WAE - weak areas Flashcards
1
Q
What does cumulative total mean (step 1 for both lifetime and death IHT)
A
The cumulative total at a given date = total chargeable value of the chargeable transfers made in the 7 years before that date
* Not considering NRB nor reliefs
* About e.g. whether PET has failed
2
Q
Can solicitors fees for acting in administration be deducted for IHT purposes
A
No - post-death expense
3
Q
What must be done re unmarried co-owner’s share of jointly held property
A
Half it and deduct 10%
4
Q
Taper relief
A
20% deducted from over 3 years pre-death (so 80% between 3 and 4 yrs) etc.
5
Q
What is available NRB
A
Full NRB less cumulative total
6
Q
Marriage exemptions
A
- £5,000 to child
- £2,500 to grandchild / great-grandchild
- £2,500 by one spouse to the other
- £1,000 any other case
7
Q
Conditions for normal expenditure out of income
A
Exempt if made:
* From donor’s income (not capital)
* As part of a normal / regular pattern of giving, and
* Does not affect the donor’s standard of living
8
Q
Fees re grant of probate
A
£300 probate fee and £1.50 per sealed copy
9
Q
What else can PRs now apply for other than a commercial loan?
A
Grant of representation on credit - only where impossible for PRs to pay any / all tax before grant is issued (still must pay by deadline to avoid interest)
10
Q
When does presumption of TC arise
A
- Will properly executed
- Appears rational
- No reason to doubt T’s TC
burden on proof on those admitting will
11
Q
When does presumption of K&A arise
A
- Will duly executed
- T had TC
- T signed own will having had opportunity to read it
12
Q
When does presumption of K&A not arise
A
- T blind / illiterate / foreign language
- Someone signs on T’s behalf
- Suspicious circumstances
attestation clause should be amended to reflect the steps taken - otherwise affidavit of K&A needed
13
Q
What does a properly drafted attestation clause raise the presumption of
A
Due execution
14
Q
When is executor unable to act
A
- Pre-deceased T
- Minor
- Lacks capacity
- Former spouse
15
Q
When are minimum 2 PRs needed?
A
- Minor interest
- Life interest
for administrators only!
16
Q
When is trustee unable to act?
A
- Undischarged bankrupt
- Convicted of offences involving dishonesty or deceiption
- Lack capacity
17
Q
4 bases of claim to bring against PRs
A
- Maladministration
- Misuse of assets
- Negligence
- Breach of fiduciary duty
18
Q
How can PR liability be excluded / limited
A
- Express wording in will
- s 61:
- acted honestly + reasonably, and
- ought fairly to be excused
19
Q
PR liability
A
- Personally liable for loss caused by breach of duty / acting ultra vires
- May also be liable for breaches committed by other PRs if they did not make a reasonable effort to monitor their conduct
- Duties owed to estate beneficiaries and creditors
20
Q
What is a PR breach claim called and remedy
A
Devastatit
* C will seek a court order that the PR makes good the loss using personal funds
* Even if NO LOSS - C may seek an account of unauthorised profit and/or for transaction to be set aside
21
Q
When are trustees liable
A
When breach led to:
* loss, or
* unauthorised gain
22
Q
Remedies re trustee breach
A
- Indemnity (trustee to compensate out of personal funds but can claim from co-trustees in certain circumstances)
- Contribution (just + equitable, looking at blameworthiness)
- Damages (simple or compound interest)
- Account of profits
23
Q
Pre-grant steps
A
- Obtain official copy of death certificate (usually from family member)
- Arrange funeral (usually family member arranges)
- Secure deceased’s property / notify insurers
- Locate original will / codicil
- Establish succession estate and consider the basis of the distribution (intestacy / will / both if partial intestacy)
- Identify / locate beneficiaries (consider whether a claim under the IPFDA is possible / likely
- Prepare schedule of assets & liabilities
- Prepare schedule of lifetime transfers
- Collect assets that can be collected without a grant
- Calculate IHT due and complete IHT form to account to HMRC (IHT 400)
- Raise £ to pay IHT (important as assets not usually released until after grant, but grant not issued until IHT paid)
- Complete online probate application or PA1P where there is a will and PA1A where there is no will
- Submit docs to probate registry
- May need to incl. docs like affidavits, form of renunciation, POA etc.
DASLEBSLWIRA
24
Q
Post-grant steps
A
- Notify HMRC about changes to the IHT account using Form C4
- Place s 27 trustee notice
- Collect assets
- Pay debts and distribute assets
- Prepare esate accounts
- Make final distributions to residuary beneficiaries from client account (within 12 months)
25
What does famly maintenance relief allow
**Uncapped**
* For child (incl. adopted / step) for maintenance, education or trainig - full-time if over 18
* Provide care for dependent relative / spouse / former spouse
26
Which lifetime transfer relief **can** be used with AE
Marriage gift exemption
27
Which assets / interests are excluded from taxable estate
* Life interest in an intervivos trust
* Discretionary trust where the deceased is an object
* Insurance policy written on trust
* Pension scheme nominations
* Remainder interest in life interest trust where life tenant is stil alive
28
CGT rates for individuals
18% and 24%
29
CGT rates for trustees
24%
30
CGT rates for PRs (not including carried interest gains)
24%
31
CGT rates for PRs (including carried interest gains)
28%
32
Do PRs get an exempt AE amount during admin of estate
Yes, for the year of death and the 2 years following death (one per year)
33
Only when are the downsizing rules relevant
1. *No QRI in estate* when deceased died (but was previously), **or**
2. Value of new QRI after downsizing is *less than max RNRB*
34
Main protection methods re known but missing beneficiaries
1. Benjamin order
2. Presumption of Death Act 2013 (quicker + easier than Benjamin order)
3. Retained fund (but means ongoing trustee duties)
4. Payment into court (no duties but last resort e.g. if refusing inheritance)
5. Missing beneficiaries insurance (expensive if high risk, but less than Benjamin order
6. Indemnity from beneficiaries (does not protect re breach of trust)
35
Main protection methods re unknown beneficiaries
1. Section 27 notice (does not protect PRs who are also beneficiaries from claim in capacity as B)
2. Insurance (does not protect against claim but should be able to recover from insurer)
3. Retained fund (risky - may not retain enough)
4. Indemnity from beneficiaries (does not protect re breach of trust)
36
What conditions must be met re Benjamin order
1. PRs must make **full enquiries** to establish true position, and
2. PRs must demonstrate there is **no reasonable prospect** of knowing the true position **without disproportionate expense**
37
What if there are insufficient funds to pay a demonstrative legacy (i.e. one from a designated account)?
These are made up from other assets in the estate in the same way as a general legacy
38
From when is taper relief valued from
Death NOT between the two relevant transfers!
39
Procedure re executor reserving power
1. Executor applying for probate must give notice of their intention to apply to the executor to whom power is reserved
2. Noted on grant
3. When / if executor wishes to act later, can apply for a grant of double probate
40
Which interests will not pass into estate
* life tenancies in land
* interests under equitable joint tenancy
* bare trust
41
Who can enter a citation
Anyone with interest e.g. creditor or beneficiary
42
Are handwritten amendments valid?
If will is in ink, assumed they are not intended to be effective *even if validly executed*
43
Only when is IHT instalment option payable (10 equal annual instalments)
1. land + buildings
2. company shares giving deceased control
3. unquotes shares that did NOT give control (with conditions)
4. farms or interest in farming business
5. business or interest in business
6. timber
| FLUCT B
44
Conditions to be met for unquoted shares in which deceased did not have control to benefit from IHT instalment option
1. payment cannot be made without **undue hardship**, *or*
2. tax represents **20% or more **of total tax liability, *or*
3. value of shares is **greater than £20k** AND shareholding represents **at least 10%** of nominal shares
45
Which property cannot be varied
1. property in which deceased was life tenant
2. GROB
46
Effect of GROB if exists at death
Taxed as part of estate (valued at death)
47
Effect of GROB if given away before death / benefit ceased
* Treated as PET with NO AE benefit
* CGT applies on donor's gain at transfer (unless gift on death)
48
POAC - which assets does it apply to
1. Land - taxed on market rent
2. Chattels - taxed on imputed income using market value & official interest rate
3. Intangibles in trust - tax based on official interest rate
49
POAC - interaction with GROB
* Taxed under one not both
* This is an IT charge for using assets given away / contributed to but excluded from IHT rules
50
POAC exclusions
1. spouse transfers
2. family maintenance
3. small gift exemption
4. arm's length sales
5. contributions made within 7 years before use
51
Restriction on deduction of loans
1. Loans for assets qualifying for BPR / APR must first reduce the value of those assets
2. Loans deductible from estate *only if* repaid from estate
52
When does a chain of representation apply? Process to secure it
* If last surviving executor (E1) dies having appointed an executor of their own estate and this person takes out the grant of probate for E1's estate (E2)
* **Automatically** become executor of E1's estate AND original T's estate
* **No additional grant is required**
53
When does a grant of letters of administration de bonis non apply?
If the chain of representation cannot operate
54
Conditions for grant of letters of administration de bonis non to apply
1. administration is incomplete
2. no remaining PRs
3. previous grant of representation
55
Alterations pre-signing
Valid provided T intended them to be part of will
56
56
Alterations post-signing
Only if attested like a will
57
Treatment of invalid alteration
Original wording stands if still apparent
58
How are obliterations treated
* Original wording revoked by destruction - must have intention to revoke
* Even if no proper alteration made - gift is gone if unreadable
59
Conditional revocation rule
* i.e. T only wanted to delete the original gift if the new words were valid
* If amendment not attested properly (and thus condition not met), original gift may stand if evidence can reconstruct the original wording
