Property passing outside the estate- FS Flashcards
(31 cards)
What types of property are not governed by the intestacy rules or a will?
The types of property that generally pass outside of intestacy rules or a will include: joint property, life policies, pension scheme benefits, and trust property.
What is the principle of survivorship in the context of joint property, and how does it operate?
Under the principle of survivorship, when a property is held by joint tenants, the deceased’s interest automatically passes to the surviving joint tenant, regardless of any provisions made in the will.
How does joint tenancy differ from tenancy in common in terms of inheritance?
In a joint tenancy, there is no distinguishable share; the interest passes automatically to the surviving joint tenant upon death. In contrast, under tenancy in common, each co-owner has a separate share which passes according to their will or intestacy.
Why can a person’s share in a joint tenancy not be left to someone in a will?
Because in joint tenancy the deceased’s interest ceases to exist upon death and automatically vests in the surviving joint tenant by operation of law, not by testamentary disposition.
What is the legal effect of a separation on joint tenancy?
Separation alone does not sever a joint tenancy. Therefore, property held jointly will still pass by survivorship unless the joint tenancy is actively severed or converted into a tenancy in common.
How would a divorce, rather than a separation, affect a joint tenancy in relation to inheritance?
Divorce may have the effect of severing the joint tenancy, converting it into a tenancy in common, meaning the deceased’s share could then pass under their will or the intestacy rules.
In what situation would a gift made in a will fail due to the nature of the property being held jointly?
A testamentary gift of an interest in jointly held property fails if the property is held in joint tenancy because the interest automatically passes to the surviving tenant, and not under the terms of the will.
What legal conclusion can be drawn when a person dies holding property as a joint tenant and has named a different beneficiary in their will?
The joint tenancy prevails, and the property passes to the surviving joint tenant. The testamentary provision naming another beneficiary has no effect on that property.
What determines whether the proceeds of a life insurance policy form part of the deceased’s estate?
If a life insurance policy is held in the policyholder’s own name and not written in trust, the proceeds form part of the deceased’s estate and are distributed by their personal representatives according to the will or intestacy rules.
Under what condition will life insurance proceeds bypass both the will and intestacy rules?
When the life insurance policy is written in trust for named beneficiaries, the proceeds bypass the estate and pass directly to those beneficiaries on the death of the policyholder.
Who distributes the proceeds of a life insurance policy that forms part of the deceased’s estate?
The deceased’s personal representatives are responsible for distributing the proceeds in accordance with the terms of the will or, if there is no will, under the intestacy rules.
Can a testator change the recipient of a life policy that is written in trust through a provision in their will?
No. If a life insurance policy is written in trust for a named beneficiary, any contrary provision in the will has no effect on the distribution of the policy proceeds.
Why do insurance policies written in trust not fall within the deceased’s estate?
Because once written in trust, the legal ownership of the policy’s benefit is transferred to the beneficiaries named in the trust, meaning the policyholder no longer owns it at death.
What is the legal status of a life insurance policy not written in trust upon the policyholder’s death?
It is considered part of the policyholder’s estate and is distributed accordingly by the estate’s personal representatives.
What is the key legal distinction between life insurance policies written in trust and those not?
The distinction lies in ownership: policies written in trust are owned for the benefit of specific beneficiaries, whereas policies not in trust remain owned by the policyholder until death and thus fall into their estate.
What principle explains why a will cannot override the beneficiary of a trust-held life insurance policy?
The principle is that the trust arrangement vests the beneficial interest in the named beneficiary upon creation, removing it from the testator’s testamentary control.
What is the legal status of pension scheme benefits in relation to wills and intestacy rules?
Pension scheme benefits pass outside of the deceased’s will and the intestacy rules. They are not considered part of the estate and are distributed independently by pension fund trustees.
How are pension scheme benefits typically triggered and calculated when an employee dies in service?
Pension scheme benefits are usually paid as a lump sum by the pension fund, calculated based on the deceased employee’s salary at the time of death.
What is the function of a “letter of wishes” in the context of pension scheme benefits?
A letter of wishes allows an employee to indicate preferred beneficiaries to the pension fund trustees. While not legally binding, these wishes are generally followed by the trustees in practice.
Can a provision in a will dictate who receives pension scheme benefits?
No. Even if the will includes directions regarding pension scheme benefits, such provisions have no legal effect because these benefits pass outside of the will and are handled by trustees.
Who decides how pension scheme benefits are distributed upon the death of a member?
The pension fund trustees are responsible for distributing the benefits. Their decision is typically guided by the deceased’s letter of wishes and family circumstances, but they retain discretion.
Why are pension scheme benefits considered to fall outside the deceased’s estate?
Pension scheme benefits do not belong to the employee during their lifetime in the same way as personal assets. Upon death, they are managed and distributed by the pension fund under separate trust-based arrangements.
How does the death-in-service condition affect entitlement to pension benefits?
If an employee dies while still in service, the pension fund typically provides a death-in-service benefit, which is then distributed by the trustees to beneficiaries, guided by any existing letter of wishes.
In what way does a letter of wishes enhance the effectiveness of estate planning for pension benefits?
A letter of wishes directs the trustees’ attention to the deceased’s intended beneficiaries for pension benefits, helping ensure the distribution aligns with personal wishes, despite not being legally binding.
