Chapter 17: Ascertaining the Residue Flashcards
What tax must the PRs take into account?
The PRs must take into account the income tax and capital gains tax of both the deceased and the administration period.
What should the PRs do if they paid IHT that should have been paid by the beneficiary of a gift?
E.g., because of the will’s terms, or because property passed a surviving joint tenant.
The PRs need to withhold the tax due or ensure they will be reimbursed.
What does it mean if a pecuniary legacy is made ‘subject to tax’?
The PRs withhold the tax and pay the net legacy to the beneficiary.
What is the presumption re whether a gift will be deemed ‘free of tax’ or not?
Succession law generally assumes that a specific gift of UK property is deemed to be ‘free of tax’, unless the will states otherwise.
The reverse is true in relation to gifts of overseas assets.
What is a corrective account?
Filed when the incorrect amount of IHT was initially paid.
If there is a change in IHT due, the residue will be affected.
What is a Certificate of Discharge?
PRs should obtain a Certificate of Discharge from HMRC which avoids further IHT liability.
It is an effective discharge, except where there is:
- fraud,
- a failure to disclose material facts,
- subsequent discovery of further assets, or
- changes in the IHT liability due to a variation
When will HMRC issue a limited Certificate?
If the PRs have to pay future instalments of IHT due to the PRs claiming the instalment option on qualifying property
When is a Certificate not required?
For an excepted estate
there is an automatic discharge 35 days after a grant of representation unless circumstances change
What is considered reasonable for funeral expenses?
Reasonableness of expenses is a question of fact, taking into account various factors concerning the deceased
What requirement is there of solicitor’s charges in non-contentious probate matters?
They must be fair and reasonable in the circumstances, taking account of factors such as complexity, time spent, the value of the estate, and the number and importance of documents involved
When are PRs entitled to charge for services?
They aren’t entitled to charge unless authorised in some way:
1. Legacy to proving executors
2. Express charging clauses
3. Agreement with beneficiaries
4. Court can authorise remuneration for PRs for past, present, or future services
What presumption is there re legacies to proving executors?
It is presumed that any specific or general legacy (but not the residue) to an appointed executor is conditional upon them accepting office.
However, this presumption can be rebutted by a clause in the will.
What are express charging clauses?
Routinely included in the will for professional PRs.
These typically. cover sole professional trustees + also remove the need for the other trustees’ agreement to payment when the professional is one of several trustees
Why must PRs prepare estate accounts?
To show the residuary beneficiaries what is available to them.
No prescribed formats
How are PRs discharged?
PRs usually endorse estate accounts to indicate their approval.
The accounts are then sent to the residuary beneficiaries for them to endorse - and for them to formally discharge the PRs with an agreement to indemnify them against all claims and demands.
