5 - Wills & Intestacy

Question 1

What is the law of succession?

Answer 1

This is when beneficiaries succeed to property on someone’s death.

Question 2

What is the purpose of a will?

Answer 2

It states which assets are left to which beneficiaries, and names the executors.

Question 3

Wills & Intestacy

Responsibilities of executors

Answer 3

• Prove the will to obtain Grant of Probate;
• Collect in assets of the deceased;
• Pay debts;
• Pay tax liabilities;
• Submit IHT return;
• Distribute the estate in accordance with the will.

Question 4

Wills & Intestacy

What must be done before Grant of Probate is issued?

Answer 4

The IHT bill must be paid.

Question 5

What are the requirements for a valid will?

Answer 5

• Must be over 18 and of sound mind;
• Must be made voluntarily;
• In writing;
• Signed by testator;
• Attestation - witnessed by 2 independent witnesses.

Question 6

What is a mirror will?

Answer 6

When spouses/partners make identical or nearly identical wills.

Question 7

What is the process of intestacy?

Is a deed of variation possible under intestacy?

Answer 7

Intestacy involves an administrator instead of executor.

• Determine assets/liabilties;
• Apply for a Grant of Letters of Administration to Probate Office;
• Once GoLoA received, collect the assets;
• pay any debts/funeral expenses;
• pay any IHT, income tax, CGT due;
• complete accounts;
• then distribute estate according to the laws of intestacy.

Deed of variation is still possible.

Question 8

How is the estate distributed under laws of intestacy?

Answer 8

• Spouse or civil partner but no issue (eg kids, grandkids) - All to spouse/CP;
• Spouse/CP & issue - Spouse/CP takes personal chattels + £250k + 50% of the rest. Children get the other half, held on statutory trust if necessary until either age 18 or they get married;
• No spouse - All taken by children, if no children then all taken by grandkids, if none then their parents, if none then siblings.
• No relatives - All assets pass to the crown.

Note: Children include all children of the deceased, including those from previous marriages.

Question 9

When must the transfer of NRB request be made and by whom?

Answer 9

Claim for NRB transfer must be made within 2 years of death by legal personal representatives.

Question 10

Residence Nil-Rate Band

Amount of NRB, including withdrawal and transfer.

Answer 10

£100k in 17/18 rising to £175k by 20/21.

Withdrawn by £1 for every £2 that net estate exceeds £2m.

Any unused amount can be transferred and used on second death.

Question 11

Residence Nil Rate Band

Who can the residence be given to?

Answer 11

Residence can be passed on to any dependent.

Includes children (including step-kids, fostered, adopted, child they were guardian for), granchildren, spouses/CP unless re-married.

Question 12

Residence Nil Rate Band

Impact of down-sizing/selling home

Answer 12

If they downsized or sold their home after 7/7/15 then the equivalent amount of assets passed to descendants receive the same protection.

Question 13

Deed of Variation

What are the requirements?

Answer 13

• Must refer to the will or intestacy being varied;
• Within 2 years of death;
• Contains a statement that the variation is to have effect for IHT purposes;
• Signed by all making the variation;
• No consideration.

Question 14

Disclaimer

Requirements to disclaim

Impact

Answer 14

You can disclaim property within 2 years of death, provided you didn’t previously accept it.

The disclaimer itself is NOT a transfer of value, property is treated as passing back into the estate.

You have no control over who would end up inheriting.

Question 15

Revocation

Requirements to revoke your will by choice

Answer 15

• Must be voluntary;
• Must have the intention to revoke;
• Need to have mental capacity;
• Must be effected by destruction of the will, by a new document or an informal declaration.

Question 16

Revocation

Automatic revocation of your will

Answer 16

• New marriage or civil partnership revokes old will, unless the will states that it anticipates the marriage/CP;
• If a spouse is an executor this is cancelled by a subsequent divorce;
• Divorce also cancels benefits under a will to a spouse (unless the wording states otherwise), the rest of the will is NOT affected.

Question 17

Tax on Death

What income taxes need to be paid by representatives?

Relevant rates and allowances

Answer 17

Personal representatives must pay any income tax debts at death, plus income tax on any untaxed earnings.

Usual rates and full allowances (for whole year, not pro rata to date of death) are available against income while they were alive.

Income received after death is taxed at basic rate with no allowances.

Question 18

Tax on Death

What CGT is payable?

Answer 18

CGT up to your death is wiped out.

However personal representatives are responsible for paying tax on any gains in the estate after death.

Taxed at 20% (28% for resi.) with annual allowance available.

Assets deemed to have been acquired at market value at time of death.

Question 19

Business Relief

If business relief assets are passed on death to a spouse, how are the assets treated for business relief purposes within the spouses estate?

Answer 19

The new holder of the assets (spouse) is treated as having held the assets for as long as the original owner (now deceased) held them.

So the 2 year requirement doesn’t reset to zero if you die and leave business relief assets to your spouse.