Trusts, Wills

Question 1

Trust of house on woman for life, remainder to son when she dies. What are their interests and what happens if the son dies before the woman?

Answer 1

Woman vested in possession, son vested in interest. If he dies first his interest will form part of his estate. His interest is not contingent on living longer than his mum.

BUT, if it was remainder to son if he survives her, and if not, to charity, his interest is contingent and will not pass to his estate if he dies before the woman. Provision for charity is a ‘gift over’. Even without a gift over, word IF makes it clear that he has contingent not vested.

Question 2

Trusts w a sole beneficiary - when can they receive income?

Answer 2

Adults - trustees must pay it to them when it is received. Minor - trustees can use power of maintenance.

Question 3

How can Sanders v Vautier be exercised with a successive (vested0 interest trust?

Answer 3

All beneficiaries must agree and must satisfy all age and capacity conditions. Can direct trustees to transfer trust fund to them in shares as they choose.

Question 4

How can SvV be exercised if there are objects without vested interests

Answer 4

Beneficiaries with contingent interests can exercise the rights but only if they act together with all other persons who share beneficial interest in the property. In contingent interests, this also includes the objects of gift-overs.

Question 5

Formalities trust of land

Answer 5

in writing, signed by settlor/maybe trustee, or by will.
non compliance renders trust unenforceable rather than void.

legal title passes on registration

Question 6

shares transferring legal title

Answer 6

registered in internal register of members. (sign stock transfer form and send it to company)

Question 7

Chose in action trasfer legal title

Answer 7

Written transfer and notice in writing to debtor or bank - passes once notice is received

Question 8

chattels legal title transfer

Answer 8

deed/gift/delivery with intention

Question 9

Conditions that must be met for Strong v Bird to apply:

Answer 9

There must be an intention to make an immediate gift
the intention must continue until the donors death
the intended donee must become an executor of the donors estate.

Question 10

To have charitable status a trust must:

Answer 10

Be for a charitable purpose
Satisfy public benefit test
be wholly and exclusively charitable

Question 11

Public benefit test

Answer 11

is there an identifiable benefit

the possible beneficiaries cannot be negligible in number and the quality that distinguishes them must not depend on their relationship to a particular individual.

Question 12

settlor transfers to unwilling trustee. trustee hold on bare trust pending appt of new trustee by:

Answer 12

1. express powers
2. trustee chooses
3. dvv beneficiaries choose
4. court chooses

Question 13

testamentary trusts - who can appoint new trustees?

Answer 13

if named executors don’t want to act as trustees, they can appoint new.

dead person named, prs temporarily become trustees and have power to appoint.

Question 14

The solicitor should not provide a copy of the will to anyone until the personal representatives provide their consent to do so, even if the will has already been read.

Question 14

Gains accrued during the deceased’s lifetime will drop away as there is a tax free uplift on death. Disposals of assets during the administration will be chargeable to capital gains tax on any increase in value since the date of death. The beneficiaries will take assets at probate value for capital gains tax purposes when they are transferred. correct

Question 15

What is marshalling?

Answer 15

If Prs take assets out of order to pay creditors, beneficiaries of those wrongly taken can use marshalling to claim against the assets inherited by another beneficiary if those assets should have been used to pay the debts.

Question 15

CGT considerations if selling assets to pay tax?

Answer 15

Try to sell assets falling in value, not that have gained.

If PRs sell a gained asset they may be liable for CGT for gain from date of death to sale less any tax free allowance.

Assests that have risen in value can be transferred directly to beneficiary without triggering a CGT charge.

Question 16

Income tax and CGT during admin?

Answer 16

PRs responsible to finalise income and CGT position for tax year of death, may need to pay more or claim refund. Payable can be deducted from estate for IHT purposes, refund is an asset that should be included for IHT.

Pay income and CGT that becomes due during the administration period.

Make sure you differentiate between deceased’s income - which can be deductible to the extent of tax free allowance - and the estate income.

Question 17

Deceaseds gains v estate gains

Answer 17

Deceased’s base cost of assets in the estate if ‘uplifted’ to the date of death value - basically wiping out gains accrued during deceaseds lifetime.

Estate - PRs potentially liable to CGT if they make disposals/sale o assets during admin period. Assets that have increased since date of death will have a gain hen they are sold. PRs can claim same tax-free allowance as aan individual (unlike in income tax). if sale if 6k or less exempt from cut.

Question 17

Deceased’s income v estate income

Answer 17

Deceased’s income = PRs should account for untaxed income due and paid before death, and some after death like rent that hasn’t been paid from a tenant. Bank interest paid after death is taxed as PRs’.

Estate income = pay income tax at basic rate if income is generated while assets are in hands of PRs. Not entitled to claim income tax on personal allowance. Any income generated after assets been distributed is taxed as beneficiary’s income. PRs give form r185 to bens- records income tax paid by PRs in respect of the income Ben receives. Beneficiaries who are higher-rate tax payers need to make a ‘top up’ payment to hmrc

Question 18

What if no PR remains after death of proving PR?

Answer 18

IF the PR was an executor, chain of representation = their executor can also be the executor of estate 1. No grant needed.

If not, or this doesnt work, grant of letters of administration de bonus non = second grant issued.

Question 19

A man has died without a valid will. He was judicially separated from his wife at the time of death, under an order made 18 months before his death. His wife was still living in the marital home until the completion of the purchase of her own flat.

Which of the following correctly states the entitlement of the man’s wife to a share of his estate?

a) The wife has no entitlement under the intestacy rules, but she may be able to claim against the estate if she was being maintained by the deceased.

b) The wife is entitled to a share in the man’s estate under the intestacy rules as the parties were still married at the time of the man’s death.

c) The wife remains entitled to a share of the estate under the intestacy rules but this is capped due to the judicial separation.

d) The wife has no entitlement under the intestacy rules without an order of the court revoking the judicial separation due to the death.

e) As the judicial separation ends the marriage, the wife is regarded as having predeceased and has no entitlement under the intestacy rules.

Answer 19

a) The wife has no entitlement under the intestacy rules, but she may be able to claim against the estate if she was being maintained by the deceased.