Wills Flashcards
(180 cards)
1
Q
What are the 4 requirements for a valid will?
A
- Testator aged 18 or over (except married minors & those in army)
- Testamentary capacity
- Knowledge and approval
- Formalities
2
Q
What is needed to prove testamentary capacity?
A
a) Understand nature of act and its affects
b) Understand extent of property of which they are disposing
c) Understand & appreciate moral claims to which they ought to give effect to, and have no disorder of mind
Must have TC at time will is executed
3
Q
What is the exception to the requirements necessary for testamentary capacity?
A
Those who lack TC at time of execution can still make a valid will provided:
- Had TC at time they gave instructions
- Will was prepared in accordance with those instructions
- At time of execution, they knew they were signing a will for which they’d previously given instructions
4
Q
What is the golden rule for testamentary capacity?
A
When taking instructions from an elderly or seriously ill client, instruct a medical practitioner to make assessment of TC and a record with conclusion - best practice
5
Q
When will testamentary capacity be presumed?
A
Where the will on face of it appears rational and has been duly executed
To challenge, must provide sufficient evidence to raise doubt
If provided, burden of proof falls on propounded of will to demonstrate TC’s satisfied
6
Q
Where a client lacks TC and can’t make a valid will, what should a solicitor do?
A
Should not accept instructions
Although court can authorise execution on their behalf
7
Q
What must be proved to show knowledge and approval?
A
Testator must have general intention to make a testamentary document which disposes of their property and takes effect following death
Must have specific intention to make the will they’re signing
8
Q
When is knowledge and approval presumed?
A
If testator has TC and will is executed correctly
Can be rebutted if evidence raises doubt and burden of proof shifts
9
Q
Where is there no presumption that there’s knowledge and approval?
A
Testator is blind or illiterate
Will signed by someone on behalf of testator
Suspicious circumstances
10
Q
What should be done where there is no presumption as to knowledge and approval?
A
An affidavit of knowledge and approval should be submitted
11
Q
When will there be no valid will even if there’s knowledge and approval?
A
Where will made due to undue influence or duress
If whole will due to UI, invalidates whole will
Where part, remainder can be given effect to as long as omission don’t upset what remains
12
Q
What principles are there for undue influence?
A
Occurs where testator was coerced into making a will or including particular terms
Goes beyond persuasion
Question of fact
Burden of proving UI lies with person alleging it
Physical & mental strength of testator is relevant
Ask did testator act as a free agent?
13
Q
What formalities are necessary to make a valid will?
A
- In writing and signed by testator or by some person in his presence and by his direction
- Appears testator intended his signature to give effect to this will (at end of will)
- Signature made/acknowledged by testator in presence of 2 or more witnesses present at same time (can’t be minors, drunk or of unsound mind)
- Each witness either attests & signs will, or acknowledges his signature in presence of T
14
Q
What do attestation clauses do?
A
They are not mandatory but raise presumption that will was executed in accordance with requirements
If will executed in special circumstances, attestation clause should reflect these circumstances, providing evidence of knowledge and approval
15
Q
What happens where a gift in a will is made to an attesting witness (or their spouse)? When won’t this apply?
A
Clause is void (will remains valid)
Beneficiaries should not act as witnesses as they won’t be able to inherit
Professional executor witnesses can still receive remuneration
Won’t apply if at least 2 other witnesses aren’t caught by this, or subsequently confirmed by properly executed codicil
16
Q
What is the difference between an executor and an administrator?
A
Executor = PR appointed by will
Administrator = PR appointed by statute (if will or no will)
17
Q
What is the primary duty of a PR?
A
To administer the estate
18
Q
When will an executor appointed under a will be unable to act?
A
If they pre-decease testator, or die before taking out the grant
If they’re a minor
If they lack capacity
f they’re the testator’s former spouse & divorce took place after will made
19
Q
If an executor is unable to act, what should be done?
A
Remaining executor(s) must apply for grant of probate but explain why all those appointed are not applying
If unable executor is minor/lacks capacity, probate issued with power reserved, who can make application when 18/have capacity
20
Q
For executors unwilling to act, what options do they have?
A
- Renunciation
- Reservation
- Appointing an Attorney
21
Q
What is renunciation?
A
Executor formally renounces their rights to apply for probate before grant issued and administration continues
Must sign form of renunciation, submitted when others apply for grant
Its final
22
Q
When can an executor not renunciate?
A
If they’ve intermeddled i.e. taken steps indicating acceptance of appointment e.g. obtaining assets, paying debts, selling assets
23
Q
What is reserving power?
A
For executors who don’t want to act initially and won’t apply for initial grant, but want to retain option to apply for probate later
Must be at least 1 other executor who takes out grant and notifies reserving executor
To act later, executor who reserved applies for grant of doubt probate (if administration not completed)
24
Q
What is appointing an attorney?
A
An executor who doesn’t want to be directly involved can appoint another person to act on their behalf
Can be given before or after grant is obtained
If before, attorney applies for letters of administration with will, alongside normal executors applying for grant of probate
25
If all executors to a will are unable to act, what grant is applied for?
Grant of letters of Administration (with will) and an administrator is appointed
26
If an administrator is unwilling to act, what options does it have?
Renunciation
Appointing an attorney
- Remember to distinguish in MCQ whether administrator or executor in determining options
27
If a PR refuses to act but refuses to renounce, or has intermeddled but refuses to apply for grant, what can be done?
A court direction can be obtained to require person to take out a grant, remove their right to apply or authorise another to take on administration
28
How does one incorporate an unexecuted document into a will?
Refer to it in the will
1. Doc must exist when will is executed
2. Will must refer to doc being in existence at time of execution
3. Doc clearly identified in will
29
What options does a testator have to amend a will?
1. Make entirely new will
2. Make a codicil
3. Make manuscript amendments
30
What is the difference between an obliteration and an interlineation?
Obliteration: text ahs been crossed out so original text is illegible
Interlineation: writing inserted between lines, often to add something previously omitted
31
What is the general rule for manuscript amendments to a previously executed will?
Post-execution amendments are invalid and unenforceable - alteration has no effect with original wording given effect to
Based on rebuttable presumption that alteration is made after execution - to rebut this, PRs produce affidavit evidence
32
What is an attested alteration?
An alteration executed like a will alongside alteration is valid
33
Are manuscript amendments made by another person valid?
No unless intended by testator and made in their presence, at their direction
34
If a manuscript alteration is not specifically attested, how can it be confirmed?
By re-executing will as a whole or executing a subsequent codicil
35
What exceptions are there to the general rule regarding alterations?
1. Blank space that's been completed is presumed to have occurred before execution i.e. it's valid
2. Where original wording is not apparent as it's been obliterated, there's intention to revoke and alteration is affective - if no intention, extrinsic evidence used to establish original gift
36
What is conditional revocation of alterations?
Where testator made an obliteration with conditional intent to revoke a gift i.e. substituted another figure for original wording but substitution failed
Court finds testator only intended to revoke original gift if substitution was successful, so if it's not, alteration is not valid and original gift given effect to
37
In summary, what alterations are given effect to?
Made before execution of will/codicil
Obliterations with intent to revoke
Attested alterations
Completion of a blank space
Subsequently confirmed by re-execution or codicil, with reference to alteration
38
What are codicils?
Formal testamentary docs that amends an earlier wills, with both read together
Have same requirements for will to be valid
39
When is a codicil appropriate?
Adding, amending or revoking a provision to will
40
If testator wants to make significant changes to a will, what is advisable?
To make a new will
41
If there are no express words of revocation, what is the presumption regarding original will?
The terms of original will remain where possible, only revoked to extent of inconsistency
42
What is the effect of executing a codicil?
It republishes the will, with will given effect to as if it had been executed on date codicil executed
Can correct problems in earlier wills
43
What is the difference between revocation and revival in context of codicils?
Revocation = codicil may revoke a will in whole/part
Revival = codicil can revive a will that was revoked previously if it's the testator's intention unless will was revoked through destruction
44
What methods of revocation are there?
Destruction
By later will/codicil
Testator's subequent marriage
Testator's divorce
An effective alteration
45
What is revocation by destruction?
Needs a physical act destroying the original will with intention of testator who has same TC as to make a will
Must be by testator or at their direction, in their presence
Where will is missing or damaged, presumed to be destroyed otherwise evidence suggests otherwise
If will can't operate with remaining parts, whole will revoked
46
What is revocation by later will/codicil?
Might be an express revocation clause
Implied revocation where a later valid will is inconsistent
47
What is a mirror will and a mutual will? How do they deal with revocation?
Mirror will: same terms - each person free to revoke at any time
Mutual will: 2 or more people make wills on agreed terms, agreeing that neither will amend without consent of other - if 1 tries to revoke, constructive trust imposed
48
What is revocation by testator's subsequent marriage? What can be done to remedy this?
A subsequent marriage automatically revokes a will made before
A T can draft a will in contemplation of marriage, naming specific spouse and intention as to revocation
Can't avoid with a hypothetical marriage or where they marry someone else
49
What is revocation by divorce?
If will made before divorce, operates as partial revocation to clauses former spouse relates to
Treats former spouse as if they'd died
Subject to any contrary intention
50
What does 'children' include for a gift made to children in a will?
Illegitimate, legitimate and adopted (not stepchildren)
51
What are class gifts?
Gift given to group of beneficiaries who meet a general description
52
What rules on construction are there for class gifts?
Class closing rules: class closes when 1 member first becomes entitled in possession
53
What is the difference between specific gifts, collections and chattels? What do chattels not include?
Specific Gifts: particular item owned by deceased at date of death - if not owned at death, gift fails
Collections: gift of collection of items - should be clearly identified to avoid uncertainty
Chattels: personal possessions (except money, security, assets used at death solely or for mainly business purposes or solely held for investment purposes)
54
How does property owned as joint tenants pass?
Outside succession estate, by survivorship to coowner
55
What are general legacies and demonstrative gifts?
General Legacies: gift of property not distinguished from property of a similar type e.g. pecuniary
Demonstrative Gifts: type of general legacy that will directs should be paid out of specific fund
56
What is a residuary gift?
Gift of all testator's property which hasn't already been disposed of under will/codicil
57
If a beneficiary dies before a testator, what is the effect?
If an asset given in an earlier gift fails, what happens?
What happens where a residuary gift fails?
1. Gift fails
2. Gift usually passes under residue clause
3. Results in partial intestact
58
To avoid gifts failing, what should a testator do?
Include express substitutional clauses
Use ultimate gift
59
What areas of construction are there for a will?
1. Date from which will speaks
2. Relieving provisions
3. Survivorship provisions
60
What are the rules for 'date of which will speaks' for property, collections and people?
Property: unless contrary intention shown, will speaks from date of T's death
- Contrary intention shown by words e.g. 'my' 'now' 'at present' which means, if don't exist at death, gift fails unless express substitution
Collections: will speaks from date of death - wording doesn't change it
People; speaks from date of execution unless contrary intention
61
What are relieving provisions and what 3 main ones are there, with general rules?
Deal with matters as to who should bear burden of taxes, expenses and costs
1. IHT: in absence of express provision, payable out of residue with gifts made free of IHT
2. Expenses/Costs of Transfer: in absence of express provision, specific beneficiaries bear costs of delivery & expenses incurred in preserving them since death
3. Charges
62
Where meaning of a will/codicil is unclear/ambiguous, what can be done?
Courts can rule on how it should be constructed
63
What are survivorship provisions? What is the position where there's a valid will?
Stipulate that to take a gift, beneficiary must survive T
If beneficiary pre-deceases, gift lapses
No specified periods for any beneficiary with a valid will
Express survivorship clauses should be included if desired as no default
64
What are substitutional gifts?
What T would like to happen in event of gift lapsing
65
What will happen, in absence of express substitution clauses, to gifts in a will that failed as the beneficiary pre-deceased testator? Who does this apply to?
It will go to issue of pre-deceased, to be shared equally
This only applies gifts to T's issue (i.e. not gifts to siblings, parents etc)
This can be excluded
66
What is partial intestacy?
When will doesn't cover whole estate
67
What property does not pass to succession estate?
DMC
Discretionary pension scheme benefits
Insurance policies written intrust (if benefit is for another person)
Statutory nominations
Property held as beneficial JTs
Some other beneficial interests under trusts and property held in trust (if life tenant under life interest trust)
68
Under intestacy rules, what is the starting point when determining entitlement?
Determine which relatives have survived T
If spouse and/or issue have survived, don't consider anyone else
If spouse/issue have not survived T, consider other relatives in order of priority
69
How long must a spouse survive a T to benefit under intestacy?
28 days
70
Under intestacy, what happens if spouse survives but no issue? If issue but no spouse? Or if spouse doesn't survive by 28 days?
Spouse but no issue = spouse inherits everything
Issue but no spouse = issue inherit everything under statutory trust
Spouse dies within 28 days = operates as if no spouse
Always check if issue of T left issue of their own
71
If both spouse and issue survive an intestate T, how is entitlement determined?
Spouse gets all personal chattels, £270,000 statutory legacy and 1/2 of residue
Issue gets other half of residue
72
When there's no spouse or issue, under intestacy, what is the order of entitlement?
Parents
Siblings of whole blood
Siblings of half blood
Grandparents
Uncles/aunts of whole blood
Uncles/aunts of half blood
Crown
Where more than 1 person in relevant category, share equally
73
What rules are there on issue under intestacy?
They get their interests on statutory trusts
If they don't survive deceased, their own issue inherit their entitlement
74
What is the contingency limb?
Each entitled beneficiary must reach 18 and survive intestate, or marry earlier to inherit
Until satisfied, their interest is contingent
75
What must be done by PRs before grant is issued?
Pay IHT and send estate info to HMRC
Obtain death certificate and organise funeral
Locate will/codicil
Basis of distribution and identify beneficiaries
Schedule of assets & lifetime transfers
76
From what does an executor derive authority? And for an administrator?
Executor derives authority from will but grant confirms this authority
Administrator derives authority from grant - no authority until grant issued
77
The power conferred under the grant is limited to what?
The succession estate - PRs have no legal authority to deal with assets that pass outside
78
What must PRs do to administer the deceased's assets?
Transfer assets into their own names to obtain legal title
79
When is a grant of probate used? In whose names is it issued?
For PRs of a valid will which appointed executors where at least 1 will act (only 1 executor required)
Issued in names of executors who apply
80
When will executors named in a will not be able to act?
Pre-deceased
Minor/lacks capacity
Former spouse and divorce took place after will made
81
Where not all executors are applying for grant, what must be done?
Executors who are applying will need to explain why
82
How many executors can be named on the grant?
4 (but can have as many executors otherwise as they want)
83
If grant issue but PR dies before administration is completed, what happens?
If at least 1 PR remains:
- Remaining PR continue
- If following death, no. falls to below min needed, addition PR can be appointed
If no PR remains:
- chain of representation applies (not with administrators)
- Grant of Letters of Administration de bonis non issued
84
What succession estate assets do not need a grant to be handled?
Assets under AE (Small Payments) ACt 1965
Personal household possessions
Cash
85
When is a grant of letters of administration with will used?
Deceased left valid will but appoints no executors willing/able to act
86
What is the statutory order for who can apply for a Grant of Letters of Administration (with will)?
1. Executor
2. Trustee of residuary estate
3. Residuary beneficiary or, for partial intestacy, beneficiary of estate under intestacy
4. PRs of anyone in 3 other than trustee/life tenant of residue
5. Any other beneficiary/creditor
6. PRs of anyone in 5
87
What rules apply to the statutory order for applying for a GOLOA(WW)? (And for GOLOA for intestacy)
Person in 1 category can't apply if anyone in a higher capacity is willing/able to act
Those within same category have equal right to apply
Applicant must explain why anyone with a better right to apply isn't doing so
88
When is a grant of letters of administration used?
Where T left no valid will, dying intestate
89
What is the order of priority for those who can apply for GOLOA? (i.e. without will)
1. Surviving Spouse (if survive by 28 days)
2. Children
3. Parents
4. Whole blood siblings
5. Half blood siblings
6. Grandparents
7. Whole blood uncles/aunts
8. Half blood uncles/aunts
If no one else, Crown
They must have beneficial entitlement i.e. look at who can claim under intestacy
90
Who cannot apply for a grant?
Someone whose a minor or lacks capacity
91
How many administrators are required for each Grant of Letters of Administration?
Just 1 unless minor/life interests under estate where 2 are needed
92
What is the max number of applicants for a grant?
4
93
What potential additional documentation may PRs need to send?
Death Certificate and Probate Registry fees
Testamentary documents
Form of Renunciation
IHT Forms (to HMRC)
Power of Attorney
Affidavits
94
What requirements are there for a valid affidavit?
Signed by all parties and dated
Completed and signed by witness
Follow immediately from text
95
How are low value chattels, bank accounts and single items over £500 valued?
Low value chattels: estimate value
Bank accounts: request summary of account balance and interest from bank
Single Items > £500: formal probate valuation
96
What are the 2 categories of excepted estates?
Low Value Excepted Estate
Exempt Excepted Estate
97
What is a low value excepted estate?
No IHT payable as gross value of estate is less than NRB
98
What is an exempt excepted estate?
Gross value of estate no more than £3m but no IHT payable as after debts deducted and spouse/charity exemption applied, net value of estate is below NRB
Or deceased lived permanently outside the UK when they died & value of UK estate is under £150k
99
What else must be satisfied for either excepted estate to not pay IHT?
Factors must not be present that will prevent them from being excepted:
- No GROB
- Foreign assets don't exceed £100k
- Only 1 trust and its value doesn't exceed £250k (unless passing to spouse)
- Specified transfers don't exceed £25k
- No claim made for RNRB
100
What 2 options do PRs have for funding IHT?
Direct Payment Scheme
Borrowing from beneficiary or bank
101
How is IHT paid?
By PRs, from residue (unless will states otherwise)
102
What must PRs deliver to HMRC before issue of grant?
Account specifying all property in taxable estate & value of each item at death
Form provided & any IHT payment due
103
What is the deadline for submitting account to HMRC?
12 months from end of month death occurred
104
What is the deadline for paying IHT due to HMRC?
6 months from end of month death occurred
105
What is the installment option?
IHT due for certain assets can be paid by 10 equal annual instalments, with 1st one due on normal deadline of 6 months and remaining on each anniversary
106
What form is used to provide estate info to HMRC (for not excepted estates)?
IHT 400
107
What are corrective accounts?
Where PRs discover later that info in IHT 400 was inaccurate so send Form C4 and make adjustment to IHT calculation
108
Who is liable for tax on lifetime transfers? And for tax on death estate?
Lifetime transfers: transferee (even on death) (for LCT, the trustees of trust which receives the assets - if they don't donor becomes liable)
109
What is the deadline for payment of reassessed lifetime transfers?
12 months from end of month of death
110
If the recipient of a lifetime transfer doesn't pay IHT due within deadline after death, who becomes liable?
the PRs
111
What possible changes can be made to a will to mitigate tax consequences?
Variation
Disclaimer
Precatory Trusts
112
What is a variation and the conditions for making one?
A direction from an original beneficiary to transfer property they're entitled to, to someone else
1. Made by original B in writing
2. W/in 2 years of death
3. Contains express statement of S142
4. Not to be made for consideration
113
What is the effect of a variation?
Gift is 'read-back' to date of date, treated for IHT as if deceased made gift to new B
Original B is not seen has having made a PET
IHT due is recalculated
Can be done without approvals of PRs
114
What CGT consequences are there for a variation?
Similar writing back effect: new B treated as inheriting from deceased, original B not made a disposal
No issue of additional CGT
115
What restrictions are there on variation?
1. Capacity to vary: can't be a minor or lack capacity
2. Number of Variations Possible: no limit but each asset can only be varied once
3. Property Subject to variation: GROB and property deceased was a life tenant cannot be
116
What is a disclaimer and some limitations it has?
A refusal to accept property to which a beneficiary is entitled
- Can only be done before acceptance
- Can only refuse whole gift
- Inheritance passes as if the gift failed - B can't choose who it goes to
Same IHT and CGT consequences as variation
117
What is a precatory trust?
WHere gift is made to a B by will with wish as to how B should pass those assets on to others
If done within 2 years, as if deceased made gift for IHT - writing back happens automatically
However, for CGT, seen as disposal from B
118
When will a PR be a trustee of some/all of estate property?
Where will expressly appoints them
Where there's an intestacy
Where statutory trust arises under intestacy
119
What are PRs personally liable for?
Loss caused by breach of duty
120
Under a grant, what duties do PRs owe?
Collect real/personal estate & administer it
Provide inventory and account of estate assets
121
What is the duty of due diligence?
PRs must carry out administration with due diligence and within a reasonable time
122
When should PRs complete administration by?
Within 12 months of death
Must justify if takes longer
123
What does the statutory DoC apply to?
Power of investment, delegation, insurance and purchasing land
124
What statutory powers do PRs have?
Sell, Charge or Lease
Appropriate; in satisfaction of a B's entitlement
Insure: take out insurance for estate assets, paying premiums from estate income/capital
Invest: if retain assets, duty to preserve & actively invest - same requirements as for trustees
Charge for PR Services: reimbursement for all PRs and renumeration for professions if not acting alone and with co-executors consent
Delegation
Appointing Trustees
125
When can a trustee exercise power to appropriate?
Specific B must not be prejudiced
Consent of recipient B
Value of asset must not exceed B's entitlement
126
When can PRs not delegate?
Cannot delegate to beneficiaries, their distributive obligations, appointing powers, or determining fees/costs payable from income/capital
127
Where there are joint PRs, what must they do?
Must act together and exercise discretionary powers unanimously
128
If a solicitor acts as an executor, what are they?
A professional PR
129
Who do PRs owe duties to?
Creditors & beneficiaries
130
What is a devastavit?
Claim of action for breach of PR duties
131
What can a devastavit claim be based on?
1. Maladministration
2. Misuse of assets
3. Negligence
4. Breach of fiduciary duty
132
How can PRs be removed?
By court order
By administration action
133
What protection is there for PRs against claims from unknown beneficiaries/creditors?
S27 TA 1925 Notice
134
What protections are there for known but missing beneficiaries?
1. Benjamin Order: permits PRs to distribute on basis that missing one has died
2. Presumption of Death Act: application for court order declaring a person thought to have died for 7 years or more has died
135
What protection is there for questions over construction of the will?
S48 AJA 1984 application
136
When should insurance be taken out to protect PRs?
To cover risk of B/creditor returning after administration complete
137
What other protections are there for PRs?
Seeking court directions (expensive & timely)
S61 TA 1925: PRs apply to court for order exonerating them
Indemnity from beneficiary
Payments into court
Exeption clauses
138
As soon as assets are collected, what should RPs do?
Pay debts and funeral expenses
139
If PRs fail to pay debts where assets available?
They are liable to creditor & any beneficiary for consequent loss
140
For secured debts, which estate assets are used to pay back loan?
If amount on outstanding loan is less than value of asset secured, no other assets can be used
If loan is greater than asset value, creditor ranks as an unsecured creditor
141
What happens to unsecured debts in terms of determining order in which estate assets are used to repay?
Use statutory order
1. Property not disposed of by will but subject to retention of £ for pecuniary legacies
2. Residue
3. Property will sets aside for debts
4. Pecuniary Legacy Fund
5. Property specifically given
142
What is marshalling?
Where PRs take assets out of order to pay creditors, beneficiaries whose assets have been wrongly taken can compensate themselves & claim against those assets that should have been used to repay debts
143
Once PRs have paid debts, what must they do?
Distribute assets
144
What are interim distributions?
Can be made where PRs confident there are sufficient assets to meet later payments for part of residuary beneficiary's shares before end of administration
145
What is the order of payment for legacy gifts?
1. Specific - take priority
2. General
3. Residuary
146
What happens with estate accounts?
PRs will prepare these as part of administration
Should be signed/approved by PRs and residuary beneficiaries
147
What can those who feel deceased unreasonably left them without anything (or wasn't enough) do? (under will or intestacy)
Claim under Inheritance (Provision for Family & Dependents) Act 1975
148
What is the effect of an order under IPFDA?
Order deemed effective from date of death
149
To be eligible under IPFDA, what requirements must be fulfilled?
1. Deceased domiciled in E & W
2. C falls within recognised category of eligible applicants
3. Claim within prescribed time limit
150
What categories of eligible applicants are there?
Spouses
Former spouses who haven't remarried
Person who cohabited with deceased as if they were spouses for at least 2 years prior to death
Child
Any person treated as child by deceased
Any other person who was maintained (wholly or partly) financially by deceased immediately before death
151
What is the prescribed time limit for IPFDA claims?
Within 6 months after date of grant of representation made
152
On what grounds can an IPFDA claim be made?
Deceased's will didn't make reasonable financial provisions for C; and/or
Distribution under intestacy fails to make reasonable financial provision
153
What is the test for determining an IPFDA claim?
1. Did deceased fail to make reasonable financial provision (Surviving Spouse Standard & Maintenance Standard, plus guidelines)
2. If so, what award should court make? (Quantum & Form)
154
What is the surviving spouse standard under IPFDA? And the maintenance standard?
Surviving Spouse: Provision as would be reasonable in the circumstances for spouse to receive whether or not for maintenance
Maintenance: such provision as is reasonable in the circumstances for C to receive for their maintenance
155
What guidelines are there when determine if deceased made reasonable financial provision?
C's financial resources/needs
Needs/resources of other applicants or beneficiaries
If C has any disability
Size and nature of estate
Contributions made by C to welfare of family
Obligations/responsibilities deaded had towards C/beneficiaries
156
What IHT trigger events are there?
Potentially Exempt Transfers
Lifetime Chargeable Transfer
Death
157
What is a PET?
Lifetime transfers of value to another individual which would become chargeable to IHT if transfer dies within 7 years after transfer
Only failed PETs are chargeable
158
What is an LCT?
Lifetime transfers of value into a trust which are immediately chargeable to IHT at lifetime rate of 20%
Reassessed again if transferor dies within 7 years at 40%, using NRB at date of death
159
What 2 separate calculations may need to be done when calculating IHT due on lifetime transfers?
1. Tax due on immediately chargeable LCTs
2. Tax due because transferor died within 7 years (LCTs and PETs)
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What is the calculation required for IHT of lifetime transfers?
1. Calculate cumulative total (total chargeable value of chargeable transfers in last 7 years)
2. Identify value transferred (decrease in value of transferor's estate)
3. Apply any exemptions/reliefs (if more than 1, apply AE last)
4. Apply NRB (& any TNRB) & calculate tax (involves taking cumulative total off NRB & charging remaining at 0%, with excess at relevant rate - either 20% or 40%)
5. Apply Taper Relief
6. Credit for tax paid in lifetime (only for reassessed LCTs, deduct IHT paid previously)
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What is never applied in calculating IHT due on lifetime transfers?
RNRB (and any TRNRB)
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What is never applied in calculating IHT due on lifetime transfers?
RNRB (and any TRNRB)
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What are the rates of taper relief?
0 - 3 Years: 0%
Increases by 20% for each year after that
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What is the residence nil rate band?
Individuals who leave qualifying residential interest (home they were resident in)
Which is closely inherited (i.e. gift under will, intestacy, survivorship) by direct descendant
Can make £175,000 transfer at 0%
- Spouse can inherit any unused as with NRB
- No RNRB if estate exceeds £2.35m
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How is IHT calculated for transfers on death?
1. Calculate cumulative total
2. Identify assets in taxable estate
3. Value taxable estate
4. Deduct debts/expenses
5. Apply exemptions/reliefs (spouse, charity, BPR, APR)
6. Apply RNRB (& TNRB)
7. Apply NRB & calculate tax
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What is a 'direct descendant' for RNRB?
Lineal descendants e.g. children, grandchildren etc
Spouse of any lineal descendant
Widow(er) of lineal descendants who predeceased
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What is downsizing?
Allow estate to qualify for full NRB even if deceased didn't own QRI when they died or was less than RNRB
Claim must be made within 2 years of end of month of death
Only relevant if no QRI in estate when deceased died
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What property is excluded from taxable estate?
Discretionary pension scheme payments
Insurance policies written in trust for 3rd parties
Excluded property
(Everything else included)
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What exemptions and reliefs are available for BOTH lifetime transfers & death estate?
Spouse Exemption (only if life interest, not if remainder/residue)
Charity Exemption (reduced rate of 36% may apply if 10% of estate given to charity) - must be UK/EU charity
Business Property Relief
Agricultural Property Relief
Political Party Exemption
National purposes or heritage maintenance funds
Gifts to EBTs
Gifts to housing association
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What are the requirements and rates of relief for BPR?
Must have owned assets for at least 2 years prior to transfer (if inherited from spouse, deemed to have owned the whole time)
For lifetime transfers, only available if transferee still owns assets when transferor dies
Unquoted Shares & Business/Interest in a Business = 100%
Quoted Shares & Assets Owned by Taxpayer but for Business Purposes = 50%
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What are the requirements for APR?
Qualifying Assets: agricultural land/buildings or farmhouses/cottages
Qualifying Period: occupied at least 2 years before for agr purposes or owned by transferor & occupied by them or another for 7 years for agr purposes
100% if transferor is owner/occupier
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What exemptions and reliefs are available only for lifetime transfers?
Annual Exemption: £3,000 per tax year & can use any part of unused AE from previous tax year
Family Maintenance Exemption: spouse; minor child of either party to marriage or adult child in full time education/training; dependent relative on their care
Small Gifts: up to £250 per recipient per year, to as many people as they like (can't apply with AE for same gift)
Marriage Exemption
Normal Expenditure out of Income
Taper Relief
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What is the marriage exemption?
£5,000 = parent
£2,500 = one party of marriage to the other, or from remote ancestors e.g. grandparents
£1,000 = anyone else
Can be combined with AE for same gift
Applies per marriage but also per donor (i.e. parents can make one payment each for same marriage)
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What reliefs are only available on death?
1. Woodlands Relief (deferral rather than reduction): value = trees; if owned for at least 5 years or inherited
2. Quick Succession Relief: death estate includes assets inherited in 5 years before death which were also subject to IHT charge - if death within 1 year of previous IHT charge = 100% relief of amount of IHT previously paid
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What anti-avoidance provisions are there for IHT?
1. Restriction on Deduction of Loans for IHT Purposes
2. Gifts with Reservation of Benefit
3. Pre-Owned Assets Charge
4. General Anti-Abuse Rule
5. Disclosure of Tax Avoidance Schemes (reporting regime with penalties for failure to comply)
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What are the GROB rules?
Treats property given away during lifetime but still with benefit retained, as remaining part of donor's estate, taxed on death
1. Donee doesn't assume bona fide possession at or before start of period
2. During relevant period, property not enjoyed to entire exclusion of donor
If benefit subsists at death, property included in taxable estate
If it doesn't, treated as having made PET
Donor can pay market rent to counter this
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What PR responsibilities are there for income tax and CGT during period of administration?
1. Finalise deceased's iT and CGT position for tax year of death
2. Pay IHT & CGT that has become due during administration period
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Is death a disposal for CGT purposes?
No - doesn't give rise to CGT liability
Only post-death gains are chargeable
They may have to pay CGT however, if make sale/disposal of estate assets during administration
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At what rate do PRs pay income tax for estate income generated during administration?
Basic rate
But aren't entitled to perosnal allowance
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What is the chattel exemption for CGT for PRs?
Generally, PRs can sell chattels w/o CGT applying if consideration is £6,000 or less
