Wills & Trusts Flashcards
(43 cards)
IPFDA 1975 Claim
A claim against your estate, on the basis of not being properly financially provided for
- We cannot say at this stage whether a claim would be successful
- It would depend on his/her financial situation at the time
- Cannot stop the person making a claim
- Advise on the consequences of excluding one potential beneficiary - considerations when making lifetime gifts/drawing up a will
Settlement option to avoid litigation (IPFDA claim)
If an individual has a claim against the client’s estate and the client wants to avoid litigation:
- advise they make a settlement offer = deed of variation to redirect the inheritance
Personal chattels
Household items, car (if you own one), jewellery, furniture
The Nil Rate Band (for IHT purposes)
£325,000 which is tax free. Anything in your estate above that (the balance), is taxed at 40%
Undue Influence
Undue influence occurs where a testator is coerced into making a will which is against their judgment and contrary to their true intentions. It is coercion which goes beyond persuasion.
Advising a client on a claim:
- the burden of proving it lies with the person making the allegation and the court requires evidence
- the question the court considers is whether the testator acted as a “free agent” when executing the will, not whether the will is fair
The issue:
- if a will is made under undue influence, then it will not be valid
The formal requirements for a will to be valid (s9 Wills 1837)
s9 WA 1837 outlines the requirements for a will to be validly executed. It must be in writing and signed by the testator (or someone under their direction), with the testator intending their signature to give effect to the will, and witnesses by two people who sign in the testator’s presence.
Attestation clause
An attestation clause describes the circumstances under which the will was executed
- there is not a legal requirement to have one for the will to be valid
- however, a properly drafted one raises a presumption that the will is executed in accordance with requirements of s9 WA 1837
Testamentary capacity
A person’s legal and mental ability to make or alter a valid will, meaning they understand the nature of the act, understand the extent of the property they are disposing of and appreciate any moral claims against them.
This means they are mentally capable of making a will
Intermeddling
Intermeddling is when a person takes steps indicating that they have accepted their appointment and are fulfilling the duty to administer the estate
For example, obtaining, receiving, or holding the deceased’s assets, forgiving any debt or liability, selling assets, disposing of personal property
- Acts of common humanity, such as arranging the funeral or reviewing the deceased’s home and contents insurance police does not count as intermeddling
DMC
This is a gift made by someone in contemplation of their imminent death and is made conditional on their death. As this is a deathbed gift, it does not need to follow the usual formalities. The gift becomes effective on death
Saunders v Vautier rule
The right of a beneficiary over 18 of sole mind with a vested interest, to compel the trustee to transfer legal title to them, bringing the trust to an end
What is a codicil?
A codicil is used to make changes or additions to an existing will, without making a new one. It is a testamentary document which is intended to be read together with the will
This is useful for minor changes, but if a testator wants to make significant changes, it it better to draft a new will
- The use of many codicils can make it confusing and more prone to errors
- For clarity, the codicil should expressly state the extent to which the testator confirms or revokes their earlier will
Effect of a codicil:
- When a testator executes a codicil, this ‘republishes’ the will. This means the will is given effect too as if it had been executed on the date that the codicil was executed (the will is treated as if it was made on the date of the codicil, not the will)
- This can have implications for determining specific legacies or which beneficiary is entitled, as these will be determined by the testator’s assets / beneficiaries at the date of the codicil
Effect of a codicil on unattested amendments:
- If a will has unattested amendments which would not have effect under the general rule as they are made after execution, these can be confirmed by a later codicil
- The codicil must expressly refer to the alterations it confirms and the amendments must be made before codicil is executed
Revocation and revival
- A codicil can revoke a will
- A codicil can revive a will that was previously revoked, but not if it has been destroyed
What is a precatory trust?
This is type of trust where the language used expresses a wish or recommendation as to how the beneficiary should pass on the assets. No formal trust is created and the testator’s wishes are not binding on the beneficiary
- If the original beneficiary makes the distributions intended by the testator within 2 years of the testator’s death, these are treated for IHT purposes as being gifts made by the testator, and not the original beneficiary
- However, these rules do not apply for CGT and re-distribution in accordance with the testator’s wishes would be treated as a disposal by the original beneficiary
What is a resulting trust
It is a type of trust which is imposed by law. It returns the beneficial ownership in the trust property back to the settlor (the person who set up the trust for the benefit of the beneficiaries)
- Automatic resulting trust - where a transfer on trust wholly or partially fails but the property has been transferred to the trustee (intended trust has failed but legal title has been transferred)
- Presumed resulting trust - arises where a legal owner transfer legal title to someone else for no consideration, but there is no evidence of gift or trust. It is presumed that the transferor intended the transferee to hold it on trust for them
- Gratuitous transfer or pay all/part of purchase price
What is proprietary estoppel?
It is an equitable doctrine (a remedy) which allows an individual to informally acquire property rights. This prevents the property owner from dealing with all or part of the land in they way they want because of promises they made to the claimant, and prevents unconscionable conduct
Elements:
1. Assurance - that claimant has or will acquire a right in the property
2. Reliance - there is a link between the assurance and the claimant’s conduct
3. Detriment - detriment in consequence of their reliance
4. Unconscionable - behaviour which shocks the conscience of the court
There are a range of remedies available (court has discretion)
- The remedy should never exceed the claimant’s expectation
- The most obvious remedy is one which satisfies the expectation
What is a common intention constructive trust
A trust founded on common intention of the parties regarding property ownership of a family home, even if it is not legally declared
- Need common intention and detrimental reliance
- Can be express or inferred intention
What is a trustee?
A trustee holds property for the benefit of the beneficiaries, as legal owners of the trust property
- Trustee must be an adult of sound mind
- It is a voluntary, unpaid role
- It is good practice to have more than one trustee and joint trustees must act together (unanimously)
- Trustee role is an active role
- Fundamental duty is to act honestly and in good faith for the benefit of beneficiaries
What are trustee duties?
- Trustee duties
- Duty to comply with the terms of the trust
- Duties to exercise functions with prescribed standard of care and skill - Fiduciary duties
- No conflict duty
- No profit duty
What duties do trustees have for investment?
Trustees have an obligation to ensure the trust fund produces income and capital growth, for the benefit of current and future beneficiaries. Trustees have an overriding duty to exercise their investment powers with care and diligence
Breach of trust
Trustees may only act within their powers. A breach of trust is an act (or failure) to act by a trustee which is not authorised by the trust document or by law
Trustees will breach the trust if:
- Act outside their powers
- Fail to comply with trustee duties
What is a fiduciary relationship?
The fiduciary is placed in a position of trust and confidence in relation to another (owes a single-minded loyalty) and acts on their behalf or in their interests. In respect of a trust, the trustee has a fiduciary duty:
- Not to create conflict between personal interests and their duties to beneficiaries
- Not to make unauthorised profit from their role as a trustee
What is an account of profits?
It is a personal claim which requires the trustee to pay the principal an amount equivalent to the profit they have made
- remedy available for breach of the no profit rule (fiduciary duty)
What is a constructive trust?
This provides protection against insolvency of a beneficiary and allows principal to trace into subsequent profits made by the fiduciary
- It arises by operation of law where it would be unfair to allow a property owner to retain full ownership of an asset
Rule in Saunders v Vautier
The rule grants adult beneficiaries of sound mind absolute ownership of trust property if they are entitled to the entire beneficial interest. This means beneficiaries can terminate the trust, take control of the assets and distribute them in the shares they choose
