Property Passing Outside the Estate Flashcards
What types of property do not pass to the succession estate?
- DMC
- Discretionary pension scheme benefits
- Insurance policies written in trust
- Statutory nominations
- Joint property held as beneficial joint tenants
When can assets passing outside the succession estate be dealt with?
These can be dealt with before obtaining the grant
- Distribute assets early on in administration
What is a DMC?
A gift made in contemplation of death:
- Donor believes they will die imminently
- Gift is conditional upon their immediate death
- Donor either parts with the property or something representing ownership
Discretionary pension scheme benefit
If the deceased was a member of an employee’s discretionary pension scheme, payments made by the trustees are not included in the succession estate
- This only applies to discretionary pension schemes as payment is entirely at the trustee’s discretion
Pension policy
- If the pension policy does not pay a lump sum on death, it is not relevant for IHT purposes
- Ask if the policy is written in trust?
- If a client is unsure about the terms of the policy, namely if it is written ini trust, advise them to check the position and if it is not written in trust amend this so it is
Insurance policies
- A simple life insurance policy: proceeds pass to the succession estate
- If the benefit of the policy was written on trust for another person: proceeds do not form part of succession estate. This is because the proceeds to the nominated beneficiaries and they receive their entitlement upon the insured’s death
Benefits are released on production of a death certificate
Joint property (joint tenant vs tenant in common)
Beneficial co-ownership:
- Joint tenants: if the deceased was a beneficial joint tenant, the property passes automatically to the surviving joint tenant(s) by survivorship. This means it does not form part of the succession estate
- Tenants in common: if the deceased was a beneficial tenant in common, their share will pass as part of the succession estate (under terms of will or intestacy)
This relates to:
- Property (e.g., family homes)
- Joint bank accounts
Interests in trust property
- If the deceased was a beneficiary under a trust, their beneficial interest does not necessarily form part of the succession estate. It depends on the nature of the interest and whether it survives death
- Assets held in trust are usually distributed in accordance with terms of trust, rather than the will or intestacy
If deceased was a life tenant under a life interest trust
Their beneficial interest does not form part of the succession estate
- The life interest expires on death and remainder interest vests in possession
Remainder interest in trust property under life interest trust
The remainder interest can survive the remainder-man’s death, provided the interest is vested in interest (e.g., not contingent on outliving the life tenant)
- The remainder interest passes to the estate
Client interview: obtaining information about the client’s assets / value of estate (questions to ask)
- Need to compile a complete list of the client’s assets
- If a list is given, confirm that these are all the client’s assets and sources of income
- Look for obvious missing property: pension (particularly if old), life insurance (particularly if middle aged) - Need to extract as many figures and as much precise information about what assets they own/income streams/value/length of ownership/how the property is held
- Ask for the value of the assets now
- Ask for the value at which these assets were acquired
- Ask how joint property is held - Determine potential IHT liability
- Ask if any gifts / lifetime transfers have been made in past 7 years?
- Determine if exemptions/reliefs are available
Once all the information is gathered, can then advise on IHT liability, distribution of property under the will etc…
