaving a will that leaves her entire estate to her sister.
Answer: The £4,000 passes directly to Leo as the nominated beneficiary. It does not form part of Amira’s estate and is not available for distribution under her will.
Revocation and variation of nominations
A nomination can be revoked or changed at any time before death, provided the nominor has mental capacity. Revocation is usually achieved by:
- making a new nomination (which automatically revokes the earlier one)
- giving written notice of revocation to the society, bank, or scheme administrator
A nomination is automatically revoked by marriage or civil partnership (unless the relevant statute provides otherwise), and may also be revoked by a later will if the will expressly refers to the nomination.
Exam Warning
A nomination is not revoked by a later will unless the will expressly refers to the nomination or the relevant statute so provides. Always check the statutory rules and scheme documents.
Nominated property and the estate
Although nominated property passes outside the estate for distribution purposes, it may still be relevant for other purposes:
- It is included in the estate for inheritance tax calculations.
- The personal representatives may be required to declare the value of nominated property on the inheritance tax return.
- If the nominated property is not claimed within a certain period, it may revert to the estate.
Worked Example 1.2
Jaspreet dies with a friendly society account of £3,000, nominated to her cousin, Sam. Sam does not claim the money for several years.
Answer: The money remains available to Sam as the nominated beneficiary. If Sam fails to claim within the statutory period (often 10 years), the money may revert to Jaspreet’s estate and be distributed under her will or intestacy.
Practical issues and conflicts
Nominations are often overlooked or forgotten. Problems can arise if:
- the nomination is inconsistent with the will or intestacy
- the nominated beneficiary cannot be traced or has died
- the nomination is invalid due to failure to comply with statutory requirements
It is important for clients to review nominations regularly, especially after major life events (such as marriage, divorce, or the birth of a child).
Revision Tip
Always advise clients to review and update nominations when their circumstances change, and to keep a copy of the nomination with their will.
Nominations and pension death benefits
Many modern pension schemes allow members to nominate a beneficiary to receive lump sum death benefits. However, the trustees or administrators of the scheme may have discretion as to who receives the benefit, and are not always bound by the nomination. Always check the scheme rules.
Worked Example 1.3
Omar is a member of a workplace pension scheme and nominates his partner, Alex, to receive any lump sum death benefit. The scheme rules give the trustees discretion to pay the benefit to any of Omar’s dependants or nominees.
Answer: The trustees will consider Omar’s nomination but are not legally bound to follow it. They may pay the benefit to Alex or to another dependant, depending on the circumstances and the scheme rules.
Key Point Checklist
This article has covered the following key knowledge points:
- Nominated property is property that passes outside the estate under a valid statutory nomination.
- Statutory nominations must comply with the requirements of the relevant statute or scheme.
- A valid nomination overrides the will or intestacy for the nominated asset.
- Nominations are usually revocable and can be changed at any time before death.
- Nominated property is included in the estate for inheritance tax but not for distribution by will or intestacy.
- Pension nominations may not be binding on scheme trustees—always check the scheme rules.
Key Terms and Concepts
- nominated property
- statutory nomination
- nominor
- nominated beneficiary
