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DIPFA > Topic 16 > Flashcards

Topic 16 Flashcards

0
Q

Testator is and must be

A 
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
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1
Q

Name 4 parties to a will

A

Testator
Executor
Beneficiary
Witness

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2
Q

Executor is and must be

A

Responsible for administering
18 and of sound mind
Can be beneficiary

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3
Q

Testators sig must be witnessed by…

A

2 people 18 or over

Witness or spouse of witness cannot be beneficiary

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4
Q

Requirement for will to be valid are..

A 
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
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5
Q

Will and divorce

A

Former spouse auto eliminated, rest remain valid

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6
Q

What is a codicil?

A

Outlines changes and continuing validity of will
Signed by testator and 2 witnesses
Additional page to will

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7
Q

Interstate means?

A

Died without valid will

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8
Q

Absolutely means

A

Owns the assets

Goes in trust if under 18

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9
Q

Life interest is

A

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

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10
Q

Spouce must survive partner by

A

28 days, otherwise deceased treated as single under laws of interstacy

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11
Q

If decease leaves both spouse and children…

A

Spouse get first £250k
Half the bal goes to children absol
Spouse gets life int in other half

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12
Q

If decease leaves a spouse but no children…

A

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

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13
Q

Children but no spouse

A

Estate shared amongst children or their issue if dead

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14
Q

Disclaimer is

A

Beneficiary rejects bequest

Write written disc with 2 years

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15
Q

Deed of variation is

A

Can terms of will or laws of interstacy if all bene are in agreemnt
Must be within 2 yrs

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16
Q

Eg of gift with reservation

And affect of this

A

Settlor gifts house but insist on right to live there

Considered part of estate for IHT

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17
Q

Trustees duties are

A

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

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18
Q

If trust deed does not confer specific powers of inv…

A

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

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19
Q

Discretionary trusts give trustees discretion over…

A

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

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20
Q

Contingent benefitiary right to the property is….

A

Contingent on something happening- like if you only get assets if someone else has already died

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21
Q

3 certainties for a trust to be valid

A

Clear that settlor intentended to make trust
Subject matter- property
Object- bene

22
Q

A trust is established through…

A

A trust deed or a will

23
Q

A settlor cannot revoke a trust or change terms once assets settled into it, unless….

A

A revocable trust

24
Q

Trust deed will specify…

A

Property
Trustees
Bene
Powers conferred on trustees

25
Q

What is meant by a testators mental competence?

A

Mean testator must know what a will is, the prop leaving, to whom and how distributed

26
Q

Interest in possession trust?

A

Must provide an income from trust assets for a specific bene for life
Assets pass to other bene on their death

27
Q

Gift and loan trust?

A

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

28
Q

Life tenant?

A

Interest in possession trust- Bene rec income

29
Q

Remaindermen?

A

Interest in possession trust- Receive the assets once the life tenent dies

30
Q

Trust max of 80 yrs if set up prior to?

A

April 2010

31
Q

After april 10, how long can trusts last?

A

125 yrs

32
Q

Inv bond is arranged in a trust, so what?

A

Orig inv is a trfr for iht

Growth not part of estate

33
Q

Will trusts are normall set up as

A

Int in possession or discretionary trusts

34
Q

Immediate post death interest trust is

A

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

35
Q

Bereave minors trust

A

Set up for child under 18

Cannot get bene till 18

36
Q

18-25 trust?

A

Same as bereaved minors only date bene can get assets absolutely can be increased to 25

37
Q

Absolute (bare) trust is used when

A

To make sure assets are passed to children

Any bene over 18 can demand the assets at any time

38
Q

Split trusts used when

A

Along side combines life, cic policy
So cic will be paid to them while alive
And life cover paid held in trust on death

39
Q

Discounted gift trust is

A

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

40
Q

Revert to settlor trusts

A

Benefit can revert back to settlor if required

Gift remains in settlors estate so no good for IHT tax

41
Q

Statutory trusts?

A

Number of trusts where if no will trusts are created by statute
Eg bereaved minor
18-25
Married wo prop tr

42
Q

Married womans prop act trust

A

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

43
Q

Trust are genrally subject to…..

A

Uk income and cgt if at least 1 trust is uk resident

44
Q

Discretionary trust and tax

A

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

45
Q

CGT and trust

A

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

46
Q

Absolute and bereaved minor- cgt?

A

Regarded as belonging to bene

Do get annual exemption

47
Q

Transfers into trusts on death- iht

A

Normal bequest and all above nil rate band subject to iht

48
Q

Lifetime transfers into trust- iht

A

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

49
Q

Relevant prop trust is

A

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

50
Q

Int in possesion trust and lifetime tfrs before mar 06

A

Treated as PET not lifetime tranfer

So no 20% and only IHT if die within 7 yrs

51
Q

Relevant prop trust and periodic charges?

A

Trust value on 10th anniv, less nil rate- 325k

Max chrg 6% of that above nil rate

52
Q

Relevent prop trust and exit chrge

A

6% charge when cap paid out from trust, less nil rate and between 10 yr annivs
No charge at last anniv, no exit charge

53
Q

IHT and bene

A

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

DIPFA (24 decks)

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