Wills 17

Question 1

What tax issues must be considered in determining the residue of the estate?

Answer 1

• The PRs must take into account the income tax and CGT of both the deceased and the administration period. * If the PRs paid IHT that should have been paid by the beneficiary of a gift (either because of the will’s terms or because property passed to e.g. a surviving joint tenant), the PRs need to withhold the tax due or ensure they will be reimbursed.

Question 2

If a pecuniary legacy is made “subject to tax”, who pays the IHT?

Answer 2

The PRs withhold the tax (to be paid to HMRC) and pay the net legacy to the tenant.

Question 3

If not specified in the will, what is the presumption relating to the tax on a specific gift of UK property?

Answer 3

It is deemed to be “free of tax”, unless the will states otherwise.

Question 4

If not specified in the will, what is the presumption relating to the tax on a specific gift of overseas assets?

Answer 4

It is deemed to be “inclusive of tax”, unless the will states otherwise.

Question 5

What should PRs do if tax is owed by a beneficiary and the beneficiary won’t pay it?

Answer 5

In the worst case scenario, they may have to sue for any tax due as otherwise they could be held liable.

Question 6

What is a ‘corrective account’?

Answer 6

A corrective account is filed when the incorrect amount of IHT was initially paid. If there is a change in IHT due, the residue will be affected.

Question 7

What is a ‘certificate of discharge’?

Answer 7

The PRs should use Form IHT30 to obtain a Certificate of Discharge from HMRC, which avoids further IHT liability. It is an effective discharge, except where there is:* fraud, * a failure to disclose material facts, * subsequent discovery of further assets, or * changes in the inheritance tax liability due to a variation.

Question 8

When will a Certificate of Discharge be issued?

Answer 8

HMRC will issue a limited Certificate if the PRs have to pay future instalments of IHT due to the PRs claiming the instalment option on qualifying property.

Question 9

Is a Certificate of Discharge required for an excepted estate?

Answer 9

No. There is an automatic discharge 35 days after a grant of representation unless circumstances change.

Question 10

What factors are taken into consideration in determining whether a solicitor’s charges in a non-contentious probate matter are ‘fair and reasonable’?

Answer 10

Complexity, time spent, the value of the estate, and the number and importance of documents involved.

Question 11

Are PRs entitled to remuneration?

Answer 11

No, unless specifically authorised

Question 12

How might remuneration of PRs be authorised?

Answer 12

• Legacy to proving executors - presumption (rebuttable by clause in will) that any specific or general legacy (but not the residue) to an appointed executor is conditional upon them accepting office. * Express charging clauses are routinely included in the will for professional PRs. * Agreement with beneficiaries-PRs can be paid out of assets to which the beneficiaries are entitled if the beneficiaries agree. * The court can authorise remuneration for PRs for past, present, or future services.