13.5 Property passing outside the estate

Question 1

What property will pass OUTSIDE the estate instead of via the testator’s will or the intestacy rules?

Answer 1

• property owned as a beneficial joint tenant
• life assurance policies
• pension scheme death benefits
• nominated property
• life interests in trust property, and
• gifts where the donor has reserved a benefit.

Question 2

Explain the succession of property owned as a beneficial joint tenant?

Answer 2

Property owned as a beneficial joint tenant: Interest passes to the survivor(s). This could be a bank account or the matrimonial home for example.

This rule does not apply for tenancies in common, where the share passes via the will or intestacy rules.

Question 3

Explain the succession of life assurance policies?

Answer 3

Life assurance policies:

These policies can be held in trust for, or assigned to, beneficiaries. If beneficiaries (e.g children) are taking the benefit of the policy, the value of the policy is not included in the estate for succession or tax purposes

Question 4

Explain the succession of pension scheme death benefits?

Answer 4

Pension scheme death benefits: The scheme member is normally permitted to make a non-binding nomination of their preferred recipient.

Question 5

Explain the succession of nominated property?

Answer 5

Nominated property: If an individual has made a nomination for such accounts, the institution will pay the investment to the chosen nominee. The provisions apply to deposits not exceeding £5000.

Question 6

Explain the succession of life interests in trust property?

Answer 6

Life interests in trust property: The trust fund will pass according to the terms of the trust deed. When someone with a life interest dies, the trust assets will pass to the named capital beneficiary (remainderman) outside of the life tenant’s estate.

Question 7

Explain the succession of gifts where the donor has reserved a benefit?

Answer 7

Gifts where the donor has reserved a benefit: Inheritance tax concept. The deceased has given something away but has retained some benefit in the gifted property.

There is a tax consequence to this but the asset does not belong to the deceased for succession purposes.

Question 8

Explain what will form part of the deceased’s estate for IHT purposes?

Answer 8

Part of the estate for tax purposes:

• Beneficial interests - jointly owned property,
• life interests in trust property;
• gifts with reservation of benefit.

However → they are not payable to the personal representatives for succession purposes.