Topic 5

Question 1

What is a mirror will?

Answer 1

Commonly used by couples, each partner makes an almost identical will typically leaving everything to each other first.

Question 2

What is a mutual will?

Answer 2

less common, more complex, they both contain an agreement that, on the death of the first party, the survivor cannot revoke their own will if they have benefits from their partners will; this forms a legal contract between the parties.

Question 3

What is a codicil?

Answer 3

Codicil allows an individual to make a small change to the terms of a will without making a new will. it must be signed by the testator in the presence of 2 witnesses and becomes an additional page to the original will.

Question 4

What is a disclaimer in will terms?

Answer 4

A beneficiary can reject a bequest through a written disclaimer. One of the common reasons for writing a disclaimer is to change the IHT position.

Question 5

What is a deed of variation?

Answer 5

if all beneficiary’s affected by the proposal are in agreement, it is possible to change the terms of a will or the laws of intestacy through a deed of variation.

Question 6

What is a trust?

Answer 6

A trust is an arrangement where one party (the settlor) can give assets to another (the beneficiary) without the beneficiary gaining control of the asset.

Question 7

What 3 certainties must be established when setting up a trust?

Answer 7

1. Certainty of intention: it must be clear the settlor intended to create a trust.
2. Certainty of subject matter: the trust document must make clear which property is to be the subject of trust.
3. Certainty of object: the beneficiarys (the object) must be clear.

Question 8

What does a trust deed specify?

Answer 8

1. What property or assets are to be held within the trust.
2. the trustees
3. the beneficiarys
4. the powers conferred on the trustees and the rights of the beneficiarys

Question 9

What can be held within a trust?

Answer 9

Almost any tangible property or asset such as money, shares and other investments, land or buildings, life assurance policies, valuables.

Question 10

What 8 types of trust are there?

Answer 10

1. Will trust: (creating a trust through a will, with the type of trust and the beneficiary’s subject to the terms of the deceased’s will)
2. Absolute (bare) trust: established for the benefit of 1 or more beneficiary’s, who are absolutely entitled to the trust assets.
3. Interest in possession trusts (IIP): the beneficary(‘s) will receive an income from the trust or have use of an asset in the trust for their lifetime or an event (contingency) stated in the trust deed.
4. Immediate post-death interest trusts(IPDI): The trust is created in the settlors will and the gift to the trust is made on their death.
5. Discretionary trust: trustees are given discretionary powers (to appoint beneficiarys from a specified category set out by the settlor, or decide whether to pay income or capital to any beneficiarys).
6. Life assurance trusts: 2 main trusts used w life assurance protection policies - flexible trusts (power of appointment) trusts are essentialy a form of discretionary trust main advantage being trustee’s ability to vary the beneficiary interests of the trust through a poa. split trusts - only used with a combined life and critical illness policy and it splits the plan into different elements.
7. Gift and loan trust: setllors gifts typically £3k tax exemption then they make a further payment to the trust as an interest free loan, the trustees then use the gift and loan to arrange investment bonds, which theyre able to withdraw 5% of each policy year without incurring a tax charge, so trustees use the 5% allowance to repay the loan to the settlor.
8. Discounted gift trusts: are for IHT planning and allow the settlor to reduce immediately the size of their taxable estate by making a gift.

Question 11

What makes a will valid?

Answer 11

1. Must be in writing, handwritten, typed or printed.
2. should be dated to avoid issues although not a legal requirement
3. each person should write an individual will
4. clear statement in the will revoking any previous ones
5. will is auto revoked if testator gets married unless it is stated in the will the anticipation of marriage, must be made clear e.g specific name of person
6. not legal requirement but solicitor or professional can help avoid issues.
7. Testator must be 18+ and sound of mind, memory and understanding at the time of making the will.
8. Testator’s signature must be witnessed by 2 people aged 18+ who must sign to confirm, witness cannot benefit from the will