Pt 3. Laws and legal concepts relevant to financial advice - Wills and intestacy

Question 1

What are the laws of succession?

Answer 1

The laws relating to the disposal of a person’s estate after death is governed by their will or by the law of intestacy.

Question 2

Who do the laws of succession apply to?

Answer 2

• When beneficiaries succeed to property on someone else’s death.
• Property cannot continue to belong to deceased and legal principles lay down how, and whom property of deaceased person is to be distributed.
• Any properties held solely by deceased, along with certain assets held jointly form the deceased’s estate.
• The estate is the total value of deceased’s assets.

Question 3

What are the 3 major formalities required in the making of a valid will?

Answer 3

1. Writing - the will must be in writing, including print and type.
2. Signature - the will must be signed by testor or by some person in testator’s presence acting under direction if testor is unable to write for whatever reason.

• Initials will suffice.

3. Attestation - the testator’s mark or signature must be witnessed by 2 or more people present when will is signed, and should be independent, meaning neither they nor spouse/civil partner will be beneficiary of will.

• Attestation by witnessses must be made in presence of testator, unless eligble to witness via live video link.

Question 4

When can a will be revoked?

Answer 4

• Marriage or civil partnership - unless the will states it was made in anticipation of marriage or civil partnership.
• Divorce or dissolution of civil partnership - any bequests to former partner will lapse (unless will clearly states divorce/dissolution will not entitlement) - remainder of will carries on being valid.

Question 5

What happens if a person revokes a will without making a new will?

Answer 5

• They will die intestate.
• The appointment of spouse or civil partner as executor is cancelled by subsequent divorce/dissolution.

Question 6

Who governs intestacy rules in England and Wales?

Answer 6

This is governed by the Inheritance and Trustees’ Power Act 2014.

Question 7

What happens if intestate dies leaving a spouse or civil partner, but no children/grandchildren (issue)?

Answer 7

• The surviving spouse/civil partner is the sole beneficiary of intestates estate.

Question 8

What happens if intestate dies leaving a spouse or civil partner, and children/grandchildren (issue)?

Answer 8

• The civil partner/spouse takes personal chattels (car, furniture, pictures, clothing etc) plus statutory legacy of £270,000 plus half of any balance outright.
• Chattels cover all tangible property, not money or securities of money, property used at date of death by intestate for business purposes, property held at death on intestate solely as investment.
• The surviving issue takes the other half of remaining estate on reaching 18/or marrying civil partnership below that age.
• Statutory legacy amount is reviewed every 5 years, generally increasing by CPI rounded to nearest £1,000.

Question 9

What happens if intestate dies leaving no spouse or civil partner, but children/grandchildren (issue)?

Answer 9

• Then everything is taken by issue (children followed by grandchildren), then successively: parents, brothers & sisters, grandparents, uncles, aunts etc.

Question 10

What happens if intestate dies leaving no surviving relatives?

Answer 10

The succession goes to the:

• The Crown (i.e. the Government acting for the State)
• The Duchy of Lancaster (if deceased wer a resident)
• The Duchy of Cornwall (if the deceased were a resident).

Question 11

Who are legal personal representatives?

Answer 11

• Executors - responsible for dealing with deceased’s estate.
• Administrators - no will, and has died intestate, their estate is handled by their next of kin.

Question 12

What is the role of an LPR?

Answer 12

• They can use solicitors to administer estate and the fees can be paid from estate.
• They are personally liable for the payment of all debts and taxes from estate, hence essential sufficient funds available before making estate asset distribution - hence, should take action asap to identify A&L at time of death.

Question 13

When is a Grant of Representation needed?

Answer 13

• Issued by Probate Registry, either a Grant of Probate or Letter of Administration.
• If deceases only has savings or premium bons or joint land, property, shares or money automatically passed to surviving owners, then probate may not be needed.

Question 14

What should executors initially do?

Answer 14

• They need to prove the will in Proabate Registry to obtain Grant of Probate enabling them to administer estate.

Question 15

What should executors do of large estates?

Answer 15

• Before receiving Grant of Probate, they must complete an HMRC account showing all assets of deceased plus any gifts made in last 7 years.
• IHT may be due in total of estate, plus all non-exempt gifts in previous 7 years, exceeds available nil-rate and residence nil-rate IHT band and tax due paid before Grant of Porbate is issued.
• Once proabet is granted, the executors must distribute estate’s assets as directed by will.

Question 16

What is the role of an administrator?

Answer 16

• Where there is no will, they must apply to the Probate Registry for grant of LOA; procedure similar to executors in paying tax due.
• When administrators have paid tax, obtained LOA, estate should be distrbuted according to law of intestacy.