WAE

Question 1

Statutory legacy

Answer 1

£322,000 to spouse
Free of tax and costs plus interest from the date of death to the date on which payment is made

Question 2

Lifetime Chargeable Transfers

Answer 2

Into a trust during life

20% on transfer, 40% at death if within 7 years, taper relief applies

Question 3

Potentially Exempt Transfers

Answer 3

Outright gift during life

No IHT upon transfer, but 40% at death if within 7 years, taper relief applies

Question 4

Nil Rate Bands

Answer 4

NRB: £325,000

TNRB: percentage of unused NRB from deceased spouse
Can claim from multiple spouses, subject to a cap of 100% of the full NRB

RNRB: £175,000 if leave qualifying residential interest to direct descendant
Tapered withdrawal from estates worth £2M
No longer available if estate with £2,300,000 or more
Can also be transferred

→ it is possible for a person’s estate to qualify for a total NRB of 1M

Question 5

Rules to value the taxable estate

Answer 5

Quoted shares:
Taking the lower of the two prices on the Stock Exchange Daily List and adding ¼ of the difference between the higher and the lower value

Related property:
If assets owned by spouses are worth more when valued together (eg because they form a set), each party’s share is valued at their proportionate share of the combined total

Co-ownership between non-married people (JT or TIC):
The value of the deceased’s share is reduced (by 10-15%) to reflect the difficulty of selling a share of the property rather than the whole

Question 6

BPR

Answer 6

Transferor must have owned the business assets continuously for at least 2 years immediately prior to the relevant transfer

Rates of relief
Unquoted shares - 100%
Quoted shares - 50%
Business or interest in a business - 100%
Assets used for business - 50%

Question 7

APR

Answer 7

Occupied for agricultural purposes by transferor throughout 2 years immediately before transfer OR owned by transferor and occupied by them or another for agricultural purposes throughout 7 years immediately before transfer

Rates of relief
100% EXCEPT
50% if property was let on a tenancy created before September 1995

Question 8

Exempt excepted estate

Answer 8

The gross value of the estate is no more than £3M, but
- No IHT is payable and the reason for this is because
- After debts are deducted and spouse and/or charity exemption are applied the net value of the estate is below the NRB

Question 9

Taper relief

Answer 9

Kicks in if donor died over 3 years ago.
To apply both of the following conditions must be met:
(1) A lifetime transfer was made 3 – 7 years prior to the transferor’s death (i.e. a PET has failed / LCT will be re-assessed)
(2) IHT is payable in respect of the lifetime transfer (i.e. separately and in addition to IHT due in respect of the death estate)
= the amount transferred was higher than the NRB

Question 10

Annual exemption

Answer 10

£3,000 - April 6 to April 5
Can add the previous year’s if run out

Question 11

Small gifts exemption

Answer 11

Up to £250 per gift
Cannot cumulate with AE or any other exemption

Question 12

Marriage exemption

Answer 12

Counts per donor. Can cumulate with AE

A gift given in consideration of a marriage to a party of that marriage is exempt up to:
£5,000 if made by a parent of one of the parties
£2,500 if made by one party of the marriage to the other
£2,500 if made by their remoter ancestor e.g. grandparent or great-grandparent; and
£1,000 or anyone else

For the purposes of the marriage exemption, ‘child’ includes an illegitimate child, an adopted child and a step-child

Question 13

Deadline: intestacy - spouses

Answer 13

Spouse must survive the deceased by 28 days

Question 14

Deadline: rectification of wills

Answer 14

If the PRs discover an error in the will, they can apply for rectification within 6 months of the grant (or later with court permission)

If the PRs make a distribution 6 months or more after the grant, they will not be personally liable to a beneficiary wishing to claim against the estate as a result of the error.

Question 15

Deadline: ‘writing back’ provisions for IHT or CGT

Answer 15

For variations and disclaimers

(1) Made by the original beneficiary in writing
- Deed not required, but frequently used
(2) Within the 2 years following the deceased’s death
(3) Contains an express statement by the beneficiary confirming TCGA/IHTA should apply
(4) Not be made for consideration in money or money’s worth

Question 16

Deadline: precatory trusts

Answer 16

Gift by will with a wish expressed as to how the beneficiary should pass those assets to others

Automatic IHT writing back effect if original beneficiary follows the testator’s wishes within 2 years of testator’s death
- Treated for IHT purposes as gifts made by the testator’s will and not the original beneficiary
- Original beneficiary not treated as having made a PET of these items, which would otherwise be the case

Question 17

Deadline: TNRB

Answer 17

PRs must make claim within 2 years at the end of the month of death of the second spouse.

Question 18

Deadline: paying IHT

Answer 18

6 months from the end of the month of death, after which interest becomes payable on unpaid amount.
UNLESS - paying in 10 equal instalments

Submitting IHT400 - 12 months from the end of the month of death

Question 19

Deadline: section 27 notice

Answer 19

For unknown beneficiaries and creditors

Gives 2 months’ notice of their intention to distribute to known beneficiaries, after which no more personal liability.

Question 20

Deadline: presumption of death

Answer 20

Person must have been missing for at least 7 years.

Question 21

Deadline: IPFDA claims

Answer 21

6 months from grant of probate

→ PRs may wish to delay distribution of the estate until 10 months of the grant being issued (6 month from grant + 4 months to issue a claim)

Question 22

Deadline: IPFDA - cohabitee category

Answer 22

Person who cohabitated with the deceased as if they were spouses/civil partners for 2 years prior to their death

Question 23

Deadline - IPFDA: surviving spouse standard

Answer 23

(1) Applicant is a former spouse or civil partner of the deceased who has not remarried / entered a civil partnership, or a spouse who is judicially separated from the deceased;
(2) Divorce, dissolution, nullity or judicial separation occurred within 12 months of the death; and
(3) No order for financial provision has been made or refused in the ancillary proceeding

Question 24

Deadline: quick succession relief

Answer 24

Applies where a person dies and
- Their death estate includes assets received by way of gift or inheritance,
- In the 5 years before their death, and
- Those assets were subject to an IHT charge when transferred to the deceased

IHT must have been payable on both the original transfer and following the subsequent death

Question 25

Deadline: 2-year discretionary trusts

Answer 25

= discretionary will trusts drafted with the intention that they will only last 2 years following testator’s death Effect: if distribution happens within the 2 years, the payments are treated as having been made by the testator’s will, NOT the trustees, which means that relevant exemptions and reliefs might be able to be claimed and potentially can reclaim a refund of IHT

Question 26

Grant of representation

Answer 26

Order of the High Court Establishes - Authority of PRs to act - Validity of deceased’s will Needed to collect or realize assets in the estate - EXCEPT if asset can be distributed under Administration of Estates (Small Payments) Act 1965.

Question 27

Administration of Estates (Small Payments) Act 1965

Answer 27

For assets up to £5,000. Permits payments to be made to persons who appear to be beneficially entitled to assets WITHOUT formal proof of title.

Question 28

Preliminary steps before application for grant

Answer 28

1. Death certificate / funeral 2. Secure estate assets 3. Locate will / codicil 4. Basis of distribution & identify beneficiaries - Intestacy? - Inform beneficiaries, provide realistic timescale for distribution 5. Schedule of assets, liabilities & lifetime transfers - Notify appropriate organisations of death and confirm values of the assets

Question 29

How to value assets in the succession estate?

Answer 29

Bank accounts - get summary from bank Joint accounts - presumption of 50/50 but enquire further Low value chattels - can just estimate Single items worth over £500 (or unusual items) - obtain formal valuation Quoted shares - take the lower of the two prices on the Stock Exchange Daily List and add ¼ of the difference between the higher and the lower value Private shares / partnership interests / sole trader - instruct a valuer Land - instruct estate agents to prepare a valuation If land held jointly - need to establish deceased’s share (view land registry official copies)

Question 30

What to do when PR dies before completion of administration

Answer 30

Remaining PRs can continue if at least 1 of them remains - Can appoint an additional PR if needed If no PR remains: EITHER 1) Chain of representation (ONLY EXECUTORS) No additional grant required - the second executor automatically becomes executor of the original testator’s estate 2) Grant of letters of administration de bonis non (ADMIN AND EXEC) If chain of representation cannot operate This is s a second grant Requirements Administration incomplete No remaining personal relatives There has been a previous grant of representation

Question 31

Grant of letters of administration (with will) - entitlement

Answer 31

Rule 20 NCPR - follows entitlement to estate assets Executor Trustee of residuary estate Any residuary beneficiary (including if partial intestacy) PRs of anyone in above category, OTHER than a trustee of a life tenant of the residue Any other beneficiary or a creditor PRs of anyone in the above Remember - Must clear off people of higher categories - Beneficiaries with vested interests > contingent interests

Question 32

Grant of letters of administration - entitlement

Answer 32

Rule 22 NCPR - follows entitlement under intestacy Surviving spouse or civil partner Children + their issue Father and mother Whole blood issue + their issue Half-blood siblings + their issue Grandparents Uncles / aunts of whole blood + their issue Uncles / aunts of half blood + their issue Remember - Must clear off people of higher categories - PR of any applicant who survived the deceased but died before taking a grant may apply on their behalf, but an application by a living person within the same category is preferred - Must demonstrate familial relationship with deceased - Must have BENEFICIAL ENTITLEMENT under estate - If nobody from any of the categories above with a beneficial entitlement will apply, a person with no immediate entitlement may do so, provided they would have benefited if the estate were larger

Question 33

Options if executor unwilling to act (3)

Answer 33

1) Renounce CANNOT if intermeddled Sign a form of renunciation The others applying for a grant must submit it to probate registry as evidence 2) Reserve power Can still reserve even if you have intermeddled The other executors give you notice, saying that they will apply for grant without you, then indicate on the application that another executor is reserving power = you, as the one reserving, don’t need to do anything 3) Appoint an attorney After executor obtains grant Give notice to other executors PR may delegate functions for up to 12 months Before executor obtains grant Attorney must make a parallel application for letters of administration (with will) The remaining executors make the regular application for grant of probate

Question 34

Options if administrator unwilling to act (2)

Answer 34

1) Renounce Can still renounce even if have intermeddled Form of renunciation must be signed and submitted to probate registry with the application for the grant 2) Appoint an attorney After executor obtains grant Give notice to other executors PR may delegate functions for up to 12 months Before a grant has been obtained The applicant delagates the power to apply for a grant, which is PERMITTED under Rule 33 NCPR Power of attorney must be provided to the probate registry as part of the application

Question 35

What do do if the process to apply for a grant is blocked

Answer 35

Example: a person who is entitled to apply refuses but also does not renounce, or if executor intermeddles in the estate but refuses to apply for the grant → Apply to court using the citations procedure It is possible to obtain a court direction (using the citation process) to Require a person to take out a grant Remove their right to apply Authorise another person to take on the administration

Question 36

Who signs the application for grant of representation?

Answer 36

All persons making the application must sign it (or a legal representative)

Question 37

Documents to submit to probate registry with application

Answer 37

Probate registry fee - No fee if estate worth less than £5,000 - £ per each sealed copy of grant Death certificate (personal application) - If personal application: need certified copy (not photocopy) of death certificate - NO NEED if professional application Original will and codicils Form of renunciation IHT forms (unless excepted estate) Power of attorney - Completed by the donor - Attorney’s details must be provided in application form along with an express declaration of why the named executor is not applying Affidavits - If there is a valid will but something makes its validity uncertain

Question 38

What is an affidavit and why would you need one?

Answer 38

= formal written statement of fact which a person signs under oath 1) Compliance with s9 WA - affidavit of due execution Signatures oddly placed No attestation clause but signatures at the end 2) Knowledge & approval - affidavit of due execution Testator was blind Appearance of signature suggests extreme frailty 3) Date (must be at end of will with attestation) - affidavit of due execution Date is missing, incomplete, or more than one date included 4) Physical condition of the will Alterations - Affidavit as to alterations (to establish timing) Signs indicating will is incomplete or may have been tampered with - Affidavit of plight and condition or attempted revocation If evidence suggests another missing testamentary document was meant to be attached to will - Affidavit of search 5) If the original will or codicil is missing You need to apply for a court order approving the fact that you want to make a grant application with only a copy of the will / codicil When applying for the court order - need an affidavit that includes the following - Evidence the will / codicil existed after deceased’s death - Confirmation the will / codicil was correctly executed - That the copy document accurately records the testamentary wishes of the deceased

Question 39

PR duties (pre-grant)

Answer 39

1. Common law duty to dispose of the deceased’s body 2. Statutory duty to provide information about the estate to HMRC and pay IHT

Question 40

PR duties (post-grant)

Answer 40

1. Collect and get in in the real and personal estate of the deceased and administer it according to law (s25 AEA) 2. Provide an inventory and account of the estate assets (s25 AEA) - Inventory - list of assets and values - Account - record of steps taken during administration 3. Duty of due diligence and duty to complete the administration within 12 months 4. Statutory duty of care (s1 TA 2000) - when invest, delegate, insure, and purchase land 5. Fiduciary duties

Question 41

Can a PR choose which assets to give a beneficiary?

Answer 41

Yes, so long as the will does not override this. = POWER TO APPROPRIATE Cannot appropriate if the value of the asset exceeds the beneficiary’s entitlement If the asset is LESS than the entitlement: appropriate it, then make a balancing cash transfer Subject to following rules: (1) A specific beneficiary must not be prejudiced (2) Consent of recipient beneficiary is required (3) The value of the asset = date of transfer/appropriation, NOT date of death Example: T left a will giving £25,000 to F and the rest to S. F wants the PRs to give her T’s antique desk instead of giving her £25,000 cash. The desk was worth £20,000 at T’s death but is now £18,000. PRs can do this - meets all above requirements F will receive a further £7,000 - total value is equal to amount of the gift

Question 42

Can PRs charge for their services?

Answer 42

If professional PR: yes, provided that (1) They are NOT acting alone (2) The co-PRs give their written CONSENT If lay PR: no, but all PRs have the right to be reimbursed for expenses incurred while acting on behalf of the estate (eg, travel costs) Otherwise (lay PR, or professional PR acting alone) = need express power given in will

Question 43

How can PRs make an immediate legacy to minors?

Answer 43

They have the power to appoint trustees (usually the minor’s parents) of the legacy → give the legacy to the trustees - Good practice to include in the will that the parents can give good receipt Minors aged 16+ can give valid receipt so long as the will expressly says so Otherwise: PRs must hold the legacy on trust for minor until they are 18

Question 44

Can a joint PR act alone?

Answer 44

If more than 1 PR is appointed, they are required to make decisions together and should exercise discretionary powers unanimously. EXCEPT: if the jointly appointed PR is exercising a lawful power to sell or transfer the estate asset during the administration - Example: a PR acting alone has authority to pass title to the deceased’s personal possessions to a TP and so bind the other PRs - BUT NOT IF the sole PR is dealing with stocks and shares which are registered in the joint names of the PRs - then no authority to act

Question 45

What does it mean when an estate is ‘solvent’

Answer 45

Assets are sufficient to pay all the funeral, testamentary, and administration expenses, debts, and liabilities - Not about whether sufficient to pay the legacies

Question 46

Order of payment of unsecured estate debts and expenses (solvent estates)

Answer 46

Note - for secured debts, liability runs with the asset (ie, mortgaged house) Statutory order, unless varied by the will 1. Property not disposed of by a will (ie full or partial intestacy) BUT subject to the retention of £ for pecuniary legacies 2. Residue (subject to retention of pecuniary legacy fund, if not already done) 3. Property the will sets aside (or charges with) the repayment of debts 4. Money in the pecuniary legacy fund (if £ is insufficient, the legacies are reduced proportionately according to value) 5. Property specifically given (eg chattels)

Question 47

What should PRs consider when exercising power of sale?

Answer 47

1. CGT implications (sell assets that haven’t risen in value) - subject to tax-free allowance 2. How easily or quickly a sale can be carried out 3. Wishes of the beneficiaries

Question 48

What must PRs do wrt the deceased’s income and gains?

Answer 48

1. Pay any IT and CGT that deceased owed at date of death 2. Notify HMRC by submitting a tax return on behalf of the deceased for the period of 6 April to date of death These tax liabilities are an estate expense and payable from the estate assets. The liabilities are deductible when valuing the taxable estate as a whole for IHT purposes.

Question 49

What must PRs do wrt the estate’s income and gains?

Answer 49

Income tax: -If the total income received is more than £500 per tax year (ie £100 of tax payable) → must report to HMRC and pay income tax - Any income generated by the assets after distribution is taxed as the beneficiary’s income - Form R185: records the income tax paid by PRs in respect of the income a beneficiary receives CGT: If asset has increased in value since date of death and PRs disposes/sells it (distribution to beneficiary is not a disposal) - make a gain - Tax free allowance (as if the estate was an individual) - If above the tax free allowance - pay CGT on that - Can offset losses against gains - No CGT on chattels if the disposal is for £6,000 or less

Question 50

Distributing the estate: timing considerations

Answer 50

PRs may wish to delay distribution until 10 months after the grant of probate is issued - wait for any IPFDA claim (6 month deadline for issuing claim + 4 months to serve CF)

Question 51

Who signs/approves the estate accounts?

Answer 51

All PRs, and Residuary beneficiaries

Question 52

Can a residuary beneficiary get paid before end of administration?

Answer 52

Yes: PRs are allowed to make interim distributions But - must be confident that they’ll have enough money to meet any later payments