Introduction to WAE Flashcards
What is a testator?
A person who had died leaving a valid will
What rules are followed if a person dies without a valid will?
The intestacy rules - they have died intestate
What is partial intestacy?
Cases where the will does not cover the entire estate - partial intestacy often arises due to poor will drafting
Where are the intestacy rules found?
In the Administration of Estates Act 1925 (as amended by the Inheritance and Trustees’ Powers Act 2014
What is the succession estate?
Assets capable of passing by will or intestacy are collectively referred to as the succession estate
What assets fall outside of the succession estate?
- property held as beneficial joint tenants
- property held in trust
- discretionary pension scheme benefits
- insurance policies written in trust
- statutory nominations
- donations mortis causa
What is donationes mortis cause?
DCM is a gift made in contemplation of death
3 requirements for a valid donatio mortis causa
- the gift is made because the donor believes they will die imminently of a particular clause
- the donor makes it clear that the gift is conditional upon them dying, and the property will revert if they survive
- the donor either parts with the property or something representing its ownership
Are discretionary pension schemes included in the distribution estate?
No - if the deceased was a member of an employer’s discretionary pension scheme, payments made by the trustees will not be included in the estate for distribution purposes
Discretionary pension schemes
A third party is usually nominated to benefit, but the trustees are not bound by this. However in practice the trustees almost always make this payment
Payment of discretionary pension schemes
As payment is entirely at the discretion of the trustees, the deceased is not deemed to have any entitlement to any payment from the scheme so does not form part of the distribution estate
When is a benefit of a discretionary pension scheme released?
Upon the production of a death certificate
Can insurance policies proceed as part of the succession estate?
Maybe - it depends how it is held
What happens to simple life insurance policies?
The proceeds of the simple life insurance policy pass as part of the succession estate
Life policies written in trust?
Where a benefit of a policy is written in trust, the proceeds do not form part of the succession estate. The proceeds belong to the beneficiaries nominated in the policy and vest on the insured’s death
3 ways life insurance policies can be written in trust?
- under s11 Married Women’s Property Act 1882 for the benefit of spouse and/or children
- Expressly for the benefit of any nominated third party (grandchildren)
- Into an existing trust for the benefit of the named beneficiaries in the trust deed
When are insurance policy benefits released?
On the production of a death certificate
What type of accounts can you make statutory nominations into?
- friendly society
- industrial society
- provident society
Maximum statutory nomination amount?
cannot exceed £5,000
What happens to statutory nominations?
On the deceased’s death the monies in the relevant accounts pass to the nominee rather than under the will or intestacy
When is the benefit of the nominated account released?
On the production of a death certificate
What is joint tenants?
If the deceased was a beneficial joint tenant, the property will automatically pass to the other joint tenant by survivorship
Does property held as joint tenants form part of the succession estate?
No - property held as joint tenants passes by survivorship
What is tenants in common?
If the deceased was a beneficial tenant in common, they have separate divisible shares. This is not extinguished upon their death.
Does property held as tenants in common form part of the succession estate?
Yes - the share in the property will pass into the succession estate
Can land be held legally as joint tenants or as tenants in common?
No - the legal title can only be held as either joint tenants (up to 4) or solely. The equitable/ beneficial title can be held as either joint tenants or tenants in common
What assets are commonly joint?
Property and bank accounts
How do two people hold a joint bank account?
As legal joint tenants
Can the rules of survivorship apply to joint bank accounts?
Yes - bank accounts held as JTs pass under the rule of survivorship
Does trust property form part of the succession estate?
It depends on the nature of the interest and whether it survives their death
If a D was a life tenants under a life interest trust, does the beneficial life interest form part of their succession estate?
No not usually - the life interest expires on their death and the remainder interest usually vests in possession
Does a remainder interest form part of the succession estate?
Yes sometimes - provided that the remainder interest is vested ‘in interest’ - i.e not contingent on the D outliving the life tenant
What makes up the succession estate?
All property that D owned beneficially at the time of death that is capable of passing to PRs (via Will or intestacy)
What do PRs do in an intestate estate?
Hold the undisposed property on trust with power to sell under s33 AEA
Where is the statutory order for intestacy found?
S46 AEA
What happens under intestacy if D leaves a spouse and no issue?
The spouse inherits the succession estate absolutely
What happens under intestacy if D leave an issue but no spouse?
The issue inherits the entire succession estate on the statutory trusts
What happens under intestacy if D leaves a spouse and issue?
The position is more complicated - it would depend on the nature and value of the assets forming the succession estate
Rule for a spouse entitlement in intestacy?
A spouse’s entitlement is dependent upon them surviving D by 28 days - this is specific to spouses, not a requirement for any other beneficiaries
If D leaves a spouse and issue, what are their entitlements?
Spouse:
1. personal chattels absolutely
2. statutory legacy of £322,000 tax free
3. half of the residue estate
Issue:
1. other half of the residue (if any) on the statutory trusts
What rules apply to issues who survive the D under intestacy?
s47 AEA - the statutory trusts are the 2 limbs
- contingency limb
- substitution limb
What is a statutory trust?
A trust that arises on an intestacy where the issue of the deceased are entitled to the whole or part of the estate
What is the contingent limb of a statutory trust?
Each entitled beneficiary must survive the intestate and reach 18 - until this requirement is satisfied beneficiary has a contingent interest
What is a vested interest in a statutory trust?
When a beneficiary is already 18 when the intestate dies, they inherit immediately - this is a vested interest
What is the substitution limb of a statutory trust?
If a beneficiary dies before the intestate, their own issue may still inherit their entitlement under the substitution limb
Under the substitution limb, does a beneficiary’s issue need to be a certain age to inherit?
Yes - they must also be 18 (contingent limb ties over)
