5. Wills & Trusts Flashcards
What are the 3 requirements for a testator?
To make a will:
18+ and of sound mind, memory and understanding
Have specific intention of making a will
Know what a will is, the property they are leaving, who they are leaving it to and how it will be distributed
What are the requirements for a valid will?
In writing
Testator’s signature witnessed by 2+ people 18+ (witness or their spouse cannot be beneficiary)
What are the other features of wills? (6)
Should be dated to avoid confusion
Each person should make own will
Clear statement that previous wills are revoked
Automatically revoked on marriage unless specifically provided for
No legal requirement to be drawn up professionally
Divorce does not revoke but former spouse’s share goes into estate
7 key general principles of intestacy?
Spouse only benefits if they survive the deceased by 28 days
Divorcees have no rights and estranged/separated treated as married
If a relative dies before intestate, their children inherit their share equally
Step/foster children have no rights but can claim for provision
Full blood relatives take precedent over half blood
In-laws have no rights
Shared assets are excluded (they go to surviving owner)
What is the order of intestacy?
If spouse + children: spouse gets chattels and first £270k of estate, plus half of remaining estate. Children get remaining half.
If spouse/children only, they get everything (equally)
Grandchildren
Parents
Siblings (full then half)
Grandparents
Uncles/Aunts
Crown/Treasury
What must executors/administrators do before distribution?
Obtain grant or probate from Probate Registry
- small estate exemption £5k
- need to complete and pay IHT first
Administrator of intestacy needs letter of administration
How can wills or intestacy be changed by beneficiaries?
A beneficiary can reject a bequest by written disclaimer, within 2 years death
Deed of variation - unanimous agreement between affected beneficiaries (18+)
- within 2 years of death
- cannot be made in exchange for consideration
What are 6 duties of a trustee?
Act in accordance with trust deed
Understand duties + powers in relation to investments
Balance maximising returns with protecting capital
Act honestly and prudently
Diligently avoid losses (could be liable for negligence)
Balance interests of all current & future beneficiaries
What are the 3 conditions on which a trustee can invest assets when power to do so is not specifically conferred in the trust deed?
Be aware of need for diversification and selecting suitable investments
Obtain and consider proper advice when selecting/reviewing investments
Keep investments under review
What are the 3 “certainties” of a trust
Certainty of:
Intention: settlor intended to create a trust
Subject matter: specifies which assets
Object: beneficiaries must be clear
Describe an Absolute or Bare trust?
Specific beneficiaries who can demand assets if 18+
- Beneficiaries and terms cannot be changed
- If beneficiary dies before receiving assets, they go into their estate
- Ensures certainty of beneficiaries
Describe an Interest in Possession trust
Beneficiary can receive income for lifetime or from/until contingency
Life tenant is the main beneficiary
Remaindermen benefit on death of life tenant
Describe an immediate post-death interest trust
Trust created in a will, for beneficiary to receive income for life or contingency
Gift is at death so subject to IHT
Describe a discretionary trust
Trustees can appoint beneficiaries from a specified category
Trustees can choose whether to pay income or capital to beneficiaries
Trust assets do not belong to any beneficiaries so excluded from estates
What are the 2 types of life assurance trust?
Flexible: trustees can vary beneficiaries but settlor must appoint default beneficiary
Split: combined life assurance + critical illness
