5. Post-Death Changes, Legacies, Residue, Estate Accounts, Assents, Beneficiaries Rights and Remedies, and Provision for Family and Dependents Act

Question 1

How may a beneficiary disclaim their entitlement, and what precludes them from being able to do so?

Answer 1

Orally or in writing, unless they have already accepted benefit

Question 2

However, for what purposes must a disclaimer be in writing?

Answer 2

Inheritance tax and capital gains tax purposes

Question 3

Where does a disclaimed gift go?

Answer 3

Into the residue, or into partial intestacy if the gift is the residue

Question 4

Does disclaiming a gift prevent the same person from receiving property under intestacy rules?

Answer 4

No, and for confusion on the exam it could potentially be the exact same property.

Therefore consider disclaimer to be rejecting the status as beneficiary under a will, not rejecting the property.

Question 5

What is the main disadvantage of a disclaimer, and what is a way to overcome this?

Answer 5

The disclaiming beneficiary has no control over the ultimate destination of the gift.

This can be overcome by use of a variation (allows B to change who receives the gift) instead of a disclaimer.

Question 6

What does it mean for a variation to be effective for tax purposes, and what are the three conditions for this?

Answer 6

It means that the variation is read back to the date of death as if the new beneficiary was the original beneficiary

Variation must be:

1. In writing
2. Made within two years of death
3. Not made for monetary consideration

Question 7

Unlike disclaimer, in what situation can a variation still be made?

Answer 7

When the original beneficiary has accepted a benefit

Question 8

On to Payment of Legacies:

What are the methods with increasing levels of formality which PRs must use to vest gifts in beneficiaries when the gift is of:

1. Chattels
2. Company shares
3. Land

Answer 8

1. Chattels: Items can be delivered, in exchange for receipt, and insurance then cancelled
2. Company shares: Stock transfer form
3. Land: Assent in writing, and insurance then cancelled (B needs to register their interest with HMLR)

Question 9

Unless the will provides otherwise, who bears the costs of transferring assets?

Answer 9

The recipient beneficiary

Question 10

When does the doctrine of abatement arise, and what does it provide?

Answer 10

When assets of a deceased person are not sufficient to fully satisfy all creditors, their debts abate i.e. are reduced, proportionally, and the creditor has no choice but to accept this lower value

Question 11

Does abatement also apply to legacies?

Answer 11

Yes, excluding where there is a priority given to any specific legacy

Question 12

On to Ascertaining the residue:

What is the tax presumption given to specific gifts of (1) UK property and (2) non-UK property?

Answer 12

Specific gifts of UK property are deemed free of tax, unless the will states otherwise.

The opposite presumption applies to non-UK property.

Question 13

What does free of tax require in practice?

Answer 13

That the PRs pay off any tax liabilities before vesting assets in beneficiaries

Question 14

For what type of estate is a Certificate of Discharge (document from HMRC confirming liabilities are discharged) not required?

Answer 14

An excepted estate

Question 15

How long after a grant of representation regarding an excepted estate is there an automatic discharge?

Answer 15

35 days

Question 16

What are the four ways a PR can be authorised to receive remuneration for their services, in exception to the general rule that they are not entitled to do so?

Answer 16

1. A legacy given to an executor
2. Express clause in the will (usually for professional PRs)
3. Beneficiaries (of the source of funds used to pay the PR) consent
4. Court permission

Question 17

On to Estate accounts:

What are the three accounts which generally make up the estate accounts?

Answer 17

1. Income account
2. Capital account
3. Distribution account

Question 18

Where does income that relates to the period before death but is received after death go?

Answer 18

Capital account

Question 19

What are the three purposes of the commentary document which accompanies the estate accounts?

Answer 19

1. Identifies the gross and net values of the estate
2. Confirms the disposition of the estate
3. Deals with any other relevant matters

Question 20

At this stage, how are the PRs discharged from liability?

Answer 20

1. PRs endorse the accounts and send to the residuary beneficiaries
2. Residuary Bs endorse the accounts
3. Residuary Bs formally discharge PRs with agreement to indemnify them against all claims and demands (again, can be worthless if Bs have no money)

Question 21

What are the PRs’ two options if a residuary beneficiary refuses to endorse the accounts?

Answer 21

1. Ask court to approve the accounts
2. Pay the objecting beneficiary’s share into court

Question 22

On to Assents:

What is an assent and what are the three requirements for one?

Answer 22

Document which vests legal title in a beneficiary.

1. In writing
2. Signed by the PRs
3. Expressly name the person in whose favour it is given

Question 23

In what situation is an assent still required, despite examiner’s attempts to trick, and why?

Answer 23

Even when the PR is the beneficiary, because the capacity in which they are holding the asset is changing from PR of the estate to beneficiary in their own capacity

Question 24

Is an assent required when a PR is to continue to hold property in a different capacity, e.g. as trustee under a trust arising out of the will or intestacy, and why?

Answer 24

Yes, because again, the capacity in which they are holding the asset is changing from PR of the estate to trustee of the trust

Question 25

Whilst in the case of unregistered land, the PRs must ensure the land is subject to first registration, what are the PRs two options in the case of registered land?

Answer 25

1. Apply to be registered as the owner in place of the deceased, producing the grant when doing so, or
2. Transfer the property by assent to a beneficiary who will then apply to be the registered owner, submitting a certified copy of the grant when doing do

Question 26

When buying land from a PR, what should a purchaser insist on which will protect the purchaser unless they have notice to the contrary?

Answer 26

A statement in the conveyance that no previous assent has been made

Question 27

When buying land from a beneficiary, what is sufficient to prove the beneficiary has the right to sell?

Answer 27

An assent in the beneficiary’s favour

Question 28

On to Beneficiaries’ rights and remedies:

Before administration is complete, what is the term given to a beneficiary’s right to have the deceased’s estate properly administered?

Answer 28

A chose in action

Question 29

Until administration is complete, what does a beneficiary not have?

Answer 29

B does not have any legal or equitable interest in the deceased’s assets

Question 30

What right to income do specific legatees have?

Answer 30

A right to the income accruing from death, e.g., legacy is a specific investment property producing monthly rental income. Beneficiary would be entitled to the income from the date of death.

Question 31

What right to income do residuary beneficiaries have?

Answer 31

A right to intermediate income whether their interest is vested or contingent

Question 32

Can the income rules be overridden by a will?

Answer 32

Yes

Question 33

What are the two ways to recover loss from the PRs?

Answer 33

1. Personal action
2. Tracing

Question 34

What are the two ways the PRs be absolved, even if they would otherwise be personally liable?

Answer 34

1. If they acted honestly and reasonably, and ought fairly to be excused, or
2. Beneficiaries consent

Question 35

What is tracing, and in what two situations is the right to it lost?

Answer 35

The right of the beneficiaries to trace and recover property from the estate from PRs or subsequent purchasers.

The right to trace is lost if the purchaser is a bona fide purchaser for value without notice, or it would otherwise be inequitable to allow tracing.

Question 36

On to Claims against estates under Inheritance (Provision for Family and Dependents) Act 1975:

What are the grounds to make a claim to the court under the 1975 Act, and what is the effect?

Answer 36

The terms of a will can be set aside or an intestacy can be varied if the deceased was domiciled in England and Wales and did not make reasonable financial provision for the applicant

Question 37

Within what time of what event must an application under the 1975 Act be made?

Answer 37

Within six months of the grant of representation to the PRs, or later with court permission

Question 38

What are the five categories of people who will qualify to make a claim under the 1975 Act?

Answer 38

1. Surviving spouse or civil partner at the date of death
2. Former spouse or civil partner who has not remarried
3. Child of the deceased or person treated as a child of the family
4. Person who was being maintained
5. Person living with deceased as partner for entire two-year period before death

Question 39

When might a former spouse be precluded from making a claim under the 1975 Act?

Answer 39

If they agreed to a clean break divorce

Question 40

Although children are a category who can make a claim, when will adult children be unlikely to be allowed to claim?

Answer 40

If they are able-bodied and in full employment

Question 41

For a person who was being maintained to be able to make a claim, how much of a contribution must the deceased have been making?

Answer 41

A significant contribution towards the reasonable needs of the claimant

Question 42

What is the two part process for determining what constitutes reasonable financial provision?

Answer 42

1. Has the will or intestacy rules failed to make reasonable financial provision for the claimant?
2. If so, what would such a provision have to be for the answer to part 1 to become no

Question 43

What is the standard for reasonable financial provision when it comes to a spouse?

Answer 43

Financial provision which is reasonable in all the circumstances, whether needed for maintenance or not

Question 44

In their discretion, in what circumstance can the court apply the spouse standard to former spouses?

Answer 44

If the death occurs will 12 months of the divorce decree and no final order has yet been made in the divorce proceedings

Question 45

For all other applicants who aren’t spouses or former spouses qualifying for the spousal standard, what is the standard?

Answer 45

Financial provision which is required for maintenance such that they can live decently and comfortably according to their situation

Question 46

Is the test for this objective?

Answer 46

Yes, although evidence of the deceased’s reasons for not providing for the claimant are admissible

Question 47

What occurs when the court approves an application under the 1975 Act?

Answer 47

The estate is administered according to the terms of the court order, and not the will or intestacy

Question 48

In the event of a successful application under the 1975 Act, what are the court’s four options under their wide discretion?

Answer 48

1. Transfer property
2. Payment of a lump sum
3. Payment of income
4. Settlement of property on trust

Question 49

Does the court have any powers under the 1975 Act regarding property disposed of by the deceased before death?

Answer 49

Yes, if that disposal was intended to avoid the provisions of the 1975 Act