Cii Practice Test 4 Flashcards
State the date by which IHT needs to be paid
The end of the sixth month after person died
Outline an executor’s responsibilities
Establish the assets and debts of the estate.
Apply to HMRC/complete PA1 form.
Obtain Probate.
Gather the assets.
Pay off her outstanding mortgage/tax/debts.
Pay the IHT bill.
Distribute the net proceeds to the named beneficiaries.
Act with due care/best interest of estate.
Initial and ongoing treatment of a discretionary trust
Transfer in is CLT.
Amount above the nil rate band, less two annual exemptions of £3,000, would have been subject to Inheritance Tax at 20% if paid by the trust or 25% if paid by settlor.
If settlor dies within seven years there could be further tax to be paid by the trustees based on the amount above the then nil rate band.
Taper relief might be available.
Credit would be given for tax paid at outset.
Periodic charges could be levied every ten years.
Exit charges could be levied on any capital distributions or appointments.
Responsibilities of a trustee
(BI FIT CARD) Balance Interests of beneficiaries Act Fairly, Impartially, and in accordance with the Trust deed. Care with investing/treat money as their own Advice (take if needed) Review reguluarly Diversify Keep accounts & file tax return Comply with Trustee Act 2000 Invest cash promptly
When may it be necessary to replace a trustee?
If they:
refuse to act.
are unfit e.g. bankruptcy, acts fraudulently.
are incapable
desire to be discharged/resign.
remain out of the UK for more than a year.
die.
Explain the effect bankruptcy would have on a pension
As long as pension scheme is registered with HMRC
It cannot be claimed by the trustee in bankruptcy.
Unless the trustee in bankruptcy can show excessive contributions/intent to defraud creditors.
Explain the effect bankruptcy would have on cash and investments.
Ownership of ISAs, OEICs etc and cash will pass to the Trustee in Bankruptcy (TIB).
They remain in the TIB’s ownership even if George is discharged.
Any income from them will be claimed by the TIB.
TIB could encash the investments and use the proceeds to repay creditors.
In respect of assets, state the restrictions that will apply a person who is bankrupt.
Person must not:
Conceal debts or assets from the Trustee in Bankruptcy.
Destroy or falsify any records of affairs.
Make any false statements to the Trustee in Bankruptcy.
Dispose of assets with intent to defraud creditors/undervalue.
Fraudulently give priority to one creditor over another.
Take any assets out of the country.
Obtain credit without disclosing their status.
List the general duties of a Lasting Power of Attorney.
Make decisions in the donor’s best interest.
Only make decisions that the terms of the Lasting Power of Attorney allow them to make.
Not passing on the powers unless authorised to do so.
Keep the donor’s affairs confidential.
Make sure no conflict of interest/the decisions benefit the donor and not the attorney.
Keep their money separate from that of the donor.
Support the donor prior to taking action wherever possible.
Liaise with Court of Protection (COP)/Office of Public Guardian when considering gifts/other actions.
State the circumstances that could result in a POA being revoked.
Donor can revoke it at any time if they have capacity.
If attorney loses capacity.
If donor or attorney becomes bankrupt, financial element is revoked.
If donor or attorney die.
Court of Protection can revoke e.g. misuse.
state the priority order in which his creditors will be paid.
(SEPFUIS)
Secured creditors.
Expenses of bankruptcy.
Preferential debts, e.g. pension scheme contributions remuneration owed to employees.
Floating charges held by creditors, e.g. debenture.
Unsecured creditors/HMRC.
Interest due on debts since the bankruptcy restriction order.
Debts owed to Spouse/CP.
State the conditions of rent-a-room relief.
Accommodation must be furnished and not self contained.
Must be used as a residence.
Must not be used for business purposes.
Must be let on a commercial basis.
What are the tax rules around rent-a-room relief?
£7,500pa tax free.
If earn more than this threshold, complete a tax return.
Can chose between being taxed on profits over £7,500 (with no deduction for expenses) or on whole amount on an income less expenses basis.
State the tax considerations someone should be aware of when investing into an offshore bond.
Gains not taxed within the fund
Gains assessed on CGT principles but subject to Income Tax on encashment at highest marginal rate and with no CGT annual exempt amount.
Dividends may be subject to withholding tax.
Can take 5% tax-deferred withdrawals each year of original investment amount.
Time apportionment relief for time spent abroad.
Top slicing may be available.
