IHT And Trusts Flashcards
1
Q
Rules for a valid will (5)
A
W - witnesses and written (by 2 people at same place + same time) I- intention L - legal capacity (18+ and sane) L - lasts even after divorce S - signed or marked
2
Q
When is a will revoked? (7)
A
- on execution of a new will
- destruction by the testator
- marriage (unless the will anticipates marriage)
- divorce
- cancels benefit to former spouse ONLY (unless the will states otherwise)
- cancels appointment of former spouse as executor - if original will was found not to have been executed correctly I
3
Q
Rules of Deed of variation (7)
A
BENEFICIARIES:
- All beneficiaries affected by the variation must AGREE and SIGN
- beneficiaries must be 18+ and sane
THE DEED:
- must be executed within two years of testators death
- must specifically REFER TO THE WILL
- must state the variation is for the purpose of IHT
GENERAL:
- there must be no consideration for money or money’s worth
- legal reps must sign if IHT (or more IHT) becomes payable
4
Q
Residence NRB
A
- introduced on 6/4/17
- £125k each person for main residence in 18/19
As long as passed to direct descendants (children, grandchildren, step children, foster children) or any of their spouses / civil partnership - increasing by £25,000 to max £175k
- transferable on death as per standard NRB
- even if 1st spouse died before 6/4/17
-estates in excess of £2mn will suffer from tapering of RNR - £1 for every £2 exceeded
5
Q
Benefits of using a Discretionary Will Trust (8)
Works best with assets that are likely to grow by more than NRB!!
A
- effective immediately
- clients retain full access to access during their lifetime
- provides flexibility to accommodate for future changes in circumstances
- no ongoing costs (but set up charges)
- no age or health restrictions
- once made, assets grow outside the estate
- on second death more or spouses NRB may be available
- it provides protection against business creditors and on divorce
- previous lily deceased spouse / CP NRB could be utilised (triple NRB!)
6
Q
Drawbacks of DWT (5)
A
- unmarried couples can not benefit
- married couples who are about to divorce
- married couples who have a domicile mismatch
- couples who do not want complex wills
- where the local authority is being asked to fund care costs - could be seen are deliberate deprivation of assets
7
Q
Options to insure an IHT liability
A
- PETS within NRB and CLT’s within NRB = level term assurance (to protect the NRB)
- Excess PETS = gift inter vivos plan (7 years in trust to executors of the will to pay the liability)
- long term liability beyond 7 years = WOL in trust to executors of the will
8
Q
Options in battle against IHT (7)
A
- will/DOV (DWT, charity gifts are exempt)
- exempt gift reliefs (£4K, £250, Gifts out of NI, charity, intra-spouse, BR
- gifts into trust
- loan trusts
- DGT
- outright gifts
- Insure the liability
9
Q
SJP Later Life Planning Scheme - facts
A
X
10
Q
Considerations when meeting an attorney of a new client (6)
A
- do they have authority to represent the client
- LPA document has appropriate Office of Public Guardian (OPG) stamp on each page
- Type of POA
- Restrictions
- number of attorneys/replacement attorneys
- Are the attorneys appointed to act Jointly or Jointly and Severally
11
Q
Conditions that need to be met for a disabled persons trust (2)
A
- beneficiary must be eligible to receive AA/DLA/PIP / qualify under the mental health act 1983
- trust property can only be applied for the benefit of the disabled person and the beneficiary must be entitled to receive any income arising from the trust property
12
Q
Tax advantages of a disabled personals trust (10)
A
General:
- income and gains are taxed as a normal DT but trustees can reclaim the difference between what tax was paid and what the disabled person would have paid if they held the property in their own name
CGT:
- reduced amount of CGT is payable than usually within a DT
- because the disabled person has a CGT exemption of £11,700 and basic rate CG tax is payable on the element in the basic rate band
IT:
- a lower amount of IT is payable than normal within a DT
- because income is tax as if received personally by the disabled person
- therefore he can use his PA, PSA and DA
IHT:
- payments into the trust are a PET so no IHT is payable immediately
- even if exceeds the donors NRB’s
- no period or exit charges apply
13
Q
Benefits of a WOL plan (3)
A
- sum assure will cover all/most of IHT liability
- assets in the estate will not need to be sold to pay IHT
- Maintains use of other assets during lifetime
- if placed in trust then it will not add to the estate liable for IHT
- if the premiums is classed as a gift out of normal expenditure then it will reduce the value of the estate
14
Q
Drawbacks of WOL (3)
A
- can be expensive
- no guarantee IHT liability will be covered
- if eatatw remains above £2mn then RNRB will still be affected
15
Q
Benefits of lifetime gifts (3)
A
- no cost involved
- donees can benefit immediately
- exempt from IHT if donor survives 7 years
- can make use of exemptions (e.g annual exemption or GOONES)
- growth on gifted amount is immediately outside the estate
- can help to reclaim RNRB
