The Fortescue family, owners of the historic Boconnoc Estate in Cornwall, have won a court case to avoid a substantial inheritance tax bill. The bill, totaling £1.2 million, resulted from a mistake made while attempting to secure the estate’s future for the next generation.

Historic Estate and Family Legacy

The Fortescues, a historic aristocratic family with links to British royalty and the abolition of slavery, acquired the Boconnoc Estate in 1717. They financed the purchase with the sale of the renowned Pitt Diamond, now housed in the Louvre Museum.

The Inheritance Tax Dispute

The dispute arose from an administrative error made by Elizabeth Fortescue following the death of her husband, Anthony Fortescue, in 2015. Elizabeth attempted to transfer her life interest in the family trusts to her daughter, Clare, to minimize inheritance tax.

Initial Tax Planning and Unexpected Charge

Acting on initial tax advice, Elizabeth released her interest, believing it would exempt the properties – valued at approximately £4.4 million – from inheritance tax if she lived for another seven years. However, flaws in the plan’s execution led to an unexpected 20% tax charge.

Estate at Risk

The family faced the prospect of selling parts of their ancestral home to cover the £1.2 million tax liability. Oliver Conolly, Ms. Fortescue’s barrister, described the mistake as ‘plain vanilla tax mitigation gone wrong’ and emphasized the family’s long-standing commitment to the estate.

Personal Struggles and Court Testimony

The court heard details of Anthony Fortescue’s struggles with psychotic depression. An inquest into his death recorded an open verdict. Conolly underscored that the estate was ‘not swimming in cash’ and Elizabeth would not have proceeded if she understood the consequences.

High Court Ruling

Deputy Master Joanna Lampert of the High Court acknowledged the ‘grave and unintended tax consequence’ and granted permission to reverse the process. The judge recognized the initial advice was sound, but the implementation method was flawed and unnecessary.

Corrective Action and Estate Preservation

The ruling allows the family to rectify the situation and potentially avoid the tax bill. The judge stated Elizabeth believed no inheritance tax would be payable if she survived seven years, but this proved incorrect. The preservation of Boconnoc Estate, a site with historical connections to Charles I and Charles II, remains a priority.

The case highlights the complexities of inheritance tax law and the potential for significant financial repercussions from even unintentional errors. The Fortescue family will now take the correct steps to ensure the estate’s long-term security and legacy.