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FLK 2: Wills and the Administration of Estates > Topic 7 - Paying IHT > Flashcards

Topic 7 - Paying IHT Flashcards

(68 cards)

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1
Q

What are the two main stages of the administration process carried out by PRs?

A
  1. Steps from death to the issue of the grant of representation
  2. Steps from issue of the grant to completion of the administration
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2
Q

What duty do PRs have under s.216 Inheritance Tax Act 1984?

A

Deliver an account to HMRC regarding the deceased’s estate and pay any IHT due

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3
Q

What must be included in the account delivered to HMRC by PRs?

A

A list of all property comprising the deceased’s taxable estate and the value of each item at the date of death, along with applicable exemptions and reliefs

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4
Q

How is IHT calculated?

A

By adding the value of the deceased’s taxable assets, deducting debts, and applying exemptions/reliefs

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5
Q

True or False: No IHT is due on assets passing to a spouse or charity.

A

True

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6
Q

What is the tax rate applied above the nil rate band (NRB)?

A

40% on any value above the NRB

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7
Q

What is the nil rate band (NRB) threshold?

A

Currently £325,000, though it may vary

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8
Q

What is the deadline for submitting the IHT account?

A

12 months from the end of the month in which the death occurred

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9
Q

What is the deadline for paying IHT due?

A

6 months from the end of the month in which death occurred

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10
Q

What is the IHT account form that PRs must complete unless the estate is excepted?

A

IHT 400

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11
Q

What qualifies an estate as a low value excepted estate?

A

Gross value of the estate is below the NRB and no IHT is payable

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12
Q

What is an exempt excepted estate?

A

Gross value is no more than £3 million, no IHT is payable after debts and spouse/charity exemptions are applied

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13
Q

What types of assets can be paid by 10 equal annual instalments under the IHT instalment option?

A
  1. Land and buildings
  2. Company shares/securities giving control
  3. Some unquoted company shares/securities
  4. Farms or interests in farming businesses
  5. Business or interests in a business
  6. Timber
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14
Q

Fill in the blank: The deadline for the first instalment of IHT under the instalment option is _______.

A

Six months after the end of the month in which the deceased died

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15
Q

What is the significance of the transferable nil rate band (TNRB)?

A

It allows the deceased’s estate to claim the unused part of the spouse’s NRB if the spouse pre-deceased them

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16
Q

What happens to the instalment option if the property is sold?

A

The instalment option ceases, and the outstanding IHT becomes due immediately

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17
Q

What must PRs do if an estate includes more than one trust interest?

A

The estate cannot be excepted

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18
Q

What is the maximum value of specified transfers for an estate to be considered excepted?

A

£250,000

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19
Q

What happens if the deceased made a gift with reservation of benefit?

A

The estate cannot be excepted

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20
Q

True or False: Changes in the value of assets post-death are recorded for IHT purposes.

A

False

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21
Q

What is loss relief in the context of IHT?

A

It allows PRs to claim a partial refund of IHT where losses occur on the sale of certain assets within prescribed time frames

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22
Q

What is the maximum gross value for a low value excepted estate?

A

Below the NRB

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23
Q

Which estate is considered exempt excepted: A) Estate worth £400,000 after BPR or B) Estate worth £3.5M to a spouse?

A

A) Estate worth £400,000 after BPR

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24
Q

What values are relevant for IHT purposes?

A

The date of death values are relevant for IHT purposes.

Changes in the value of the assets post-death are not recorded for IHT purposes.

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25
What is Loss Relief in the context of IHT?
Loss Relief entitles the PRs to claim a partial refund of IHT where losses occur on the sale of certain assets within prescribed time frames. ## Footnote The detail of this relief is beyond the scope of this module.
26
What is a Corrective Account Form C4 used for?
The C4 is used to inform HMRC about: * additional assets/liabilities discovered after the IHT 400 was submitted * corrections to the value of assets/liabilities originally included in the IHT400 * changes to exemptions/reliefs applied * a variation of the original beneficiary entitlements affecting IHT liability.
27
What happens if the PRs discover inaccuracies in the IHT400?
They must correct the inaccuracies using a Corrective Account Form C4. ## Footnote This could involve adjustments to the calculation of IHT.
28
What are the two main options PRs have for raising funds to pay IHT?
The options available are: * Direct Payment Scheme * Borrowing.
29
What is the Direct Payment Scheme?
It allows banks or building societies to make a direct payment from the deceased’s account(s) to HMRC by telegraphic transfer. ## Footnote PRs must complete schedule IHT 423.
30
What is a Grant of Representation?
A court order confirming the authority of those named in it to administer the estate.
31
What type of grant is required when the deceased left a valid will appointing executors?
Grant of probate.
32
What type of grant is needed when the deceased left a valid will but no executors are appointed?
Grant of letters of administration (with will).
33
What type of grant is required when the deceased died intestate?
Grant of letters of administration.
34
What must applicants demonstrate to the Probate Registry?
They must demonstrate they are entitled to the grant by providing sufficient information about the deceased's estate.
35
What are the categories of professional applications?
Applications by professionals fall into one of three categories: * Mandatory online application * Online application possible but not mandatory * Mandatory paper application.
36
What is the form PA1A used for?
It is used when the deceased did not leave a will.
37
What is the form PA1P used for?
It is used when the deceased left a valid will.
38
What information is required in all grant applications?
Applicants must: * confirm the identity of the deceased and applicants * justify the type of grant requested * provide information about the estate's value and IHT status * complete the legal statement on the probate form.
39
What should be included in the identity confirmation of the deceased?
The full name of the deceased, date of birth and death, and any name variations.
40
What does an express statement in the application confirm?
It confirms the type of grant requested.
41
How must executors' entitlement to grant be established?
By providing evidence of appointment under the will and submitting original testamentary documents.
42
What is required if an executor wishes to renounce their right to the grant?
They must complete a form of renunciation.
43
What must be confirmed regarding the estate value and IHT status?
The gross and net estate values and confirmation that the IHT400 was sent to HMRC.
44
What is settled land?
Settled land refers to a specific interest in land under a trust governed by the Settled Land Act 1925.
45
What must applicants confirm in the legal statement?
They will comply with their obligation to collect in and duly administer the estate.
46
What are the required documents for the application process?
The items needed depend on the estate and may include: * Probate Registry Fees & Death Certificate * Testamentary documents * Form of renunciation * IHT forms.
47
What is the probate registry fee based on?
It depends on whether a professional is applying and the value of the estate.
48
What must be submitted if the deceased left a valid will?
The original will must be submitted with the application.
49
What happens if an executor has intermeddled when seeking to renounce?
Renunciation is not possible if the executor has intermeddled.
50
What is the significance of excepted estates?
If the estate is excepted, there will be no IHT payable and no IHT form is required for the grant application.
51
What must an executor complete to renounce their position?
A form of renunciation ## Footnote This form must be included in the application.
52
What is the consequence of an executor's renunciation?
The administration is completed as if they had not been appointed ## Footnote Refer to s 5 AEA 25.
53
When is no Inheritance Tax (IHT) payable?
When the estate is excepted ## Footnote Personal representatives are not required to submit an IHT form in this case.
54
What form must be completed if the estate is non-excepted?
IHT400 ## Footnote This form is sent to HMRC, not the probate registry.
55
What does HMRC provide after the IHT400 is submitted?
Confirmation by letter to the applicants ## Footnote The Probate Registry will not issue the grant without this confirmation.
56
What details must be provided when an attorney applies on behalf of an executor?
Attorney’s details and an express declaration ## Footnote This includes why the named executor is not applying.
57
What is an affidavit?
A formal written statement of fact signed under oath ## Footnote The deponent swears or affirms the truth of the contents.
58
What is required for an affidavit to be considered valid?
The jurat must be signed, dated, and witnessed by an independent solicitor or commissioner for oaths ## Footnote The jurat must follow immediately after the text.
59
When is affidavit evidence required?
When there is a valid will but its validity or interpretation is uncertain ## Footnote The original will is submitted with the affidavit.
60
What does an affidavit of due execution confirm?
That the will was executed in accordance with formalities ## Footnote This may be made by one of the witnesses.
61
What presumption arises from a properly executed will with a standard attestation clause?
Presumption of knowledge and approval ## Footnote Doubts may arise under special circumstances, requiring an affidavit.
62
What should be confirmed regarding the date of the will?
That it is clear and corresponds to the last will of the testator ## Footnote Issues can arise if the date is missing or incomplete.
63
What issues can arise from the physical condition of a will?
Alterations, missing pages, or signs of tampering ## Footnote These issues can affect the interpretation of the will.
64
What is a potential requirement if a will contains alterations?
An affidavit of alterations ## Footnote This would establish the timing of the alterations.
65
What happens if the original will or codicil is missing?
A copy may be admitted to probate with a court order ## Footnote An affidavit must support this application.
66
What is necessary for a court order to admit a copy of a will?
Evidence that the will existed post-death and was correctly executed ## Footnote The copy must accurately reflect the testamentary wishes.
67
What must be ensured when a will is executed at home?
Proper drafting, execution, and care of the document ## Footnote This helps avoid the need for affidavit evidence.
68
What alternative can be submitted instead of affidavit evidence in non-contentious probate matters since November 2020?
Witness statement supported by a Statement of Truth ## Footnote This provides a more straightforward method of evidence.

FLK 2: Wills and the Administration of Estates (10 decks)

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