WAE Extra Flashcards
What is an alternative to using a life interest trust?
Rights of beneficiaries?
Advantages?
Disadvantages?
Using a discretionary trust
None of beneficiaries have rights to capital or income - would receive capital or income at the trustees’ discretion
Advantages:
-Flexibility - do not have to determine fixed interest now and trustees can meet beneficiary needs as they arise
-trustees can use powers, such as powers of investment to purchase home if needed for beneficiaries
Disadvantages:
-Spouse exemption does not apply like in life interest trust
-Dependent on trustees for inheritance
What is the purpose of a 2 year discretionary trust?
Intention only to last for 2 years - distributions made within 2 years of testator’s death from trustees will be deemed to have been made under deceased’s will for IHT purposes (will still have to pay CGT though)
What are the rights to income/capital under a life interest trust?
Life tenant only has rights to income (e.g. can live in house which is part of estate). Will have no rights to capital
Rights to capital - preserved or invested by trustees and would pass to remainder beneficiaries on death of life tenant
Give overall process of distribution and estate accounts
Duty?
When would an interim distribution be made?
When can/should PRs delay distributions?
Legacies?
Residue?
Appropriation?
Receipt?
DUTY: Once PRs collected in assess and paid debts, funeral, testamentary and admin expenses - have a duty to distribute remaining assets in accordance with will/intestacy
Interim distribution: early payment to residuary beneficiary before end of admin (e.g. if in financial difficulty)
Need to complete admin within 12 months but:
-IPFDA - delay distributions for 10 months (6 months to issue claim, 4 months to serve)
-s27 TA - 2 months after notice
Distribute specific first, general second, residuary third
Residue: Leftover distributed last (if any)
Appropriation - to pay general and residuary legacies - PRs can choose assets to appropriate to beneficiaries in settlement of entitlement (can’t appropriate where value of asset exceeds entitlement)
PRs should obtain confirmation of receipt from beneficiary (issue with minors - express clause 16/17 effective, trustees to hold property)
What is the order of entitlement under NCPR 20?
a) executor;
b) trustee of the residuary estate;
c) any residuary beneficiary (whether taking absolutely or for life), or, where there is a partial intestacy, a beneficiary of the estate under intestacy;
d) the PRs of anyone in (c) other than a trustee or life tenant of the residue;
e) any other beneficiary or a creditor;
f) PRs of anyone in (e).
What must be done if PRs later find info in IHT400 was correct?
Used form C4 to correct errors - will have to recalculate IHT and include this as well
What is the rule with IHT and LCT?
Transfers to a trust are immediately chargeable at the lifetime rate (20%), will only be assessed at death rate if they fail
