Topic 16 Flashcards
Testator is and must be
Person making the will Must be 18 Sound of mind, memory and understanding Intention of making that will Must know what a will is, the prop they are leaving and to whom
Name 4 parties to a will
Testator
Executor
Beneficiary
Witness
Executor is and must be
Responsible for administering
18 and of sound mind
Can be beneficiary
Testators sig must be witnessed by…
2 people 18 or over
Witness or spouse of witness cannot be beneficiary
Requirement for will to be valid are..
In writing Should be dated- but not legal req Clear statement that prev will revoked Should be individual If testator married- revoked Ideally written by sol or will writer
Will and divorce
Former spouse auto eliminated, rest remain valid
What is a codicil?
Outlines changes and continuing validity of will
Signed by testator and 2 witnesses
Additional page to will
Interstate means?
Died without valid will
Absolutely means
Owns the assets
Goes in trust if under 18
Life interest is
Gets income from cap but not cap, known as life tenant
Cap is held in trust until life tenant dies- when bene gets cap absolutely
Spouce must survive partner by
28 days, otherwise deceased treated as single under laws of interstacy
If decease leaves both spouse and children…
Spouse get first £250k
Half the bal goes to children absol
Spouse gets life int in other half
If decease leaves a spouse but no children…
Spouse gets first 450k and half the remainder absolutely
Bal goes to parents
Or siblings if parents dead
If no parents, sibs or remoter issue- spouse gets all
Children but no spouse
Estate shared amongst children or their issue if dead
Disclaimer is
Beneficiary rejects bequest
Write written disc with 2 years
Deed of variation is
Can terms of will or laws of interstacy if all bene are in agreemnt
Must be within 2 yrs
Eg of gift with reservation
And affect of this
Settlor gifts house but insist on right to live there
Considered part of estate for IHT
Trustees duties are
Act in acordance with terms of trust deed
Is deed gives them discretion, the agreement of all trustees needed
Honestly and prudently
Invest trust assets in line with trust deed
Can be liable for loss if negligent
I
If trust deed does not confer specific powers of inv…
Trustee act 2000 allows them to inv as if they owned them themselves
As long as they are aware of need to diversify, obtain and consider inv advice and review investmnts
Discretionary trusts give trustees discretion over…
What to pay, when and to which bene
Trustees appnt bene from a list, to find most appropriate, inlc those not born yet.
Good if you wants assets to be for the gen benefit of family
Contingent benefitiary right to the property is….
Contingent on something happening- like if you only get assets if someone else has already died
3 certainties for a trust to be valid
Clear that settlor intentended to make trust
Subject matter- property
Object- bene
A trust is established through…
A trust deed or a will
A settlor cannot revoke a trust or change terms once assets settled into it, unless….
A revocable trust
Trust deed will specify…
Property
Trustees
Bene
Powers conferred on trustees
What is meant by a testators mental competence?
Mean testator must know what a will is, the prop leaving, to whom and how distributed
Interest in possession trust?
Must provide an income from trust assets for a specific bene for life
Assets pass to other bene on their death
Gift and loan trust?
Settlor makes gift-3k to use allowance
Make int free loan into trust- repayable on demand, loan not gift so not a life time transfer
Gift and loan into inv bonds
Growth outside estate for iht
Use 5% pa allowance to pay back loan to settlor
Life tenant?
Interest in possession trust- Bene rec income
Remaindermen?
Interest in possession trust- Receive the assets once the life tenent dies
Trust max of 80 yrs if set up prior to?
April 2010
After april 10, how long can trusts last?
125 yrs
Inv bond is arranged in a trust, so what?
Orig inv is a trfr for iht
Growth not part of estate
Will trusts are normall set up as
Int in possession or discretionary trusts
Immediate post death interest trust is
New type of trust set up through will, give bene immediate right to income
Bene given life interest of settlors death
Can be set up with £10
Bereave minors trust
Set up for child under 18
Cannot get bene till 18
18-25 trust?
Same as bereaved minors only date bene can get assets absolutely can be increased to 25
Absolute (bare) trust is used when
To make sure assets are passed to children
Any bene over 18 can demand the assets at any time
Split trusts used when
Along side combines life, cic policy
So cic will be paid to them while alive
And life cover paid held in trust on death
Discounted gift trust is
Inv bond, decides w/d amount up to 5% - retained rights
Bond provider calc life exp
Estimated ‘retained rights’ ‘discounted’
Rest is PET
If settlor live 7+ inv will be o/s estate
Reduces iht immediately
Revert to settlor trusts
Benefit can revert back to settlor if required
Gift remains in settlors estate so no good for IHT tax
Statutory trusts?
Number of trusts where if no will trusts are created by statute
Eg bereaved minor
18-25
Married wo prop tr
Married womans prop act trust
Created when life policy on own life for specific benefit of their spouse or children.
Outside estate for tax and creditors
Scots have similar trust
Policy does not have to refer to act or trust
Trust are genrally subject to…..
Uk income and cgt if at least 1 trust is uk resident
Discretionary trust and tax
Taxed on income received- as they dont have to pay any income to a bene
Trustee pays basic on 1st £1k and additional rate on bal- 50%, 42.5%
If income paid, bene paid net of 50% tax
CGT and trust
When settlor settles asset in a trust it is a disposal
Gains can be deferred until trust disposes- unless absol trust
Usual exemptions apply in the trust- eg main res
Same rate applies to trustee but they only have half the exemption 5300- and split across trusts held
Absolute and bereaved minor- cgt?
Regarded as belonging to bene
Do get annual exemption
Transfers into trusts on death- iht
Normal bequest and all above nil rate band subject to iht
Lifetime transfers into trust- iht
If it is a relevant property trust all over nil rate charged at 20%
Together with similar trfr in prev 7 yrs
Excess over nil rate then subject to taper relief, so no charge would be payable after 5 yrs
Relevant prop trust is
All trust covered by set of rules for lifetime trfrs and applies to any trust where bene interest is not:
Immediate post death
Disabled person
Bereave minor or 18-25
Int in possesion trust and lifetime tfrs before mar 06
Treated as PET not lifetime tranfer
So no 20% and only IHT if die within 7 yrs
Relevant prop trust and periodic charges?
Trust value on 10th anniv, less nil rate- 325k
Max chrg 6% of that above nil rate
Relevent prop trust and exit chrge
6% charge when cap paid out from trust, less nil rate and between 10 yr annivs
No charge at last anniv, no exit charge
IHT and bene
If lifetime trf charge applied, no IHT payble on death while assets still in trust
If no charge then assets treated as belonging to bene on death
