PFA - Probate

Question 1

What questions should you ask in a probate interview?

Answer 1

1. Circumstances of deceased’s death
2. Date of death + whether there is a death certificate
3. Find out about deceased’s family
4. Did the deceased have a will? If yes, what are the contents?
5. What assets did they own?
6. Are there any potential claims against the estate? Was the deceased maintaining anyone?

Question 2

What assets should you consider first?

Answer 2

Consider assets that pass under their own rules of succession first, then deal with the remaining assets that pas under the will or intestacy rules

Question 3

Is there any difference in IHT if someone dies intestate?

Answer 3

Rules are exactly the same.
Only difference is that the intestacy rules now govern who gets what, and therefore determine which exemptions apply (e.g., the spouse exemption)

Question 4

How is property owned as tenants in common treated for IHT?

Answer 4

Each has their own defined share in property owned as tenants in common.

That share’s value will be included in the IHT estate on death

Question 5

How is property owned as beneficial joint tenants treated for IHT purposes?

Answer 5

The asset (or notional share in the asset) doesn’t escape the IHT charge.

The notional half share is included in the taxable estate.

Question 6

When will a specific legacy adeem?

Answer 6

If the property is not in the estate when the testator dies, the gift fails (adeems) and the named beneficiary doesn’t take anything under the gift.

Question 7

What happens if a general legacy gifts something that isn’t in the estate at the point of death?

Answer 7

The personal representative for the estate will use estate funds (if sufficient) to purchase the item

Question 8

What happens if a beneficiary dies before the testator dies?

Answer 8

The gift will fail - lapse.

If the testator failed to name a different recipient of the gift should the first beneficiary die before the testator, the gift will fall into the residue.

Question 9

What happens if the residuary gift lapses?

Answer 9

The residuary will pass through the laws of intestacy

Question 10

When does the law of commorientes apply?

Answer 10

If 2 people (such as the testator and the beneficiary) die at the same time and it’s impossible to tell who dies first, the younger person is deemed to have survived the elder.

Question 11

What happens if a gift was made to issue of the testator and the beneficiary dies before the testator but leaves living issue?

Answer 11

The gift doesn’t lapse + will go to the living issue

Question 12

What happens if a will leaves a gift for a witness?

Answer 12

The will is valid but the gift to the witness fails unless there are 2 other witnesses who aren’t beneficiaries

Question 13

When will a class close if a gift to a class of beneficiaries is contingent on something?

Answer 13

The class will close the moment any member of the class satisfies the condition (so that the interest is now vested).

Question 14

What happens when a class closes?

Answer 14

No new members can be added to the class, but anyone who is alive and within the class will share in the gift if they eventually satisfy the condition

Question 15

What is intestate succession?

Answer 15

Statutory method of distributing assets that aren’t disposed of by will, either because:
- a decedent died without a valid will, or
- because the decedent’s valid will failed to give away all of their property, such as when a residuary gift fails or when the will didn’t include a residuary gift.

Question 16

What is needed for the spouse to take under intestacy?

Answer 16

They must survive the decedent by at least 28 days

Question 17

Under intestacy, what will the spouse receive if the deceased was survived by a spouse and issue?

Answer 17

Spouse takes:
1. All of the decedent’s tangible moveable property other than money, investment property such as stocks, and property used for business, plus
2. £322,000, plus
3. Half of the decedent’s remaining property

Question 18

What can the surviving spouse do re the matrimonial home under intestacy?

Answer 18

Can require the PRs of the decedent’s estate to give the spouse the couple’s matrimonial home in partial or total satisfaction of the spouse’s interest.

If the home is worth more than the surviving spouse’s share, they will have to pay over the difference.

Question 19

If the decedent had no spouse when they die, what is the order for distribution under the rules of intestacy?

Answer 19

1. Children
2. Parents
3. Siblings of the whole blood
4. Siblings of the half blood
5. Grandparents
6. Uncles and aunts
7. The Crown

Question 20

Under the rules of intestacy, if a child predeceases the decedent but is survived by their own children, what happens?

Answer 20

The children take on trust + split the parent’s share (per stirpes or by the root distribution)

Question 21

What property passes outside the will or intestacy?

Answer 21

1. Property held as beneficial joint tenants - right of survivorship
2. Proceeds of life assurance policy - passes to beneficiary named in the policy
3. Person may nominate a person to take property held in the National Savings Bank, friendly societies, or in National Savings Certificates through a statutory written nomination
4. Life interest in a trust

Question 22

How can a person accept office of executor?

Answer 22

1. Taking a grant of probate, or
2. By intermeddling

Question 23

What would be considered intermeddling in an estate?

Answer 23

Doing something that shows they have accepted office as executor - could be as little as notifying the deceased’s bank of their death

Question 24

Where must renunciations of executorship be filed?

Answer 24

At the Probate Registry - usually by another person seeking a grant of probate

Question 25

What can an executor do instead of renouncing if they don’t wish to act in the administration?

Answer 25

Can have ‘power reserved’.

Means they won’t be involved for now, but if circumstances change, they can apply for a grant of probate at a later stage

Question 26

Who owes tax on a PET if the donor dies within 7 years of making it?

Answer 26

The recipient of the PET

Question 27

How do you determine whether IHT is owed on a PET made within 7 years of the donor’s death?

Answer 27

1. Work out remaining NRB - deduct any gross chargeable transfers made in the 7 years before the PET,
2. If there are more than 3 years between date of PET and donor’s date of death, taper relief is available to reduce the tax owed by 20% for each year

Question 28

When will PRs owe additional tax on a CLT?

Answer 28

If the donor dies within 7 years

Question 29

What reliefs are available from IHT?

Answer 29

1. Business relief
2. Agricultural relief
3. Quick succession relief

Question 30

When does 100% relief apply for business relief?

Answer 30

If the donor transfers:
i. sole trade business or partnership to the trust, or
ii. share in an unlisted trading company

Question 31

When does 50% apply for business relief?

Answer 31

Applied if the donor transfers:
i. shares in a quoted trading company if the donor has more than 50% of the company’s voting shares, or
ii. land, buildings, plant, or machinery used either by a partnership of which they are a member or a company they control.

Question 32

What is needed for business relief to apply to a business?

Answer 32

It must be a trading business.
– Business is selling goods or services as opposed to merely investing in things.

Question 33

How long must the donor have owned the business property for for business relief to apply ?

Answer 33

At least 2 years

Question 34

What amount of relief does agricultural relief apply?

Answer 34

100%

Question 35

What is considered agricultural property?

Answer 35

Agricultural land or buildings used for the purposes of agriculture and situated either in the UK, the Channel Islands, the Isle of Man, or European Economic Area State.

Question 36

When is agricultural relief available to someone?

Answer 36

1. Available to a farmer/donor who has owned the agricultural land or buildings transferred for at least 2 years if the owner was using the land in their business
2. Available to a donor who leased out the agricultural land or buildings transferred to the trust if the assets are being used for agricultural purposes by the tenants + were owned by the donor for at least 7 years.

Question 37

When will the deceased pay a reduced IHT rate on death?

Answer 37

If the decedent gives more than 10% of their ‘baseline amount’ to a charity.

Question 38

How do you calculate the value of an asset at death?

Answer 38

Its ‘open market value’.

If property is jointly owned by a spouse or civil partner, we need to consider the related property rule when valuing the estate assets.

Question 39

When will the value of property be partially discounted?

Answer 39

If property was owned jointly with someone other than a spouse/civil partner - because of the difficulty in selling such an asset

Question 40

When is the Residence NRB available?

Answer 40

if an estate includes a home that was used as the deceased’s private residence at some point if the residence or proceeds of the residence are left to lineal descendants or spouses of such descendants

Question 41

When is the Residence NRB tapered away?

Answer 41

For estates with a net value of over £2 million
Tapered away at the rate of £1 for every £2 over that limit.

Question 42

What is the ‘brought forward allowance’?

Answer 42

The percentage of any unused Residence NRB of a predeceased spouse that can be transferred between spouses on death

Question 43

When can the estate claim a ‘downsizing addition’?

Answer 43

If the decedent downsized their home during life - it uplifts the amount of Residence NRB in the death estate based on the value of the earlier home

Question 44

What is quick succession relief?

Answer 44

Given when an individual’s estate was increased by a gift made to them in the 5 years before death upon which IHT was paid.

Decreases by 20% for each year between the donor’s death + the recipient’s death.

Gifted property need not be in the decedent’s estate at the time of their death.

Question 45

How can a donor avoid the gift with reservation of benefit rule?

Answer 45

By releasing the reservation before they die.

However, HMRC will treat the release as a PET on the date of the release

Question 46

Which is IHT typically due?

Answer 46

6 months from the end of the month in which the decedent died

Question 47

When is IHT on CLTs?

Answer 47

Due at the later of:
i. 6 months from the end of the month in which the CLT was made, and
ii. 30 April after the tax year in which it was made

Any additional tax on death arising from a ClT is due 6 months after the end of the month in which death occurred

Question 48

In most cases, who is liable for IHT on property transferred on death?

Answer 48

The Personal Representatives.
If the will is silent, the PRs pay out of the residuary estate

Question 49

Who is liable for IHT on property given with a reservation of benefit?

Answer 49

The donee of the gift is primarily liable to pay IHT, but the PRs are liable if it isn’t paid within 12 months after death

Question 50

Who is liable and bears the burden of IHT on property that passes other than by will or intestacy?

Answer 50

Liability will fall on the PRs, but will be borne by the beneficiary