Probate Flashcards
Deductions from taxable estate?
- Exemptions such as spouse or charity
- Debts
- Reliefs such as agricultural
- Tax free nil rate band - Tax is only payable on excess
Gross taxable estate - debts - exemptions - reliefs - NRB = Tax due on amount left
What is the rate of IHT?
40% or 36% if at least 10% of NET estate is left to charity
How do you claim reduced rate of IHT?
IHT430
When did transferable nil rate band come into effect?
9th October 2007
Bunching of estates pre October 2007 rule, useful to know the way around the wasted IHT allowance which are….?????
- Survivorship clause - So if they died together, the other didn’t inherit to avoid bunching up.
- Gifts to children on 1st death - would reduce amount passing to spouse to help reduce IHT liability on second death.
- NRB Discretionary Trust Will - when 1st spouse died the max sum possible without triggering IHT charge passes to trustees to distribute at their discretion.
How do you claim Transferable Nil rate band?
IHT 402
RNRB only applies to deaths after what date?
6th April 2017
What are he requirements to allow the RNRB?
- Estate must include a residence
- Residence must pass to direct descendant or if they died before the deceased then to his or her spouse or civil partner.
What are the restrictions to the RNRB?
- Deceased must have owned residence on the 8th July 2015.
- If estate exceeds £2m it will taper away at £1 for every £2 by which it exceeds the £2m so the full NRB cannot be claimed.
What is the RNRB allowance?
Currently £125,000 and will increase by £25k pa until 2020/2021 when it will be £175,000
What is a PET?
A lifetime gift, potentially exempt transfer.
If there is tax to pay and the estate exceeds NRB, the amount of tax may be….
tapered if the donor survived 3 years from the date PET made
What lifetime gifts are exempt?
Gifts to spouse
Gifts to charity
7 year rule does not apply
What happens if the NRB doesn’t cover all of the gifts?
The remaining gifts will become taxable and the people receiving them are liable, not the estate.
What act allows the trustees to be paid a reasonable amount as executor?
Trustees act 2000 allows this to happen but some solicitors still include a charging clause to avoid any doubt.
The law society considers how the appointment of solicitors is dealt with which is…
- Inform the client that such appointment of the firm is not compulsory.
- Question is it in the clients best interest (small estate).
- inform the client of how fees are calculated
What is Doctrine of ademption?
Doctrine provides that if no property answering the description of a specific gift at date of death, gift will be adeemed. Will fail and beneficiary will not get anything in its place.
How can you try to avoid doctrine?
Substitutional gifts can be made in the will. For example “I give Henry my matching tankard or such other pewter jug as I may possess at the date of my death”
What is a class gift?
Just the type of clause where the children are not specifically named in the will the wording as often as follows
I leave my residuary estate to such of my children who survive me and if more than one in equal shares absolutely.
What is the definition of per stirpes?
According to bloodline
What is the meaning of per Capita
Per head
What requirements are there for an estate to be excepted?
- Gross estate for tax purposes doesn’t exceed NRB or gross estate for tax purposes exceeds NRB but £1m or less AND net estate after deduction of spouse/cp/charity exemption doesn’t exceed NRB.
- No trust value over £150,000 where deceased was receiving a benefit such as income
- No foreign assets over £100,000
- Lifetime gifts or PETS do not exceed £150,000
- No gifts with reservation of benefit (eg given house to child and continued to occupy rent free)
