Wills and the Administration of Estates Flashcards

Question

Explain the concept of the statutory trust in relation to intestacy?

Answer 1

The intestacy rules impose a trust over all the property in respect of which a person dies intestate. That property is held on trust by PRs who manage distribution and; - Pay funeral, testamentary and administration expenses (inc legal fees and taxes), - Settle any debts of the deceased. - Sell assets if necessary to raise funds for payments. - Distribute residuary estate. N.B. PRs can sell assets but are not required to sell the residuary estate.

Answer 2

Family (excludes unmarried partners, no matter how long the relationship).

Answer 3

The person the deceased was legally married to at the time of their death. N.B. A former spouse is excluded from the definition but only from the point when the divorce is actually finalised and the marriage has legally ended. N.B. A party to a void marriage is not a spouse for the purposes of intestacy rules. N.B. A party to a voidable marriage (e.g. entered into under duress) is valid until such time when the court makes a nullity order.

Answer 4

Includes all direct descendants of the deceased (children, grandchildren etc). N.B. Adopted children are included but step-children are NOT an issue of the deceased unless adopted.

Answer 5

The spouse receives; - Personal chattels absolutely. - The statutory legacy of £322,000 (or all of it if less than this). - Half of the remainder of the residuary estate (other half passes to issue on statutory trusts).

Answer 6

The estate is distributed as if the spouse/civil partner has predeceased the intestate.

Answer 7

Reaching 18 or marrying/forming a civil partnership before 18.

Answer 8

Their children (intestate's grandchildren) who are living at the intestate's death take their deceased parent's share equally between them, contingent upon reaching 18 or marrying/forming civil partnership before 18. N.B. Great-grandchildren are only included if both their parent and grandparent predeceased the intestate. N.B. The estate is divided per stripe, meaning each branch of the family receives an equal share.

Answer 9

They may be substituted by their own issue (if the issue is living at the intestate's death).

Answer 10

The spouse/civil partner receive the entire estate absolutely.

Answer 11

Between the intestate's relatives in the highest category (all or nothing) in the list below; - Issue on the 'statutory trusts' (but if none), - Parents, equally if both alive (but if none), - Brothers and sisters of the whole blood on the 'statutory trusts' (but if none), - Brothers and sisters of the half blood on the 'statutory trusts' (but if none), - Grandparents, equally if more than 1 (but if none), - Uncles and aunts of the whole blood on the 'statutory trusts' (but if none), - Uncles and aunts of the half blood on the 'statutory trusts' (but if none), - The Crown (bona vacantia, rare).

Answer 12

Technology makes it likely to trace some relatives. -- In such case, the Crown hands such funds to HM Treasury in a similar way to how taxes are collected. -- Discretion exists for Duchy of Lancaster or Duke of Cornwall to provide for dependants of the intestate, or for other persons for whom the intestate might reasonably have been expected to make provision for (e.g. step-child or cohabitant with a close relationship with intestate who has no entitlement under the intestacy rules).

Answer 13

As the children of their adoptive parents, not their natural parents. N.B. Any contingent interest which an adopted person had immediately before adoption in the estate of a deceased natural parent is preserved.

Answer 14

On the intestacy of an individual whose parents were not married to each other, presumed that the individual has not been survived by their father or any person related to them through their father unless contrary is shown to prevent PR's having to make enquiries where father's whereabouts is unknown. Presumption does not apply where the father is named on the intestate's birth certificate.

Answer 15

By considering the actual wording used in the will, what property the testator owned, who the people named or described in the will are and whether they have survived the testator.

Answer 16

Executors are those people dealing with the estate as appointed by the will. Administrators are those people dealing with the estate where there was no appointment in the will.

Answer 17

1) Non-technical words bear their ordinary meaning. 2) Technical words are given their technical meaning.

Answer 18

If from the will (and any admissible extrinsic evidence) it is clear that the testator was using the word in a different sense.

Answer 19

Court are not prepared to consider other evidence to try and establish what the testator intended. If the meaning remains unclear, gift will fail for uncertainty.

Answer 20

Under s21 Administration of Justice Act 1982 to interpret the will; - Insofar as any part of the will is meaningless. - The language used is ambiguous, or - Evidence shows that the language is ambiguous in light of the surrounding circumstances. E.g. Evidence of declarations made by the deceased.

Answer 21

Under s20 Administration of Justice Act 1982. Where the testator's intentions are clear, but the wording of the will does not carry them into effect. The failure must have one of two causes; 1) Either in consequence of a clerical error (writing or omitting something by mistake), or 2) In consequence of a failure to understand instructions. N.B. Very narrowly applied; testator must have had intentions and a will cannot be rectified to include something that the testator had never thought about.

Answer 22

PRs (executors or administrators) need to give effect to them. Will is said to 'speak from the date of death' so interpreted as if it had been executed immediately before death unless a contrary intention appears in the will (e.g. 'house which I NOW own').

Answer 23

The date of execution, unless contrary intention appears in the will. This makes it important that you satisfy description at the time the will was executed. (E.g. a gift made to X's 'eldest daughter' will not switch to the middle if the eldest daughter predeceases the testator).

Answer 24

Blood relationships unless will provides otherwise.

Answer 25

As children of the adoptive parents, unless the will provides otherwise.

Answer 26

In their acquired gender for wills made after 4/4/2005.

Answer 27

The subject matter falls into the residuary estate and will be taken by the residuary beneficiary. N.B. Where a gift of residue fails, there will be a partial intestacy and the residuary estate will pass under the intestacy rules.

Answer 28

- Uncertainty. - Beneficiary or their spouse/civil partner witnesses will. - Divorce/dissolution. - Ademption. - Lapse. - Disclaimer. - Forfeiture.

Answer 29

If it is not possible from the will's wording to identify the subject matter of the gift or recipient, the gift will fail. N.B. Exception = gift to charity which does not sufficiently identify the charity. Provided it is clear that the gift is exclusively for charitable purposes, the court can direct which charity it is to benefit.

Answer 30

Any property will pass as if the former spouse or civil partner had died on the date of the dissolution or annulment of the marriage or civil partnership.

Answer 31

A specific legacy will fail if the testator no longer owns that property at death (usually occurs when property sold, destroyed or given away during the testator's lifetime). Where an asset has been retained but has changed its nature since the will was made, only if there has been a change in substance will the gift be adeemed. If the property is capable of increase or decrease e.g. 'my shares, my jewellery,' the testator will normally be taken to have made a gift of any items satisfying the description at death.

Answer 32

A gift in a will fails or 'lapses' if beneficiary dies before the testator. If a legacy lapses, the property falls into residue unless the testator has provided for the possibility of lapse by including a substitutional gift. If a gift of residue lapses, the property passes under intestacy rules unless the testator has included a substitutional gift in the will. Where no conditions to the contrary are imposed in the will, a gift vests on the testator's death. This means that provided beneficiary survives the testator, the gift takes effect, but if beneficiary dies soon after the testator, the property passes into beneficiary's estate.

Answer 33

Vital to establish who died first; if this cannot be proved, LPA provides that the elder of the 2 is deemed to have died first. If the testator was older than beneficiary, the gift takes effect and property passes as part of beneficiary's estate.

Answer 34

The gift fails.

Answer 35

If all the donees die before the testator. N.B. Exception = gifts to the testator's children or descendants do not lapse if the beneficiary dies before the testator but has surviving issue. The gift passes to the deceased beneficiary's issue, unless the will shows a contrary intention.

Answer 36

A beneficiary can reject a gift, and is treated as having predeceased the testator which allows the beneficiary's issue to replace them. N.B. Can only be done before any benefit received from a gift e.g. payment of income.

Answer 37

A person should not benefit from the estate of a person they have unlawfully killed. The killer will be treated as if she predeceased the victim so estate will pass to son.

Answer 38

It republishes the will as at the date of the codicil.

Answer 39

The formal act of cancelling or withdrawing a will, with the effect of nullifying the will, either as a whole or in part. N.B. A revocation clause indicates that all earlier wills and codicils are expressly revoked.

Answer 40

At any time provided they have capacity to do so.

Answer 41

1) By a later will or codicil. 2) By destruction. 3) By marriage/forming a civil partnership.

Answer 42

- With a declaration to that effect in a later will or codicil; usually 'I hereby revoke all former wills previously made by me.' - In absence of express revocation clause, it operates to revoke any earlier will or codicil by implication in the event of any inconsistency. N.B. Advisable to date a will so chronology can be established for revocation.

Answer 43

- Physical destruction + intention to revoke (not accidental) is required. - Crossing out words/writing 'revoked' across the will is insufficient, but if a vital part e.g. signature is destroyed, partial destruction may be held to revoke the entire will or just that part which was destroyed if the will can still operate in the absence of the destroyed part. - Must be carried out by the testator or by someone else in the testator's presence and by their direction.

Answer 44

Can be applied to save a will, on the basis that the testator's intention to revoke their will by destruction was conditional on some future event e.g. the later execution of a new will. If that event did not take place, the original may remain valid despite being destroyed.

Answer 45

Automatically but will not apply where; -- A will is made prior to and in expectation of a forthcoming marriage/civil partnership to a particular person (general expectation or hope of marriage is insufficient). -- The testator intends that the will is not to be revoked by marriage. -- N.B. Where a civil partnership is converted into a marriage, the conversion will not revoke an existing will of either party.

Answer 46

The will remains valid but; -- Provisions of the will appointing the former spouse/civil partner as executor or trustee take effect as if the former spouse/civil partner had died on the date on which the marriage or civil partnership is dissolved, and -- Any property, or interest in property left to the former spouse/civil partner passes as if the former spouse/civil partner had died on that date.

Answer 47

Where 2 people make wills in similar terms as a result of a clear agreement between the testators as to the disposal of their estates and part of that agreement is that the survivor will not revoke their will. E.g. husband and wife making wills to leave their respective estates to each other with the proviso that whichever of them survives leaves their estate to the wife's daughter from a previous relationship. If the wife died first, the husband could technically revoke the mutual will and make a new one but equity imposes a mutual will due to it being unconscionable for him to go back on his promise. N.B. If one testator unilaterally revokes their will during their joint lives, this amounts to breach of agreement and the other testator can seek damages for loss. N.B. Survivors are not permitted to make dispositions during their lifetime with the intention of defeating the agreement in the mutual wills.

Answer 48

Not to invalidate any new will, but impose a constructive trust in favour of the original beneficiary under mutual will. Key to agreement is that survivor will not revoke their will.

Answer 49

A document which is executed in the same way and supplements an existing will; used to amend, add to or revoke in part, an existing will, with the effect of republishing the existing will (will to take effect as if made at the same time as the codicil but incorporating any changes made by the codicil). Testator must have intended to republish the will (evident either on face of codicil through express statement, or inferred by reference to previous will). Means the description of people in a will is taken to refer to those who satisfy the description at the time of republication. Means a gift which is invalid due to beneficiary acting as a witness will be saved if the will is republished by a codicil which is not witnessed by beneficiary.

Answer 50

Yes; taking effect as if made at the time of revival and must evidence the testator's intention to revive the will.

Answer 51

At the time of republication.

Answer 52

No; make a new will.

Answer 53

When the alterations were made; -- If made before the will was executed, valid provided the testator intended the alterations to form part of the will. -- If made after the will was executed, valid if those alterations were themselves executed like a will.

Answer 54

After the will was executed unless the contrary can be proved through extrinsic evidence etc.

Answer 55

Yes; will to be read to take account of it.

Answer 56

Original wording of the will stands provided it is 'apparent' (capable of being read on the face of the will by ordinary means e.g. magnifying glass, holding up to light).

Answer 57

When the testator makes an amendment which simply obliterates the original wording, provided that the act of destruction is accompanied by the intention to revoke. Here, the will remains valid but it takes effect without the obliterated words.

Answer 58

Where the testator obliterates the original wording but adds some substitute wording (i.e. testator only intended to revoke the original words on condition that the substitute words were effective). As substitution was not effective, the original gift will take effect (provided it is possible to discover what original gift was).

Answer 59

Through the use of drafting templates or precedents for convenience.

Answer 60

- Identify the testator and document nature, with full name and address stated. - Date (at time it is executed) within commencement or at end to help with chronology for purposes of revocation. - If a will is being made in expectation of marriage/civil partnership to a particular person, state this alongside the fact that they do not wish marriage to revoke the will or it automatically will. - Appointments of trustees and/or executors.

Answer 61

- Minimum 1, no maximum but max of 4 can apply for grant of probate to the same assets. - 1 will often be sufficient for a small simple estate where the executor is the sole or main beneficiary, but there is a risk that a sole executor may predecease the testator or be unable to act for another reason e.g. divorce so prudent to appoint at least 2 or name a substitute for sole executor.

Answer 62

Any combination of; - Individuals who are not professionals (e.g. family and friends). - Solicitors or other professionals (e.g. firm). - Banks or other trust corporations.

Answer 63

Advantage; - Trusted individuals familiar with the testator and their affairs are unlikely to charge for their time. Disadvantage; - Lack of expertise may necessitate hiring a solicitor, incurring costs from the estate.

Answer 64

Advantages; - Expertise in estate administration; takes on burden during grieving stage. - Avoids risk of individual solicitor retiring/dying. Disadvantage; - Professional executors charge fees for both time and expenses.

Answer 65

Advantages; - Continuity, financial and legal expertise. - No risk of corporation dying or retiring. Disadvantages; - Impersonal approach. - Potentially high costs due to %-based fees.

Answer 66

TA allows payment of reasonable remuneration to a trustee (including PR) for time spent and work done, but only if the trustee is either a trust corporation or a trustee 'acting in a professional capacity'. Wills thus often contain an express power for the executors/trustees to charge (charging clause).

Answer 67

The gift fails (adeems).

Answer 68

Vested gifts impose no conditions, and the beneficiary will be immediately entitled to it merely by outliving the testator. Contingent gifts impose conditions to be satisfied before the gift can vest.

Answer 69

No; the gift will lapse and will pass with residue unless the will provides for a substitute beneficiary.

Answer 70

The IHT on individual legacies is paid out of the residuary estate, unless the will displaces this rule through a contrary intention.

Answer 71

The beneficiary (one who takes the gift) takes the property free of IHT but subject to any charge.

Answer 72

The beneficiary who receives the charged property unless the will contains a contrary direction. N.B. If the testator does not want the beneficiary of the charged property to take on the mortgage debt, the devise should be expressed as 'free of mortgage', to cast the burden of the mortgage debt on the residue.

Answer 73

Beneficiary. Testator to consider if these will be too great for beneficiary, and if so, provide that the gift is free from these costs and allow them to be paid from the residuary estate.

Answer 74

Only to a specific gift. -- E.g. '500 shares I own in M&S Plc'; if the testator does not own the asset at the date of death, the PR must purchase the asset using funds from the estate which will then pass to the beneficiary.

Answer 75

Yes; as long as gift is small in value and solicitor is satisfied that client has taken independent legal advice.

Answer 76

To ensure it does not fail as this would result in a partial intestacy due to statutory order in AEA 1925 applying. -- E.g. 'I give all the rest of my property after deducting debts and legacies to my sister.'

Answer 77

By omitting names and specific shares and refer to only any children that the testator may have at the date of death e.g. 'for such of my children as survive me and if more than one in equal shares'. This ensures partial intestacy only occurs if all children predecease the testator.

Answer 78

To give the testator more control over the destination of their property. -- E.g. 'I give £30,000 to my son John, if he survives by 28 days, but if he does not so survive me, then to my sister Rose.'

Answer 79

To impose a tax liability on estates at the time of death, so an individual is taxed on all the money and assets acquired over time. N.B. To prevent tax being avoided by individuals divesting themselves of assets before they die, IHT also applies to certain transfers made during life.

Answer 80

Everything to which the deceased was beneficially entitled immediately before death (add together all assets and deduct any debts).

Answer 81

1) Death - charged on value of estate subject to various exemptions and reliefs. 2) Lifetime gifts made to individuals within 7 years prior to death - PETs as at the time they are made, no IHT is chargeable, the transfer is 'potentially exempt'; but if the transferor dies within 7 years, the transfer becomes chargeable. 3) Lifetime gifts to a company or into a trust - immediately chargeable at the time it is made, unless the trust is for a disabled person.

Answer 82

1) Identify the transfer of value. -- Any disposition (gift) which reduces the value of the transferor's estate. -- For transfers on death, deceased deemed to have made a transfer of value immediately before their death. 2) Find the value transferred. -- Amount of the reduction in the transferor's estate for a lifetime transfer. -- Value of the deceased's estate immediately before death, with exception of 'excluded property'. 3) Apply any relevant exemptions and reliefs. -- Some apply both to lifetime transfers and transfer on death e.g. transfers to spouses/civil partners, business/agricultural property relief; others only apply to lifetime transfers e.g. annual exemption. 4) Calculate tax at the appropriate rate. -- Nil-rate band (£325,000); available for all transfers of value. -- Residence nil-rate band (£175,000); only available on a transfer of death where there is a 'qualifying residential interest'. -- To calculate available nil-rate band on any transfer, look back at 7 years preceding transfer to take into account any chargeable transfers made during this period 'cumulation'. -- Residence nil-rate band subject to adjustments in relation to estates over £2m.

Answer 83

Property which passes under the deceased's will or on intestacy. Property to which the deceased was 'beneficially entitled' immediately before death but which does not pass under by will or on intestacy (e.g. interest in property passing on death to the surviving joint tenant(s)). Property included because of special statutory provisions. -- Certain trust property -- Property given away by the deceased during lifetime which is 'subject to a reservation' at time of death (if property is subject to a reservation at the time of the donor's death, the donor is treated as being 'beneficially entitled' to the property).

Answer 84

When a beneficiary is entitled to all the income from such a trust dies, the trust fund is taxed as if it were part of their estate. Must be a 'qualifying interest in possession'; arises for interests under which the beneficiary is entitled to claim the income from the trust property with no power on the part of the trustees to decide whether or not the beneficiary should receive it. - An interest in possession arising before 22/03/06 will be a qualifying interest in possession. - An interest in possession arising on or after 22/03/06 will only be a qualifying interest in possession where the interest is an IPDI (interest arising on death of the settlor under their will/intestacy).

Answer 85

Life assurance policy once it is written in trust for a named beneficiary (as proceeds are no longer payable to the deceased's estate). Discretionary lump sum payment made from a pension fund to the deceased's family (as the pension trustees are not obliged to pay it to the deceased's estate).

Answer 86

Basic valuation principle - assets in the estate are valued at the price they would reasonably be expected to fetch if sold in the open market immediately before death. Assess and report asset value to HMRC immediately before death. N.B. To allow for difficulty in selling a share of jointly owned land, its value may be discounted (up to 10% for commercial property, and up to 15% for residential property). Modification of the basic valuation principle - where the death causes the value of an asset in the estate to increase or decrease, that change in value should be taken into account. -- N.B. When valuing quoted shares use LSE prices for the date of death (or the nearest trading day), averaging between the lower and higher price. -- N.B. Debts and expenses owed by the deceased at the time of death are deductible (inc reasonable funeral expenses, gas and phone bills) for IHT purposes.

Answer 87

The value of an asset agreed for IHT purposes.

Answer 88

Spouse/civil partner exemption - transfers here are exempt from IHT. (N.B. If the transferor is domiciled in the UK but transferee is not, the level of exemption is limited to £325,000). Alternatively, the transferee can elect to be treated as UK-domiciled for IHT purposes and receive full exemption). Charity exemption - transfers to charities are exempt from IHT; similar exemptions apply to gifts to certain national bodies and bodies providing a public benefit (museums, art galleries). -- When large charity gifts are made by the deceased, not only is the transfer itself exempt, but it may affect the tax rate on the rest of the death estate. Business property relief (BPR) - operates to reduce the value transferred by a transfer of value of relevant business property by a certain percentage, but applies only where the business is 'trading' in nature. Agricultural property relief - applies similarly to BPR (to reduce the agricultural value of agricultural property by a certain percentage). N.B. RE Qualifying interest in possession trusts, IHT charged as if the person with the right to income owned the capital.

Answer 89

Depends on the type of property being transferred. - 100% relief applies to businesses, business interests (e.g. partnership share) and company shares that are not listed on a recognised stock exchange. - 50% relief applies to voting control shares for a company on a stock exchange or property (land, buildings, machinery or plant) personally owned by the transferor but used for business purposes only. N.B. Voting control for these purposes means the ability to exercise over 50% of the votes on all resolutions. N.B, If you do not have voting control of the company on the stock exchange, no BPR available N.B. To assess whether a person has voting control, separate shareholdings of spouse or civil partners can be taken as one, so that if the combined percentage of the votes gives the couple voting control then the test will be satisfied. Time limits - to attract any relief at all, the asset(s) in question must have been owned by the transferor for at least 2 years at the time of the transfer.

Answer 90

100% relief allowed where either (broadly) the transferor had the right to vacant possession immediately before the transfer or where the property was subject to a letting commencing on or after 1/09/95. 50% reduction allowed in other cases. Further conditions must also be satisfied for any relief; - Either that the property was occupied by the transferor for the purposes of agriculture for the 2 years prior to the transfer, OR - That it was owned by the transferor for the 7 years prior to the transfer, and was occupied by someone throughout that period for the purposes of agriculture.

Answer 91

Nil-rate band - first £325,000 of the estate is taxed at 0% if no chargeable transfers were made in the last 7 years, with any excess over NRB taxed at 40%. Transferable NRB - if the deceased died on or after 9/10/2007 having survived a spouse/civil partner, the NRB in force at the date of death of the survivor is increased by whatever % of the NRB of the first to die was unused by them (max 100%, tax-free allowance of £650,000). Cumulative principle - any chargeable lifetime transfers made within the 7 years before death use up the deceased's NRB first, reducing the amount available for the estate. Residence nil-rate band (RNRB) - Additional £175,000 applies for deaths after 6/4/17 if the deceased owned a 'qualifying residential interest' passed to direct descendants. -- RNRB reduced by £1 for every £2 above an estate value of £2m. -- Formula = £175,000 - (value of estate - £2m)/2 = adjusted RNRB. Transferable RNRB - same applies as for normal NRB; any unused RNRB may be claimed by a surviving spouse, even if first spouse died before 6/4/17. -- If the deceased spouse has not yet used any of their RNRB, the amount transferred is an additional 100% of the RNRB at the current rate.

Answer 92

Spouse/civil partner, charity exemptions AND business and agricultural property relief (apply the same as to transfers on death). The annual exemption - applies to the first £3000 transferred by lifetime transfers in each tax year, with any unused exemption able to carry over 1 year (max £6000). -- If a transferor makes more than 1 transfer of value in any one tax year, the exemption is used to reduce the 1st transfer with any unused exemption set against the 2nd and further transfers till used up. Small gifts exemption - gifts of £250 or less to any one person are exempt. Normal expenditure out of income - exempt if; -- Can be shown that the gift was made as part of the transferor's normal expenditure without reducing their standard of living (e.g. regular payment for child's uni living expenses). Gifts in consideration of marriage - exempt up to; -- £5000 by a parent of a party to the marriage. -- £2500 by a remoter ancestor of a party to the marriage e.g. grandparent, and -- £1000 in any other case.

Answer 93

Any value remaining after the relevant exemptions and reliefs have been applied is potentially exempt. If the transferor survives for 7 years after the transfer is made, PET becomes fully exempt. If the transferor dies within 7 years after making the transfer, PET becomes chargeable and must be assessed.

Answer 94

Automatically to any lifetime transfer not falling within PET definition. -- Main e.g. transfers into any trust (other than disabled trusts) or to a company. Where an individual makes an LCT, IHT calculation begins with application of steps as above for PETs and transfers on death, and the remaining balance (after exemptions and reliefs have been applied) is chargeable to IHT and tax must be calculated after. -- 0% on the first £325,000 (NRB) and -- 20% on the balance of the chargeable transfer (half the rate for transfers which are chargeable on death).

Answer 95

PETs only become chargeable upon transferor's death if made within 7 years of death; transferee liable for any IHT payable. LCTs made within 7 years of death are recalculated at death rates, and the trustees are liable for any additional IHT payable. -- Each transfer that becomes chargeable or rechargeable has its own cumulation period, which means a taxpayer who makes an LCT may have to survive for 14 years before it ceases to have an impact.

Answer 96

Available if the transferor survives more than 3 years after the transfer, and it works by reducing any tax payable on the PET. -- Transfers within 3-4 years before death = 80% of death charge. -- Transfers within 4-5 years before death = 60% of death charge. -- Transfers within 5-6 years before death = 40% of death charge. -- Transfers within 6-7 years before death = 20% of death charge.

Answer 97

Establish transferor's cumulative total of transfers a the time of the PET, as this will reduce the available NRB. Cumulative total made up of; -- Any LCTs made in the 7 years before the PET being assessed and -- Any other PETs made during the 7 years before the PET being assessed which have become chargeable as a result of the transferor's death.

Answer 98

The average tax rate applied to each item in the sale.

Answer 99

Proportionately, based on the value of each asset.

Answer 100

PR's are liable for non-settled estate (will, intestacy, survivorship); liability is limited to assets received (or should've without neglect).

Answer 101

Trustees are liable if the deceased had a qualifying interest in possession; beneficiaries are concurrently liable if property vests before tax is paid.

Answer 102

PETs - Donee (if donor dies within 7 years), PRs if unpaid after 12 months. LCTs - Trustees usually pay; transferor pays if grossed-up (higher tax).

Answer 103

If tax on lifetime gifts (e.g. PETs) is unpaid 12 months after death.

Answer 104

IHT due 6 months after the end of the death month. PET's - same. LCT's - tax on LCT's between 6/4 - 30/9 due 30/4 next year, and others due 6 months after the transfer month.

Answer 105

IHT can be paid in 10 yearly instalments due 6 months after the end of the death month.

Answer 106

Land - from the second instalment onwards. Shares/business property - from due dates.

Answer 107

No - liability rules are fixed by statute; only the burden of tax can be changed by will.

Answer 108

Who is responsible for paying IHT to HMRC; usually PRs or trustees pay it, even if they are not beneficially entitled to the property. Beneficiaries are concurrently liable with such representatives but tax is usually paid before they receive the property.

Answer 109

Concerns who ultimately bears the burden of the tax. N.B. The testator can change the burden allocation in their will.

Answer 110

Increased scrutiny on complex tax schemes led to measures abusive avoidance. N.B. Legitimate tax planning remains permissible. Disclosure of tax avoidance schemes (DOTAS) General anti-avoidance rule (GAAR)

Answer 111

Purpose - requires disclosure of schemes aimed at specific IHT advantages. Notifiable arrangements fall within DOTAS scope; must involve contrived or abnormal steps to achieve tax benefits e.g. a reduction in the value of a person's estate and include e.g. offshore trusts, indirect property control.

Answer 112

Purpose - counteracts abusive tax arrangements that aim to exploit legislation. Criteria - A tax arrangement is ‘abusive’ if the entering into or carrying out of the arrangement cannot reasonably be regarded as a reasonable course of action (failing ‘double reasonableness test’). Burden of proof - HMRC must show that the arrangement is abuse. -- E.g. Artificial schemes like circular transactions or disguised gifts.

Answer 113

An official document confirming the PR's authority to act. -- Applications for grants are made to HMCTS; solicitors often instructed to implement the procedure for obtaining the grant. Needed to show that PR's are legally entitled to deal with the deceased's estate; control needed over assets to realise or sell them; asset holders e.g. banks and building societies need proof that the PR's have been duly appointed before releasing funds to PR's.

Answer 114

Executors will obtain a grant of probate (using form PA1P).

Answer 115

Administrators will obtain a grant of letters of administration with the will annexed (using form PA1P). -- NCPR r20 determines who the administrators will be (usually the residuary beneficiary).

Answer 116

Administrators will obtain a grant of simple letters of administration (using form PA1A). -- NCPR r22 determines who the administrators will be (usually the main beneficiaries on intestacy).

Answer 117

1 PR may obtain a grant and act alone as they can give the purchaser a good receipt for the sale proceeds. When trustees sell land, the purchaser will insist on a receipt from all the trustees being at least 2 in number or a trust corporation. 2 administrators are usually required where one of the beneficiaries is an infant or only has a life interest, whereas 1 executor can always act alone in these cases.

Answer 118

Executors derive authority to act in the administration of an estate from the will; grant of probate confirms that authority. Although the executor has full power to act from the time of the deceased's death, the executor will be unable to undertake certain transactions (e.g. sale of land) without producing the grant as proof of entitlement to act. Deceased's bank and other institutions will not release money to the PR's without sight of the grant. Administrators (with or without the will) have limited powers before a grant is made; authority stems from the grant which is not retrospective to the date of death. The grant of letters of administration vests the deceased's property in the administrators; provides conclusive evidence of the administrator's title to the deceased's assets and of the validity and content of any will.

Answer 119

- That the will is the last will of the testator. - That it has not been validly revoked. - That it is executed in accordance with s9 Wills Act 1837. - That it contains an attestation clause which indicates that the will was executed in accordance with the Wills Act 1837 and raises a presumption of 'due execution'. Then, in relation to beneficiaries, establish their identity and the extent of their entitlements, whether any of the gifts in the will have failed due to e.g. lapse or ademption. N.B. For GDPR purposes, solicitors must inform beneficiaries that they are holding personal data on them, the purposes for which the data will be used and the rights of beneficiaries as data subjects. Also important to obtain details of the deceased's property and debts to assess the size of the deceased's estate and any IHT liability.

Answer 120

N.B. Particularly useful where the deceased's family needs funds immediately for paying IHT or discharging other bills. 1) Administration of Estates (Small Payments) Act 1965 - only available where asset value <£5,000 and payments made at discretion of the institution to those persons appearing to be beneficially entitled to the assets. 2) Chattels. 3) Cash found in the deceased's possession.

Answer 121

1) Joint property (survivor can get the property transferred into their sole name by producing the deceased's death certificate to the relevant institution e.g. deceased's bank or Land Registry). 2) Insurance policies assigned or written in trust (beneficiary can obtain the proceeds of a life policy through providing a death certificate). -- Proceeds do not attract IHT as they are not part of the transfer of value on death so a way of making tax-free provisions for dependents of the deceased. 3) Pension benefits - same as above.

Answer 122

It is possible to calculate the IHT (if any) payable on the estate and whether it is necessary to submit an IHT account to HMRC or whether it is an 'expected estate'. -- Will likely be due before grant is obtained. -- PR's to send IHT account (IHT400) to HMRC (or IHT401 for a person domiciled outside the UK) and pay any IHT due before the grant to HMRC, who will confirm receipt and provide unique code to give to HMCTS when submitting the grant application. N.B. Where IHT payable before the grant, necessary to find ways to fund it as won't be able to access deceased's assets without it.

Answer 123

Application; -- Applications by legal professionals for grant of probate are usually made online. -- Applications for grants of letters of administration (with or without will) are made by post, or online if there is only 1 applicant who is the only person entitled to the estate. -- Postal applications made by sending completed PA1P form (if there is a will) or PA1A form (if there was not a will). Fee; -- Standard fee payable = £300 where the estate exceeds £5000 and no fee if estate is £5000 or less. -- Applicants automatically receive one free copy of the grant (extra copies can be requested and cost £1.50 each).

Answer 124

Deceased's will and codicil (if any) to HMCTS who may ask for further evidence of the will's validity (often through an affidavit sworn before a solicitor not acting for the PR's verified by a statement of truth) before issuing the grant. Further evidence often required where; - Evidence of due execution and/or capacity. - Evidence as to knowledge and approval. - Evidence as to remote witnessing. - Evidence of plight and condition (alterations, mark including attachments or attempted revocation). - Lost will - presumed to have been destroyed by testator with intention of revoking but can be rebutted. Sworn affidavits or witness statements from witness to execution or remote witnessing may be needed or doctor's affidavit for capacity (in absence of attestation clauses).

Answer 125

Used for non-expected estates; an inventory of the assets to which the deceased was beneficially entitled and of their liabilities, and is the form for claiming reliefs and exemptions and calculating the IHT payable. Should be delivered within 12 months of the end of the month in which the death occurred; usually PR's aim to deliver the account within 6 months of the end of the month of death to comply with IHT time limits for the payment of interest. Until the account is submitted, no grant of representation can be issued. Where IHT is payable, it is necessary to apply for a reference number before submitting the IHT400 (online or by post using schedule IHT422). PR's send completed IHT400 + any relevant supporting schedules to HMRC who then write to the applicant providing a unique code and details of the estate values which must be included in the grant application.

Answer 126

PR's do not submit any IHT form to HMRC; information as to estate value is included on the forms submitted to HMCTS which is passed on to HMRC, who then have 60 days from the issue of the grant of representation to ask for additional information. If no such request is made, the estate receives automatic clearance. N.B. If an estate which initially appears to be expected is subsequently found not to be so, the PR's must submit the IHT400 within 6 months of the discovery.

Answer 127

3 categories of expected estate; 1) 'Small' estates - those where the gross value of the estate for IHT purposes, plus the value of any 'specified transfers' and 'specified exempt transfers' in the 7 years prior to death, does not exceed the current nil rate band threshold (£325,000 but can increase if the deceased's spouse or civil partner died without using all of theirs up). 2) 'Exempt' estates - those where the bulk of the estate attracts the spouse, civil partner or charity exemption. -- The gross value of the estate, plus specified transfers and specified exempt transfers made in the 7 years prior to death must not exceed £3m and -- The net chargeable estate after deduction of liabilities and spouse and/or charity exemption must not exceed the nil rate band. -- As with category 1 estates, a transferred nil rate band can increase the nil rate threshold for this purpose. 3) 'Non-domiciled' estates - where the deceased was never domiciled or treated as domiciled in the UK, and owned limited assets in the UK.

Answer 128

PR's provide no information directly to HMRC. Instead, they include the following on their applications for a grant; -- The deceased's full name and date of death, and -- A declaration (that the estate is an expected estate and whether they are claiming against the estate the unused proportion of the IHT nil rate band of a pre-deceased spouse or civil partner (the transferable nil rate band)) and -- The following 3 IHT estate values; --- 1) The gross value of the estate for IHT plus any specified transfers and specified exempt transfers made by the deceased in the 7 years before their death. --- 2) The net value of the estate for IHT less any allowable debts. --- 3) The net qualifying value of the estate (net value of estate for IHT less any spouse, civil partner or charity exemptions). HMCTS will have 1 month to pass the information to HMRC. N.B. Personal representatives of non-UK domiciliaries will have to provide more information.

Answer 129

For ALL non-expected estates when a deceased dies domiciled in the UK.

Answer 130

Due 6 months after the end of the month in which the deceased died. -- N.B. Land and some business property attract instalment option which gives the right to pay by 10 annual instalments.

Answer 131

Within 6 months of the end of the month in which the death occurred (must be paid before the grant). Late payments attract interest.

Answer 132

If PR's do not elect for instalments - IHT must be paid before the grant (or within 6 months of the end of the month of death, if earlier). If PR's elect to pay by instalments - first instalment is due within 6 months of the end of the month of death. Other 9 at annual intervals.

Answer 133

When they give X control (more than 50% of the shares).

Answer 134

Direct payment scheme. Life assurance. - Where the proceeds of an insurance policy on the deceased's life are payable to the estate, life assurance company e.g. bank may be willing to release funds to pay the IHT directly to HMRC. Assets realisable without the production of the grant. - Max value £5000 under Administration of Estates (Small Payments) Act 1965; option for small estates Loans from beneficiaries (wealthy). - Done on condition that they will be repaid from the deceased's estate once the grant issues. Bank borrowing. - Expensive as the bank will charge an arrangement fee and interest on the amount borrowed. - Money borrowed should be repaid at earliest opportunity to stop any interest running. National savings and government stock. - Payments made from. Heritage property in lieu of tax. - Taxpayers can offer HMRC an asset in lieu of tax (SoS must agree to accept such assets; high standard required). Obtaining a grant on credit. - Exceptional cases where PR's can demonstrate that it is impossible to pay the IHT in advance, HMRC will allow the grant to be obtained on credit.

Answer 135

Voluntary on part of institutions (banks and building societies) but; -- PR's to provide whatever ID well in advance of applying to a grant to avoid unnecessary delay in the application. -- PR's complete a separate IHT423 for each bank and building society from which money is transferred. -- PR's send each IHT423 (has reference number to match to IHT400) to the relevant bank or building society at the same time as they send the IHT400 and supporting schedules to HMRC. -- Bank or building society will send the money direct to HMRC. N.B. Long process; not ideal where urgent need for a grant. However, solicitors often make private arrangements with banks and building societies under which they transfer funds directly to HMRC from the deceased's accounts to be quicker method.

Answer 136

A grant of administration including a grant of administration with will annexed. A second grant of probate in respect of the same estate. A grant where the person entitled has been convicted of murder or manslaughter of the deceased or has otherwise forfeited the right to apply. A grant in respect of a foreign will. A grant accompanied by an application to prove a copy of the will. A grant, where all those entitled are deceased, to any of their legal personal representatives.

Answer 137

Death certificate, original will and HMRC forms.

Answer 138

Applicants - forms identify the applicants. The deceased - forms identify the deceased by their name, address, date of birth, date of death, along with their marital status and domicile at date of death. Settled land - forms ask whether there was any land vested in the deceased, which was settled prior to their death and which remained settled land notwithstanding their death (rare). Applications as an attorney - where a person lacks capacity to manage their own affairs, medical evidence may be required as well as the enduring or lasting power of attorney appointing the applicant to act. IHT form and probate estate - questions relating to the value of the deceased's assets. -- State whether IHT400 was completed and if so, insert the unique code and estate values provided by HMRC. -- If not because estate was expected, provide following; -- 1) The gross value of the estate for IHT plus any specified transfers and specified exempt transfers made by the deceased in the 7 years before their death. --- 2) The net value of the estate for IHT less any allowable debts. --- 3) The net qualifying value of the estate (net value of estate for IHT less any spouse, civil partner or charity exemptions). PR's must also specify the gross and net figures for the estate passing under the grant; this determines the probate fee payable. -- Estate passing under the grant comprises only the property vesting in the PR's (excludes deceased's interest in joint tenancies, life policies assigned or written in trust etc which are included for IHT purposes). -- Gross estate passing under the grant is the value before deducting debts. Net estate passing under the grant is value after deduction of debts and funeral account. Legal statements - both forms end with a statement of truth and a simple signature.

Answer 139

A form PA1P or PA1A (or online application) completed by the PR's explaining their right to take a grant. Any will and codicils. Additional evidence of validity of any will where necessary. Probate fee. Any renunciations of the right to act.

Answer 140

Using Form PA1P. Must submit original will and any codicils to HMCTS. Must declare; - Dates of will/codicils. - Existence of any foreign wills. - Whether the deceased married or entered a civil partnership after making the will.

Answer 141

Executors named in a valid will have the best right to grant of probate. A valid appointment is unaffected by partial or total failure of testamentary disposition. - E.g. if a sole beneficiary dies before the testator, the executor still applies for probate, and the estate follows intestacy rules.

Answer 142

Only 1 (even for land or infant beneficiaries).

Answer 143

Executors must have mental capacity. - If the only executor lacks capacity, an attorney (under LPA or EPA) can apply. - If one executor is a minor, others apply with power reserved to the minor. - If sole executor is a minor, a guardian/parent applies for letters of administration with will annexed for the minor's benefit. E.g. a 16 year old can't act; the adult co-executor applies alone with power reserved.

Answer 144

Executorship can be renounced via Form PA15 provided the person has not intermeddled (doing tasks a PR might do e.g. selling the deceased's chattels). - Once intermeddling occurs, renunciation is not allowed as executors are deemed to have accepted their appointment. Renouncing as an executor does not renounce a trusteeship - must be disclaimed separately.

Answer 145

No limit on how many executors can be appointed by will, but maximum of 4 can be granted probate in respect of the same property. If one doesn't want to act now (but doesn't renounce), power can be reserved to them. Must notify the executor to whom power is reserved. Possible to obtain a grant limited to part only of the estate where e.g. particular expertise is required. E.g. executor abroad may let the co-executor apply, reserving the right to join later.

Answer 146

When no executor is willing or able to act. Governed by NCPR 1987 r20 - sets priority of entitlement.

Answer 147

1. Executor (if alive, willing and able). 2. Residuary legatee/devisee holding in trust. 3. Other residuary legatee/devisee (or those entitled to undisposed residue). 4. PR of deceased residuary legatee/devisee (not for life/trust). 5. Other legatees/devisees or creditors. 6. PR of other legatees/devisees or creditors. Each lower-ranked person must 'clear off' higher-ranked ones by showing they're unavailable or unqualified. E.g. residuary legatees/devisee can apply and explain 'no executor was appointed in the will'. N.B. Minors cannot act; parents/guardians may apply on their behalf. N.B. Vested interest is preferred to contingent interest by court when choosing among equals. N.B. 2 administrators required where property passes to minors or those with a life interest. N.B. Not possible for administrators to have power reserved to prove at a later stage. N.B. As with executors, maximum 4 administrators to be issued probate over same property.

Answer 148

Same form used (PA16) but administrators do not lose the right to renounce by intermeddling. Renunciation does not affect any beneficial entitlement of the administrator or any trustee appointment.

Answer 149

When the deceased died intestate (i.e. without a valid will).

Answer 150

In the following order of priority (same as intestacy rules); 1. Surviving spouse or civil partner. 2. Children and issue of deceased children. 3. Parents. 4. Siblings of the whole blood and their issue. 5. Siblings of the half blood and their issue. 6. Grandparents. 7. Uncles/aunts of the whole blood and their issue. 8. Uncles/aunts of the half blood and their issue. 9. Treasury Solicitor (if no relatives). 10. Creditors or others with a possible future interest (if all above cleared off). 11. Bona vacantia. N.B. Stepchildren/step siblings are not entitled. Applicant requirements; - Must have a beneficial interest under intestacy rules. - Must explain entitlement in form PA1A including (relationship to deceased, statement about surviving relatives in higher classes for clearing off). N.B. Clearing off applies here too; could involve just stating that there were no relatives in the higher category or PA1A form involves applicant stating as a matter of course whether the deceased left a surviving spouse or civil partner and which relatives survived.

Answer 151

Anyone entitled under r22 can renounce their right to the grant. Does not affect their beneficial entitlement.

Answer 152

- To obtain a grant of representation. - To collect and manage the assets of the estate. - To ascertain and pay the deceased's debts and liabilities. - To distribute the remaining cash and assets in accordance with the will or intestacy rules.

Answer 153

A caveat should be lodged at HMCTS. Once a caveat has been entered, no grant can be issued until the caveat is removed or ceases to be effective. Caveats might be considered for e.g. where a beneficiary believes the executor named in the will lacks the mental capacity to act, or where the validity of the will is questioned.

Answer 154

Online or using form PA8A. - The person lodging or entering the caveat is called a caveator. - A caveat lasts for 6 months although its duration can be extended. - An applicant for a grant may issue a 'warning' to the caveator which requires the caveator to enter an appearance within 14 days setting out their interest. If the caveator fails to do so, the applicant for the grant can remove the caveat.

Answer 155

Where potential beneficiaries get frustrated if the PR's delay their application, they can apply to HMCTS for a citation. - Citation = method of forcing a party with the right to the grant to act.

Answer 156

- Citation to take probate. - Citation to propound will. - Citation to accept or refuse a grant.

Answer 157

Where an executor has lost his right to renounce probate by intermeddling in the estate but has not applied for a grant of probate and shows no signs of doing so. Once cited, the executor must proceed with an application for a grant of probate; if they don't do so (without good reason), the citor can apply to the court for an order allowing the executor to be passed over and a grant of letters of administration with will annexed to issue to the person(s) entitled under NCPR r20.

Answer 158

Where a person becomes aware that there may be a will that would diminish their entitlement under an earlier will or under an intestacy. That person can cite the executors named in the later will and any persons interested under that will to propound it. If the citees fail to enter an appearance or to proceed diligently to propound the will, the citor can apply to the court for an order for a grant as if the will were invalid.

Answer 159

Standard method of clearing off a person with a prior right to any type of grant who has not applied, and shows no intention of applying, for a grant.

Answer 160

Passing over - preferable to apply to the court under s116 Senior Courts Act 1981 for an order passing over that person in favour of someone else.

Answer 161

No; only do when the PR's transfer or assent the property to them. But, do have the right to compel due administration of the estate.

Answer 162

They can compel proper administration, request to inspect accounts and apply to court for inventories/accounts (s25 AEA 1925).

Answer 163

Accurate records of all receipts and payments during estate administration.

Answer 164

No automatic entitlement; court application required. Trust law limits apply unless overridden by Data Protection Act 1998 or disclosure rules in proceedings.

Answer 165

1) Issue-specific applications (e.g. court guidance). 2) General administration order - court supervision of PR's, used as last resort.

Answer 166

PR's are not obliged to distribute the estate within 1 year of death (s44 AEA 1925). Applies to administrators too.

Answer 167

Includes conflicts of interest, unauthorised profits, purchasing estate property - voidable by beneficiaries.

Answer 168

A PR's breach of duty causing loss to the estate. Includes misuse of assets, maladministration or negligence.

Answer 169

Failing to pay known debts, ignoring intestacy rules, delaying sale of volatile investments.

Answer 170

1. s61 Trustee Act 1925 - honest, reasonable conduct. 2. Exclusion clause in will. 3. Beneficiary acquiescence. 4. s27 Trustee Act 1925 - protects against unknown claimants. 5. Limitation - 12 years unless fraud or personal use involved.

Answer 171

Proprietary claim - recover specific assets unless BFP for value. Personal claim - against the recipient if PR remedies are exhausted. - Time limit = 12 years.

Answer 172

Only by court order under s50 Administration of Justice Act 1985. Court considers beneficiaries' welfare.

Answer 173

Yes; to the extent of estate assets. May be personally liable for devastavit (e.g. premature legacies or mismanagement).

Answer 174

By placing statutory advertisements under s27 Trustee Act 1925.

Answer 175

After paying debts and distributing the estate. - Real estate; by assent. - Personalty; automatically on completion.

Answer 176

PR's cannot retire without court order; different limitation periods apply. Both are fiduciaries and bound by Trustee Act 2000.

Answer 177

Power to charge. Extended power to appropriate assets without consent of legatee. Power to insure assets. Power to accept receipts from or on behalf of minors. Self-dealing. - Express clause in the trust may permit self-dealing by the trustees.

Answer 178

If the testator wishes to give the executors (and trustees) power to charge remuneration, the power can either be included as part of the appointment clause or with the other administrative provisions. When drafting such a clause, it is important to be clear whether a person engaged in any profession or business can charge for time spent on the administration (e.g. brain surgeon) or whether only a person whose profession involves administering estates and trusts can charge (e.g. solicitor or accountant).

Answer 179

s41 AEA 1925 gives PRs the power to appropriate any assets in the estate in or towards satisfaction of any legacy or any interest in residue provided that the appropriation does not prejudice any beneficiary of a specific legacy. Thus, if the will gives a pecuniary legacy to a beneficiary, the PRs may allow that beneficiary to take chattels or other assets in the estate up to the value of their legacy, provided that these assets have not been specifically bequeathed by the will. s41 requires legatee to whom the assets are appropriated (or their parent or guardian if a minor) to consent the appropriation, but common to remove this requirement to relieve the PRs of the duty to obtain formal consent.

Answer 180

PRs have a duty to preserve the value of the estate; s19 TA 1925 (as substituted by TA2000) gives PRs and trustees power to insure assets against all risks, to the full value of the property, and to pay premiums out of capital or income. It is not necessary to amend the statutory provision. However, including an express provision makes life easier for lay PRs who will be able to see from the will exactly what they can do.

Answer 181

Under the general law, an infant cannot a good receipt for a legacy or share of the estate. However, the Children Act 1989 allows parents and guardians to give a good receipt to PRs on the infant's behalf. Where a testator/testatrix is unhappy with a parent or guardian giving a good receipt for a legacy, will should be drafted to leave a legacy to trustees to hold for the benefit of the minor rather than to the child directly.

Answer 182

Where the executors or trustees are also beneficiaries.

Answer 183

Power to appropriate assets. Power to invest. Power to purchase land. Power to sell personalty. Power to use income for maintenance of beneficiaries. Power to use capital for advancement of beneficiaries. Power of control of trustees by beneficiaries.

Answer 184

s41 AEA 1925 does not apply to trustees. Necessary to include an express provision (equivalent to s41) to permit the trustees to appropriate trust property towards beneficial interests arising under the trust without obtaining the consent of the beneficiary.

Answer 185

Under the general law, trustees have a general power of investment to invest as if absolutely entitled (s3 and s4 TA 2000). - Wide power excludes investment in land, other than by mortgage, but land purchase allowed under s8. In exercising the investment power, trustees are required to take proper advice and to review investments of the trust from time to time; must have regard to the standard investment criteria, namely the suitability to the trust of any particular investment and to the need for diversification of investments of the trust. An express investment clause may be included but no longer necessary in most estates. Trustees may delegate the management of trust investments to a financial adviser or stockbroker under TA 2000; delegate must be appointed in writing and given a written policy document setting out investment objectives and restrictions on the choice of investments. - Must also review the delegate's work and the policy statement from time to time.

Answer 186

Permitted to acquire freehold or leasehold in the UK for 'investment, for occupation by a beneficiary or for any other reason'. - When exercising their powers, the trustees are given all the powers of an absolute owner. Not permitted = foreign land or co-ownership without express power.

Answer 187

To overcome doubt as to whether trustees who hold no land and where there is no express trust for sale have power to sell personalty, some wills may continue to impose an express trust for sale over residue. The alternative solution is to include power in the will (among the administrative provisions), giving the trustees express power to sell personalty.

Answer 188

Where trustees are holding a fund for a minor beneficiary, s31 TA 1925 gives them power to use income they receive for the minor's maintenance, education or benefit; they must accumulate any income not so used. s31 also requires that where a beneficiary is aged 18, the trustees have a duty to pay future income received from that beneficiary's share of the fund to that beneficiary. If the testator thinks that the age of 18 is too young to receive trust income, the will can postpone the beneficiary's right to income until a greater age.

Answer 189

s32 TA 1925 allows trustees in certain circumstances to give a beneficiary a payment of trust capital sooner than they would receive it under the basic trust provisions. - Many reasons why beneficiaries may want part of their entitlement early e.g. needing help to pay uni fees or to fund house deposit. Power ONLY applies to beneficiaries who have an interest in trust capital. s32 confers an absolute discretion on the trustees; therefore the beneficiaries cannot compel them to make an advancement. N.B. For will trusts created on a testator's death on or after 1 October 2014, trustees can make an advancement of the whole of a beneficiary's share of capital. N.B. Where the trust creates a life interest, it is common to extend s32 TA 1925 to permit trustees to make advancements of capital to the life tenant.

Answer 190

s19 of TLATA 1996 provides that where beneficiaries are sui juris (aged 18+ with full capacity) and together entitled to the whole fund, they may direct the trustees to retire and appoint new trustees of the beneficiaries' choice. This means that in a case where the beneficiaries could by agreement end the trust under the Saunders v Vautier rule, they now have the option of allowing the trust to continue with trustees of their own choice. The provision may be expressly excluded by the testator. If, under the terms of the trust, the position could arise where all the beneficiaries are in existence and aged 18+ but the trust has not ended, the testator may wish to prevent the beneficiaries from choosing their own trustees.

Answer 191

TLATA 1996 gives special powers (below) to a beneficiary under a trust of land who has an interest in possession. If, under the terms of the will, a trust of land with an interest in possession could arise, the will may amend those powers. - N.B. 'interest in possession' not defined so usual meaning applies (those entitled to claim the income of the fund as it arises due to life interest or because 18+ and entitled to claim income). Duty to consult beneficiaries; - Trustees exercising any function relating to the land must consult any beneficiary who is of full age and beneficially entitled to an interest in possession in the land, and so far as consistent with the 'general interest of the trust' give effect to the wishes of any such beneficiary (s11 TLATA). - The duty to consult may be excluded by the will and often is. Beneficiary's rights of occupation; - A beneficiary with a beneficial interest in possession, even if not at full age, has the right to occupy land subject to the trust if the purposes of the trust include making the land available for occupation by him, or if the trustees acquired the land in order to make it so available (s12 TLATA 1996). - No power to exclude s12, but a declaration that the purpose of the trust is not for the occupation of land may be included in the will.

Answer 192

Where an estate includes a business which was run by the deceased as a sole (unincorporated trader), the powers of the PRs to run the business are limited. - E.g. they may only run the business with a view to selling it as a going concern and may only use those assets employed in the business at the date of death. These powers may be extended by will, but in practice PRs are unlikely to wish to involve themselves in the detailed running of a business. - May be preferable to bequeath the business by specific legacy and to appoint the legatee as a special PR of the business.

Answer 193

Recites that formalities required by s9 Wills Act 1837 have been complied with. - Raises a presumption of due execution. Will have to be adapted if the execution of the will did not follow the standard procedure e.g. if will was signed by someone other than the testator in the testator's presence and by their direction.

Answer 194

In the case of a will, solicitors should not take instructions from anyone but the client for the drafting of a will. N.B. It would not be in the client's best interests to take instructions from an intermediary.

Answer 195

Solicitors should not prepare a will giving significant amounts to themselves, their spouses, civil partners or family members unless the client has obtained independent advice. This includes situations where the intended gift is of significant value in relation to the size of the client's overall estate, and where the gift is of significant value in itself.

Answer 196

Commences at the moment immediately following the death and ends when the PRs are in a position to vest the residue of the estate in the beneficiaries, or the trustee if a trust arises under the will or intestacy rules.

Answer 197

Primary duty is found in s25 AEA 1925 (collect and get in the real and personal estate of the deceased and administer it according to the law). The duties to be undertaken by the PRs are onerous; a PR who accepts office is personally liable for loss to estate resulting from any breach of duty they commit as PR. - Such a breach is known as devastavit; the test is whether there has been a loss caused by a breach of duty, not whether the PR is culpable. There are several types of breach of duty including; - Failing to protect the value of assets. - Failing to pay the people entitled to assets. s61 TA1925 gives the court power at its discretion to relieve a PR from liability for breach of duty if satisfied that the PR has acted honestly and reasonably and ought fairly to be excused for the breach.

Answer 198

1) There may be creditors of whom they are unaware or unknown relatives (e.g. children born outside marriage whose existence has been kept secret). 2) They may not know the whereabouts of some beneficiaries who may have lost contact with the deceased's family. 3) There could be a successful claim against the estate under the Inheritance (Provision for Family and Dependants) Act 1975.

Answer 199

By complying with the requirements of s27 TA1925. Provided the PRs wait for the time period specified in the statute (at least 2 months) before distributing the estate, the PRs will be protected from liability if an unknown claimant later appears (however claimant will have the right to claim back assets from the beneficiaries who received them). In view of the minimum notice period, PRs should advertise as early as possible in the administration. If they are executors, they may advertise at any time after the death; if they are administrators, they have power to advertise at any time after obtaining the grant of representation. PRs must give notice of the intended distribution of the estate, requiring any person interested to send in particulars of their claim, whether as a creditor or beneficiary, by; - Advertisement in the London Gazette. - Advertisement in a newspaper circulating in the district in which land owned by the deceased is situated, and - Other appropriate notice as would be ordered by court. N.B. If the PRs are in any doubt as to what notices should be given, they should apply to the court for directions. Each notice must require any person interested to send in particulars of their claim within the time specified in the notice, which must not be less than 2 months from the date of notice.

Answer 200

The PRs may distribute the deceased's estate, taking into account only those claims of which they have actual knowledge, or which they discover as a result of the advertisements. N.B. The PRs are not liable for any other claim, but a claimant may pursue the claim by following the assets into the hands of the beneficiaries who have received them from the PRs.

Answer 201

Keeping back assets in case the claimant appears; usually an unpopular option with the other beneficiaries. Taking an indemnity from the beneficiaries that they will meet any claims if the claimant reappears; represents a risk for PRs as the beneficiaries may lack the means to satisfy the claim when the claimant appears. Taking out insurance to provide funds; can be expensive and as the claimant may be entitled to interest on the amount of their entitlement for the period up to payment, it is difficult to know what sum to insure. - Insurance does not absolve the PR from liability but simply means that there will be insurance money available to pay the claim. - In the event of a shortfall, the PRs are liable to pay the difference. Applying to the court for an order authorising the PRs to distribute the estate on the basis that the claimant is dead (Benjamin order). - Before making an order, the court will require evidence that the fullest possible enquiries have been made to trace the missing person. - Protects the PRs from liability but claimant retains the right to recover the assets from the beneficiaries. - Applying to court is an expensive process, but only solution that offers the PR full protection.

Answer 202

PRs will be personally liable if the assets have been distributed and an applicant under the Act then successfully obtains an order for 'reasonable financial provision' from the estate. The PRs can protect themselves against such liability by waiting more than 6 months following the date of the grant of representation before distributing the assets. If earlier distribution is required, PRs should ensure they retain sufficient assets to satisfy an order should an applicant be successful within 6 months of the grant.

Answer 203

Yes; AEA 1925, TA 1925 and TA 2000.

Answer 204

Assets passing under the will or intestacy rules automatically devolves on (i.e. ownership passes to) the PRs. - For executors, devolution happens immediately on the death. - For administrators, devolution happens when the grant of representation is issued. Devolution gives the PRs ownership of the assets in the estate, but their duty is to collect them as soon as is practicable. Having collected in the assets, the PRs must preserve them pending the completion of the administration. Assets which pass independently of the will and intestacy rules do not devolve on the PRs; they have no obligation or power to deal with these assets.

Answer 205

Immediate sources of money - as soon as monies can be collected from the deceased's bank or building society, or realised through insurance policies etc, the PRs should begin to pay the deceased's outstanding debts and the funeral account. Administration expenses e.g. estate agents' and valuers' fees will arise during the course of administration of the estate and will have to be settled from time to time while the administration is proceeding. Repayment of loan to pay IHT - It may have been necessary for PRs to take out a loan from the deceased's bank to pay IHT to obtain the grant. If an undertaking has been given to the bank in connection with the loan, it will probably be a 'first proceeds' undertaking (means that the PRs must use money first realised by them during the administration to repay the bank). Failure to do so will be a breach of the terms of the undertaking. Sale of assets - any assets in the estate can be used for the payment of debts and expenses; PRs to consider carefully which particular assets they will sell to raise the money. Consider the following; - Provisions of the will. --- May direct from which part of the deceased's estate the debts, funeral account, testamentary and administration expenses should be paid (usually residue). --- In the absence of such direction, PRs must follow the statutory rules for the incidence of liabilities. --- In any event, generally incorrect for PRs to sell property given specifically by will unless all other assets in the estate have been exhausted in payment of debts etc. - The beneficiaries' wishes --- Where possible, PRs to respect (includes consulting residuary beneficiaries before any sale of assets takes place despite having power to sell the assets). - Tax consequences. --- Before selling assets, PRs to consider the amount of any capital gains (or losses) likely to arise as a result of the sale and the availability of any exemptions. --- Full use should be made of the annual exemption for CGT. --- If assets are to be sold at a loss (compared to their value at date of death), loss reliefs for CGT and IHT purposes may be available for the PRs.

Answer 206

The deceased's debts and liabilities; --- The PRs must settle any outstanding debts owed by the deceased at the time of death, such as outstanding utility bills or payments of income tax. --- PRs must pay the debts and liabilities with due diligence and will be liable for any loss if they fail to do so e.g. because the debt carries interest. Funeral expenses; --- PRs are required to pay reasonable (determined in case circumstances) expenses of a funeral conducted in a manner suitable to the deceased's position and circumstances, but are only liable in so far as they have available assets of the deceased to make the payment. Testamentary expenses; - Expenses which are incidental to the proper performance of the duties of a PR. Includes; --- Costs of obtaining the grant. --- Costs of collecting in and preserving the deceased's assets. --- Costs of administering the deceased's estate e.g. solicitors' fees for acting for the PRs, valuers' fees incurred by PRs in valuing the deceased's stocks and shares etc. --- Any IHT payable on death on the deceased's property in the UK which vests in the PRs.

Answer 207

One in which there are sufficient assets to pay all the expenses, debts and liabilities in full (irrespective of whether there remains anything with which to pay the legacies). All the debts will be paid, but s35 and s34(3) govern the order in which assets are to be used to pay the debts. - Important for the beneficiaries; have an entitlement under the will but may see that reduced or dwindle to nothing because the assets which form the subject matter of that entitlement is taken to pay the debts.

Answer 208

1) Secured debts (s35) --- i.e. debts owing by the deceased which are charged on particular items of property e.g. loan secured by legal mortgage on the deceased's house. --- Effect of this rule is that a beneficiary taking the asset takes it subject to the debt and will be responsible for paying the debt. --- s35 applies subject to any contrary intention shown in the will, deed or other document. 2) Unsecured debts and expenses (s34(3)). --- Statutory order must be followed by PRs when deciding which part of the deceased's estate should be used for the purpose of payment of the funeral and testamentary expenses and unsecured debts. 1) Property undisposed of by will subject to retention of a fund to meet pecuniary legacies. - Situations where e.g. the terms of the will simply fail to dispose of the entire estate or where testator has tried to dispose of it in the will but failed e.g. lapsed share of residue. Property undisposed of will be applied first. 2) Property included in a residuary gift subject to retention of a fund to pay pecuniary legacies not already provided. - Hence, in most estates the residue will bear the burden of the debts and expenses. 3) Property specifically given for the payment of debts. - Property is given for the payment of debts where the testator directs in the will that a particular asset is to be used for this purpose, but leaves no direction as to what is to happen to any money left over. 4) Property charged with the payment of debts. 5) The fund, if any, retained to meet pecuniary legacies. 6) Property specifically devised or bequeathed, rateably according to value. 7) Property appointed by will under a general power rateably according to value. Broadly, assets forming part of the residue are to be used before using property given to specific legatees. s34(3) applies subject to a contrary intention shown in the will. Testator can vary the order by making express provision in the will which makes it clear that the testator intends to exonerate property which would otherwise be taken in priority.

Answer 209

One in which the assets are insufficient to discharge in full the funeral, testamentary and administration debts, expenses and liabilities. Assets are applied to pay the debts until they have been used up. In such cases, the creditors will not be paid in full (or at all) and the beneficiaries under the will or intestacy provisions will receive nothing from the estate.

Answer 210

Secured creditors e.g. those holding a mortgage or charge over the deceased's property are in a better position than unsecured creditors in that they may realise the security. Unsecured creditors will have to look to any remaining assets for payment. Funeral and testamentary expenses are paid in priority to ordinary unsecured debts and liabilities of the deceased. N.B. In doubtful cases, the PRs should administer the estate as if it is insolvent. Failure to administer an insolvent estate in accordance with the statutory order is a breach of duty by the PRs.

Answer 211

Specific legacies; -- Unless an estate has significant debts, it is unusual for property given by specific bequest or devise to be needed for payment of the deceased's funeral and testamentary expenses and debts. -- Once the PRs are satisfied that the property will not be so required, they should consider transferring it to the beneficiary, or trustees if a trust arises. -- Transfer methods depend on the asset; --- Real property - use an assent (beneficiary registers with Land Registry). --- Company shares - use a stock transfer form. -- Vesting of specific gifts is retrospective to the date of death, so that any income produced by the property e.g. dividends on a specific gift or company shares belongs to the beneficiary. -- Beneficiary must wait for PRs to vest the asset before receiving income. -- Beneficiary is liable for income tax on such income from the date of death. -- Transfer and insurance costs are the legatee's responsibility, unless the will directs otherwise. -- If asset ownership is disputed, the legatee bears litigation costs to establish title. Pecuniary legacies - provision for payment in the will; -- Typically, the gift of the residue estate will be 'subject to' or 'after payment of' of the pecuniary legacies. -- In both cases, the legacies should be paid from the fund of residue before the division of the balance between the residuary beneficiaries. Pecuniary legacies - no provision by will for payment; -- If the will does not contain an express provision, the PRs will have to decide which assets are to be used to pay the pecuniary legacies. -- In essence, pecuniary legacies are paid from the residuary estate, with personalty being used in preference to realty. -- If a partial intestacy arises, the most likely outcome is that the legacies will be paid from the property which is undisposed of, with ready money being used first.

Answer 212

General rule - pecuniary legacy is payable at the end of 'the executor's year' (1 year after the testator's death). - PRs are not bound to distribute the estate to the beneficiaries before the expiration of 1 year from the death (s44 AEA 1925). If the testator stipulates that the legacy is to be paid 'immediately following my death' or that it is payable at some future date or on the happening of a particular contingency, then interest is payable from either the day following the date of death, the future date or the date the contingency occurs as appropriate. However, 4 occasions as an exception to the normal rule and interest is payable on a pecuniary legacy from the date of death. When legacies are; - Payable in satisfaction of a debt owed by the testator to a creditor. - Charged on land owned by the testator. - Payable to the testator's minor child or - Payable to any minor where the intention is to provide for the maintenance of that minor.

Answer 213

Matters relating to IHT liability, income and CGT.

Answer 214

Discovery of additional assets or liabilities since the IHT account was submitted. Discovery of lifetime transfers made by the deceased within the 7 years before death. Agreement of provisionally estimated values, e.g. with the shares valuation division of HMRC (in the case of shares in private companies) or the district valuer (in the case of land). - Such valuations may require long negotiations and can often delay reaching a final settlement of IHT liabilities. Agreement between the PRs and HMRC of a tax liability or repayment, in relation to the deceased's income and capital gains before the death. Sales made by the PRs after the deceased's death which have given rise to a claim for IHT 'loss relief'.

Answer 215

Can reduce the IHT liability of the estate in cases where the PRs have to sell assets for the cash needed to meet debts, tax liabilities, or legacies. Where 'qualifying investments' are sold within 12 months of death for less than their market value at the date of death (probate value), then the sale price can be substituted for the market value at death and the IHT liability adjusted accordingly. - The relief must be claimed; not automatic and normally available only when the PRs make the sale and not where a beneficiary to whom assets have been transferred does so.

Answer 216

If the PRs have opted to pay IHT by instalments on the property in the deceased's estate attracting the instalment option, will continue to be liable for the remaining instalments even after assets transferred to those entitled. - PRs should considering retaining sufficient assets in the estate to cover the remaining tax. IHT on lifetime transfers - PRs may be liable for unpaid tax on PETs or LCTs if the deceased died within 7 years and the donee fails to pay within 12 months. - Liability is limited to estate assets which they have received or would have received in the administration of the estate, but for their neglect or default. - Gifts with reserved benefits also fall into the estate, with similar liability rules applying.

Answer 217

When all variations in the extent or value of the deceased's assets and liabilities are known, and all reliefs to which the estate is entitled have been quantified, the PRs must report all outstanding matters to HMRC by way of a corrective account.

Answer 218

Using form IHT30; effect being to discharge all persons (particularly the PRs) from further liability to IHT (unless there is fraud or non-disclosure of material facts).

Answer 219

PRs must handle the deceased's final tax return and pay any tax due from estate funds. Income tax; - PRs pay tax on estate income during administration (8.75% on dividends, 20% on other income). - No personal allowances apply. - Relief may be claimed on interest paid on loans to pay IHT. - Beneficiaries report this income, receiving credit for tax paid by PRs. CGT; - PRs are liable for CGT on asset disposals made during estate administration, based on probate value. - They can claim the annual exemption (£3,000 for 24/25) in the year of death and the following 2 tax years. -No CGT arises if assets are transferred to beneficiaries, who inherit the asset at probate value.

Answer 220

No CGT is payable on death itself. If PRs sell assets, they make a disposal. Their acquisition value is the market value at the date of death. They have an annual exemption equal to an individual's in the tax year of death and the 2 following tax years, so there will often be no tax liability on their disposals. The rate of tax payable by PRs is 20% except for gains on residential property which are taxed at 24%. If PRs transfer assents to beneficiaries, they do not make a disposal. The beneficiary acquires the asset at market value at the date of death.

Answer 221

PRs calculate income tax and CGT yearly during administration. If the estate is not complex, they can pay informally. Complex estates (over £2.5m value, £10,000+ tax or £500,000+ asset sales) require full tax returns. CGT on UK residential land must be paid within 60 days of disposal.

Wills and the Administration of Estates Flashcards

(250 cards)