Chapter 8: Estate planning and related legal matters Flashcards
It is worth briefly making the point that in any IHT planning exercise, it is important to use any exemptions as fully as possible, what are the most common exemptions?
Gifts from normal expenditure
Annual exemptions - £3,000 and then wedding etc.
Transfers between spouses
PETs
Difference between tenants in common and joint tenancy?
In common: On death, the value of the individual’s share of the property passes to their estate.
Joint Tenancy: When one person dies, the property automatically passes to the surviving person(s). It cannot, therefore, be disposed of by will or trust.
On the other hand, if one person in a married couple requires local authority funded residential care and the other remains in the family home, what happens if the spouse in the family home subsequently dies?
If the property is owned as joint tenancy the property or any sale proceeds that are due to the surviving spouse (who is receiving the funded residential care) will be assessed when received.
It therefore may be beneficial to have the property owned tenants in common to minimise this and as prudent IHT planning.
It will have implications for the value of the share left in the hands of the other partner, since its value is the amount a ‘willing buyer’ would be prepared to pay for it. This is likely to be low given that the other half share is owned by a sitting tenant.
What does it mean if someone dies intestate?
They have died without leaving a valid will.
What is the order of beneficiaries if someone dies intestate for:
Spouse or civil partner but no issue (children) or their descendants?
spouse takes estate.
What is the order of beneficiaries if someone dies intestate for:
Spouse or civil partner and issue (or their descendants)
Spouse or civil partner takes personal chattels (car, furniture, pictures, clothing, jewellery, etc.), plus any jointly held assets, plus £270,000 absolutely.
Any amount above this figure: spouse receives half with the remaining half split equally between the
children.
If a son or daughter dies, their descendants will inherit their share.
What is the order of beneficiaries if someone dies intestate for:
Children (or their descendants) survive but no spouse or civil partner
Everything is taken by: issue (or their descendants).
What is the order of beneficiaries if someone dies intestate for:
Nobody survives
Crown takes entire estate
What are 3 requirements for a will to be valid?
Writing, signature, attestation
When may a will be automatically revoked?
- making of a later will;
- testator’s marriage/re-marriage (unless written in anticipation of a forthcoming marriage);
- destruction of the will by the testator with the intent to revoke it
When can a deed of variation be undertaken
recipient is over age of 18 and has mental capacity
To be effective for IHT planning, the deed must, what?
- refer to a will, intestacy or trust;
- be signed by those who would otherwise have benefited;
- be executed within two years of death;
- contain a signed statement that the variation is to have effect for IHT as if the deceased had made it
- have no consideration for money or money’s worth
What is a a deed of variation of intestacy?
where the beneficiaries agree to write a last will for the person who has died – but after their death
Conditions for a valid disclaimer are:
- there must be no consideration for money or money’s worth;
- it must be in writing;
- it must be made within two years of death; and
- it must state that it is intended to be effective for IHT and CGT.
