Probate Practice Flashcards
Study aid designed for CILEx Unit 21 Probate Practice
s3(1) I(PFD)A 1975
Common guidelines (all applicants):
- financial needs and resources of App. and Bs
- moral obligations of D towards App. and Bs
- size and nature of the estate
- physical or mental disability on the part of the App. and Bs
- other relevant matters (e.g. lifetime provisions or conduct)
s. 1(1) I(PFD)A 1975
Categories of applicant:
- Surviving spouse
- Former spouse (providing no remarriage)
- Cohabitee (> 2 years immediately prior to death as H&W)
- Child of D (includes unborn, adopted and illegitimate)
- Treated as a child (e.g. step-child)
- Maintained person (wholly or partially maintained immediately prior to death without full valuable consideration)
s1(2) I(PFD)A 1975
Is the provision made in the will reasonable enough?
(a) Such provision for surviving spouse as should be reasonably afforded (not just for maintenance)
(b) Such provision for other applicants as required for their maintenance
Non-probate estate property
Property held as joint tenants Nominated property Insurance policies written in trust Discretionary trust Life interest trusts
Pre-22/3/06 WT or IV Trust
Deemed an ‘interest in possession’
Capital classed as an asset of the estate for IHT
Post-22/3/06 IV Trust
Deemed a ‘relevant property trust’
Capital NOT classed as an asset of the estate for IHT
Post-22/3/06 WT
Deemed an ‘immediate post-death interest’
Capital classed as an asset of the estate for IHT
Post-Death Variation (PDV)
Must be made within 2 years of death PRs may (with B's authority) execute a PDV
Business Property Relief (BPR)
Lifetime and death transfers
Qualification requirements:
- Shareholding (any amount for Ltd, controlling for PLC)
- Trading company (not purely investment)
- Held for minimum of 2 years (N.B. unless inherited from spouse who had held for more than 2 years)
Value of IHT relief:
100% if a private company
50% if a controlling interest in a PLC
50% for any land/property used by business but owned by deceased
Burden of IHT - lifetime gifts/failed PETs
Generally payable by donee unless will states otherwise (e.g. ‘to pay from residue any IHT arising by virtue of my death’)
Burden of IHT - IPDI/interest in possession
IHT liability is to be apportioned to the trustees (not PRs)
IHT taper relief
Lifetime transfer
For transfers made < 7 years ago:
- Apply exemptions
- Deduct from NRB
- Remainder is chargeable to IHT as per following scale:
a) 0-3 years from death: 40%
b) 3-4 years from death: 32%
c) 4-5 years from death: 24%
d) 5-6 years from death: 16%
e) 6-7 years from death: 8%
IHT annual gift exemption
£3000 per tax year (N.B. Can carry forward unused amount from previous tax year)
Deadline for payment of IHT
6 months from the end of the month in which the deceased died
Apportionment of IHT
[ASSET] / [TOTAL CH. ESTATE] x TOTAL TAX
Small gift exemption
Lifetime transfers
£250 to any one donee in any one tax year is totally exempt
N.B. If a larger gift is given, then the whole gift is chargeable
Gifts in consideration of marriage
Lifetime transfers
£5000 from a parent of party to the marriage
£2500 from other relations of party to the marriage
£1000 in all other cases
N.B. Only the excess is taxable if a larger gift is given
Spouse exemption
Lifetime/death transfers
Fully exempt from IHT
Charity exemption
Lifetime/death transfers
Fully exempt from IHT
N.B. If D dies after 5/4/12 and leaves > 10% of net estate to charity, then may claim a 4% reduction in IHT on remainder of estate
Transferable NRB entitlement
D’s NRB may be increased if:
- D died after 9/10/07
- D was a surviving spouse
- D’s spouse had not used their full NRB
Transferable NRB calculation
- Calculate percentage available for increase:
Unused NRB / NRB rate in force at time of death of D’s spouse x 100 = x%
- Increase D’s NRB rate by this percentage:
NRB rate in force at time of death of D x 1.x = New NRB threshold
Requirements for a valid will
- Testamentary capacity of T
- Intention to make will
- Observe formalities
Testamentary capacity of T
Two-fold test for testamentary capacity:
a) T must have legal capacity (i.e. over 18, unless privileged will)
b) T must have mental capacity (cf. Banks v Goodfellow/MCA 2005)
Banks v Goodfellow [1870]
T deemed to have mental capacity to make a will if:
a) T understood the nature of the effect and its effect (i.e. T was of sound mind)
b) T comprehended the extent of his property (i.e. T was of sound memory)
c) T recognised the claims to which he ought to have regard (i.e. T was of sound understanding)