Probate Overview Flashcards
What are the different types of property
- joint
- trust
- inheritance policies held on trust
- pension
- nominiations
What happens for joint property
Bank accounts, property or shares/investments held as joint tenancy. Passes automatically to survivor without reference to probate
How can you identify a tenancy in common
Restriction on the land registry
What happens to a beneficiary under a trust
Succession will be governed by the owner of the full interest, ie. life interested is not inhereted
What about insurance policies
Ask whether they are held on trust, if so pass to trustees of trust
What about pensions
Normally include trust mechanism
What makes a will valid
- Compliance with formal rules - signed in the presence of 2 x witnesses who see signature of testator + attestation clause (signing in presence)
- Capacity
- Knowledge and approval
- Coercion
- Mistake
What happens if a beneficiary or spouse is a witness?
Gifts fail, will is valid
What happens if a beneficiary dies first?
Gift fails, will is valid, unless it is to issue who have issue
What happens if specific property has been sold/doesn’t exist
Gift fails, will is valid
What happens on divorce?
Divorce has the effect as if spouse is pre-deceased
Can a divorcee can be executors?
No - treated as if dead
What is the executor dies?
Adult beneficiaries - take a grant of letters in administration with will annexed
What if there is no executor and no will?
residual beneficiaries (adult) - grant of letters of administration. Child take when turn 18/marry
If dies intestate, what does the spouse get if there are children?
- The first 250k statutory legacy
- personal chattels
- half residue
Rest of residue to children. Automatic substitution of grandchildren to take parents share if parents dead
If dies intestate, where does the estate go (spouse no children)
All to spouse
What is inheritance tax paid on?
- assets in estate
- share in joint property
- assets in trust in which had interest in possession eg. life interest (as if entire capital value is yours, payable by trustees of trust)
- those gave away in last 7 years
- assets given away but benefit retained
- non-UK property if UK domiciled for IHT purposes
Does the oath for executors take into account inheritance tax
No - just use figures for what’s part of estate for probate purposes
What is exempt from IHT
- gifts to charity
- gifts to spouse
- more than 7 years ago gifts
- 325k tax free
- remaining allowance can be transferred to spouse
Can a beneficiary witness save the gift?
Yes if there are 2 other witnesses or a subsequent codicil
If a property is mortgaged, does that pass if a specific gift?
Yes - subject to contrary intention. Stating ‘residue to pay of debts’ is not sufficient to show contrary intention
Does an unborn child inherit if ‘to my children’
Yes - treated as if born at time of death
When is IHT payable?
IHT is due 6 months after end of month of death, payable prior to grant of probate, but it can be paid directly from a bank account. A form can be sent when everything is relevant - including solution to problem.
What to include in letter about inheritance
Make it clear that inheritance is net of liabilities and subject to valuations agreed with HMRC
Does the oath for executors include that outside of the estate?
No - not joint property, and not lifetime gifts
What if jointly held property isn’t exclusive ownership ie. not spouse
Could be up to 15% discount as to ownership
Passing on nil rate band to spouse
As long as nothing used of it, and all passes to spouse. If gifts - only a proportion would be passed
What is the residence exemption?
150k per person, can be passed, person must own property in excess of the value of the exemption, directly inherited by children/grandchildren as long as no conditions (ie. grandchildren upon reaching a certain age); or estate worth more than 2m (50pin£)
Tax on joint property
Tax on joint property is payable by the PRs on administration of the estate
Instalment payments
10 instalments; first 6 months after end of death. Then annual. Interest at 2.75% after 6 months. Instalments stop on sale of property. Is a proportion of estate but EXCLUDING LIFETIME GIFTS
What about Capital Gains for inheritance
Inherit at value at time of death
Annual exemption for Capital Gains
£11,300
How will CG be calculated
Will be added onto own tax system, 18% or 28% depending on amount of personal tax.
Rate for residential property is 28%, executors have CGT exemption for the tax year of death and 2 years there after of 11,700
Summary of process
Gather information Swear oath for administrators Pay tax as due (NB installment option) Get grant of representation Advert gazette - creditors Claims - 6 months from date of grant Then liquidate assets and distribute
If will, no executor - how reflect in oath
Deal with deceased - letters of the will with will annexed.
When need 2 executors
Life interests granted
One executor is a minor
If no executor, who can apply for administration?
- Beneficiary of residue, if not
- Legatee
Residuary legatee and devisee
How to fill first option in oath (no tax)
- IHT
2. Actual estate
How to fill in 3rd option in oath (no tax)
Excepted estate - ie less than 1m, ie can use short form for spouse exempt and not more than 650, or not more than 1m and no inheritance tax to pay
How to fill in 2nd option in oath - tax
IHT400 - Gross estate and net estate
other form is IHT205
What if witness to will is beneficiary
Can invalidate the gift
What happens when you leave a property with a mortgage
General direction as to debts to be paid, does not affect specific gift of property subject to a charge
