WAE (+ Trusts) Flashcards
intestacy statutory order (if no spouse and no issue)
- Parents, but if none;
- Siblings of whole blood (share both parents) on the statutory trusts, but if none;
- Siblings of half-blood (share one parent) on the statutory trusts, but if none;
- Grandparents, but if none;
- Uncles/Aunts of whole blood on the statutory trusts, but if none;
- Uncles/Aunts of half-blood on the statutory trusts, but if none;
- Crown as bona vacantia
definition of chattles
tangible movable property except x3: cash, business, investment
s. 55(1)(x) AEA defines chattels as: tangible movable property except:
* cash
* assets used at the date of death solely or mainly for business purposes
* assets held at death solely as an investment (some personal use means the item is a chattel, even if the deceased purchased the item hoping it would increase in value.
intestacy and family home
PR discretion but spouse request for their inheritance intestate’s family home share if within 12 month of grant (irrelevant if held at JT)
- PRs can choose which assets to appropriate to a beneficiary in satisfaction of their entitlement. However, a surviving spouse has a right to receive the intestate’s share of the family home in or towards the satisfaction of their inheritance, provided the right is exercised within 12 months of the grant.
- The spouse’s right of appropriation is irrelevant if the deceased’s interest in the family home was held as joint tenants. The property passes by survivorship outside of the succession estate and the intestacy rules do not apply in any event.
IPFDA and jurisdicition
Deceased (not applicant) must have died domiciled in England & Wales.
IPDFA timing requirements
6 months withing grant
Claims must be made within made within six months of the grant of representation (subject to a court order permitting an extension of the time limit)
IPFDA applicant
Only certain people are entitled to bring a claim x6:
* Spouse of the deceased
* Former spouse, provided they have not remarried
* Person living with the deceased in a relationship akin to marriage for the 2 years immediately prior to death (a cohabitee)
* Child of the deceased (includes adopted children). Both adult and minor children may apply.
* Person treated by the deceased as a child of their family (e.g. step-child)
* If none of the other categories apply, any other person who was financially maintained (wholly or partly) by the deceased immediately before their death. Financial maintenance means substantial voluntary contribution in money or money’s worth towards reasonable needs, and not under a commercial arrangement.
An applicant may bring a claim in the High Court (Family or Chancery Division) or County Court. Note that entitlement to bring a claim does not mean a claim will be successful.
IPFDA ground
“reasonable financial provision” failure
A claim must be brought on the ground that the distribution of the deceased’s estate under their will, intestacy, or a combination of both fails to make “reasonable financial provision” for the applicant.
IPFDA standard
surviving spouse standard or maintenance standard
surviving spouse standard: reasonable whether or not for maintenance
surviving spouse x3: not remarried; divorce within 12 months; no refusal for previous financial order
To determine whether “reasonable financial provision” has been made the court will apply one of two standards.
The surviving spouse standard is used where the application is brought by a spouse, and the maintenance standard is used for all other applicants.
- Surviving spouse standard: what is reasonable in the circumstances for a spouse to receive, whether or not required for their maintenance.
- Maintenance standard: what is reasonable in all the circumstances of the case for the applicant to receive for their maintenance.
The surviving spouse standard is more generous.
Note that a court has discretion to apply the surviving spouse standard where the three following conditions are satisfied:
* The applicant is a former spouse who has not remarried, or a spouse who is judicially separated from the deceased, and
* Divorce, dissolution, nullity or judicial separation occurred within 12 months of the death, and
* No order for financial provision has been made or refused in the ancillary proceedings.
The court must apply statutory guidelines when assessing firstly, whether ‘reasonable financial provision’ was made, and if it was not, to determine the form and quantum of an award. It is an objective process and all factors have equal weight.
IPDFA common guidelines
all x5
- applicant + other applicant + beneficiary financial needs/resources (foreseeable future)
- applicant physical/mental disability
- obligations/responsibility of deceased to others
- net size/nature of estate
- other factors: eg conduct of applicant
The following guidelines apply to all applicants:
* applicant’s financial resources and financial needs
* financial resources and financial needs of any other applicants
* financial resources and financial needs of any beneficiary of the estate
* obligations and responsibilities the deceased had towards any applicants or beneficiaries
* size and nature of the net estate of the deceased
* any physical or mental disability of any applicant or beneficiary
* any other matter the court considers relevant in the circumstances (including the conduct of the applicant or any other person)
When considering financial resources and needs, the court must take into account resources and needs they are likely to have in the foreseeable future.
IPFDA specific guidelines
in addition to common guidelines!
cohabitee x3: contribution + age + duration
spouse x3 : contribution + age + duration
former spouse x4: spouse + divorce reasonable expectation at DOD
child x1: how/expected to be educated
like child x4: (expected) educated + maintenance (basis: time/extent) + assumed R (know not child) + liability from other to applicant
person maintained x2: maintenance (basis) + assumed R
Application by spouse
* applicant’s age and the duration of the marriage
* the contribution made by the applicant to the welfare of the family of the deceased, including contribution made by looking after the home or caring for the family
Application by former spouse
If the court exercises discretion to use the surviving spouse standard they will consider, in addition to the two bullet points above:
* what provision the applicant might reasonably have expected to receive in divorce / dissolution proceedings if the couple had ended their relationship at the date of death.
Application by cohabitee
* age of the applicant and the length of the period of cohabitation.
* the contribution made by the applicant to the welfare of the family of the deceased, including any contribution made by looking after the home or caring for the family.
Application by deceased’s child
* the manner in which the applicant was (or might expect to be) educated or trained.
Application by someone treated as a child of the deceased
* the manner in which the applicant was (or might expect to be) educated or trained.
* the basis on which the deceased maintained the applicant, for how long and to what extent
* the extent to which the deceased assumed responsibility for the applicant’s maintenance.
* whether the deceased maintained or assumed responsibility for maintaining the applicant knowing that the applicant was not their child
* the liability of any other person to maintain the applicant.
Application by a person maintained
* the basis on which the deceased maintained the applicant, for how long and to what extent
* whether and to what extent the deceased assumed responsibility for the maintenance of the applicant.
IPFDA order
Once the court has decided that the applicant’s claim should succeed, they have wide powers to make a range of orders, which can include lump sum and periodical payments.
Assets subject to the IPFDA order
Court orders may be made in relation to the deceased’s ‘net estate’. This includes:
* deceased’s succession estate
* property over which the deceased had a general power of appointment which was unexercised
* property subject to a statutory nomination or given away as DMC
* deceased’s severable share of a joint tenancy (if ordered under s. 9)
* any property the deceased gave away during their lifetime if covered by the court’s anti-avoidance powers under ss 10 and 11.
assets without grant
9 – Collect assets that can be collected without a grant
* Within the Administration of Estates (Small Payments) Act 1965
* Proceeds of life policies written in trust
* Discretionary pension schemes
* Statutory nominated property
* Property held as joint tenants
* Donatio mortis causa
docs for probate registry
x4 (form, will - affidavit?, fee x2)
13 - Submit documentation to the probate registry:
- Online / PA1P / PA1A
- Original will / codicil
- £ probate application fee
- £ fee per sealed copy of the grant
[Death certificate may not be required where a professional is submitting the application]
You may also need to provide:
* Affidavit evidence
pre grant steps x13
x13
1 - Death certificate
2 - Funeral
3 - Secure property
4 - Locate will/codicil
5 - Succession estate: distribution
6 - ID beneficiaries (IPFDA?)
7 - Schedule: assets + liabilities
8 - Schedule: lifetime transfers
9 - Without grant collection
10 - Calculate IHT + IHT400 form
11 - Raise£ to pay IHT
12 - Probate app
13 - Docs for probate R
1 – Obtain official copy of the death certificate (usually a family member will provide this)
2 – Arrange funeral (usually a family member will do this)
3 – Secure deceased’s property / notify insurers
4 – Locate original will / codicil
* Check date / confirm it is the “last will”
* Any issues with validity?
* Might affidavit evidence be needed ?
* Consider effect s.9/15/18/18A/21/24/33 Wills Act 1837
* Has it been revoked?
5 – Establish succession estate and consider the basis of the distribution (intestacy/will/both if partial intestacy)
6 – Identify/locate beneficiaries (consider whether a claim under the IPFDA is possible/likely?)
7 – Prepare Schedule of Assets & Liabilities
* Arrange valuation of property / chattels / shares (date of death values)
* Notify banks/financial institutions/life insurance companies etc of death & request final statements
8 – Prepare Schedule of Lifetime transfers
9 – Collect assets that can be collected without a grant
* Within the Administration of Estates (Small Payments) Act 1965
* Proceeds of life policies written in trust
* Discretionary pension schemes
* Statutory nominated property
* Property held as joint tenants
* Donatio mortis causa
10 – Calculate IHT due and complete IHT form to account to HMRC (IHT 400)
* Submit IHT400 to HMRC along with payment of any IHT due. HMRC send receipt Form IHT421 (probate summary) to the probate registry.
* Submit PA form to the probate registry together with relevant fees.
* IHT form must be submitted within 12 months of death. However, interest is due on unpaid IHT 6 months from end of month of death therefore this is effectively the deadline for paying IHT and submitting forms to HMRC.
11 – Raise £ to pay IHT ( This needs particular consideration because assets will not usually be released to the PRs until the grant has been issued, but the grant will not be issued until IHT is paid.)
* Loan from beneficiary (usually interest-free)
* Direct Payment Scheme (banks release £ directly to HMRC – not to PRs)
* Bank loan (interest will be charged)
12 – Complete online probate application or PA1P where there is a will and PA1A where there is no will. Signed by applicants (or their legal representative if authorised).
13 – Submit documentation to the probate registry:
* Online / PA1P / PA1A
* Original will / codicil
* £ probate application fee
* £ fee per sealed copy of the grant
[Death certificate may not be required where a professional is submitting the application]
You may also need to provide:
* Affidavit evidence
* Form of renunciation
* Confirm notice of reservation of power was given
* Power of Attorney
Raise £ to pay IHT
11 – Raise £ to pay IHT (This needs particular consideration because assets will not usually be released to the PRs until the grant has been issued, but the grant will not be issued until IHT is paid.)
* Loan from beneficiary (usually interest-free)
* Direct Payment Scheme (banks release £ directly to HMRC – not to PRs)
* Bank loan (interest will be charged)
Post grant steps x7
1 - HMRC
2 - s27 (unknown + 2 months)
3 - collect
4 - pay debts
5 - distribute
6 - estate accounts
7 - residuary
1 – Notify HMRC about changes to the IHT account using Form C4:
* re extra assets or liabilities
* correction to original valuations
* corrections to amount of relief claimed
* if any additional IHT is due, send the extra £
2 – Place s.27 Trustee Act 1925 notice
* protect PRs from claims by unknown creditors / beneficiaries if they distribute the estate after the two month notice period has passed
3 – Collect assets
* once PRs have the grant a sealed copy is sent to each asset holder who will put assets into the PRs’ names or close accounts and send cash balance to PRs
* cash is usually collected in a PR or law firm client account
4 – Pay debts and distribute estate to beneficiaries, e.g.
* administration costs (includes legal fees, estate IT and CGT liabilities for the administration period)
* specific legacies
* pecuniary legacies
* interim distribution of part of residue
NB: Delay distribution:
* until after s.27 notice deadline expires
* if there is reason to believe an IPFDA claim may arise wait 6 months from the issue of the grant
6 – Prepare Estate Accounts
* signed by the PRs and residuary beneficiary(s)
7 – Make final distributions to residuary beneficiaries from client account
* PRs expected to complete administration within 12 months of death - known as the ‘executor’s year’.
inheritance tax – death estate
7 steps
1 – cumulative total
2 – identify taxable estate
3 – value taxable estate
4 – deduct debts/liabilities
5 – exemptions and reliefs
6 – identify/ apply available RNRB
7 – Identify and apply basic NRB and calculate IHT
inheritance tax – death – step 1
reduce NRB from 7 years prior chargeable transfers (failed LCT/PET) value (post exemptions/reliefs unlikely to amount transferred)
step 1: cumulative total
* Cumulative total = the total chargeable value of all the chargeable transfers made in the 7 years before death.
* Chargeable value = the value of a chargeable transfer after exemptions and reliefs have been applied – so is unlikely to be same figure as the amount transferred.
* Chargeable transfers = LCTs and failed PETs.
* The effect of the cumulative total is to reduce the basic NRB for the death estate. Therefore, if the cumulative total is greater than £325,000 there will be no basic NRB for the estate (assuming no transferred amount).
* The cumulative total from Step 1 is taken into account later at Step 7.
[Please refer to the IHT (Lifetime) Summary for more detail on how the LCTs and PETs are taxed]
Inheritance tax – death – step 2
exclude x4
- life policy in trust
- discretionary pension payments
- remainderman if life tenant lives
- discretionary trusts (no fixed right/interest)
include! x5
- GROB DOD
- life tenant dies DOD
- DMC
- stat nominations
- jointly owned property (regardless JT or TIC)
step 2: identify taxable estate
* The taxable estate comprises all the assets/ interests in property that an individual may have which are potentially subject to IHT following their death
- The following are excluded from a person’s taxable estate (i.e. never taxable):
o Life policy lump sum written in trust
o Discretionary pension lump sum payment
o If a remainderman dies and the life tenant is still alive, the remainder interest is not subject to IHT
o Discretionary Trust assets on the death of beneficiary – these are not assets in which any beneficiary has a fixed right or interest. - Unless an asset is mentioned above it will form part of the taxable estate even if the asset later qualifies for an exemption or relief.
- The following items are included in a person’s taxable estate even if you might think otherwise:
o Subject matter of a gift with reservation of benefit (GROB) – the value of the item given away during lifetime is included in the taxable estate at its date of death (not date of gift) value
o If a life tenant dies, the value of the trust fund at the date of death is included in the life tenant’s taxable estate if the life interest was created by will (or came into existence before March 2006)
o DMC gift, statutory nominations, and all jointly owned property whether held as joint tenants or tenants in common (you may have thought these were excluded because they are excluded from the succession estate)
inheritance tax – death – step 3
x3: market DOD, related (eg share of set), jointly (10% off unless married)
step 3: value taxable estate
* The assets in the estate are included at their market value on the date of death
* Related property: If assets owed by spouses or civil partners are worth more when valued together (e.g. because they form a set e.g. share holdings which together give control but separately do not) each party’s share is valued on death as a proportionate share of the combined total.
* Jointly owned property: The value of a person’s share of jointly owned property is the propionate share of the whole. However, where land or buildings are co-owned (whether as joint tenants or tenants in common) the proportionate value of the deceased’s share is reduced by 10%. This does not apply where the co-owners are married /civil partners.
Inheritance tax – death – step 4
deduct only before unless funeral/tombstone
Deduct debt/liabilities
* Any debts the deceased owed on the date they died e.g. overdraft or bills are deducted before the IHT is calculated.
* As an exception, funeral expenses and the cost of a tombstone can be deducted before IHT is calculated even those these costs are incurred after death. Other post-death expenses may be paid using the estate assets but cannot be deducted from the value of the estate for IHT purposes.
inheritance tax – death – step 5
RELIEF / EXEMPTIONS
exempt beneficiaries (spouse/charity) + assets (business or agricultural)
BPR: 2 years “continuous” business/50% quoted shares and control or owned by taxpayer but used for business
APR: 2 or 7 yrs (other occupied) 50% if tenancy before Sept 1995
Exempt beneficiaries (spouse / charity)
* 100% of the value of assets passing to an exempt beneficiary (whether under intestacy / will / outside the succession estate / any combination) can be deducted before IHT is calculated. For this module spouse/civil partner exemption and/or charity exemption may apply.
* Spouse/civil partner exemption will apply to the total value of assets passing into a life interest trust where the spouse will be the life tenant.
* You need to understand how the deceased’s estate will be distributed to work out the value that a spouse or charity receives.
Exempt assets (business or agricultural property)
* The value of exempt business or agricultural assets can be deducted before IHT is calculated.
* Certain criteria must be satisfied before assets qualify for the relief. If these are met the rate of relief is either 100% or 50%. [Please refer to the adapt elements for detail of the criteria for APR and BPR]
After Step 5 you will have the value of the estate which is chargeable to tax.
BR: To qualify the transferor must have owned the business assets continuously for at least 2 years immediately prior to the relevant transfer. The type of business does not need to be the same throughout the 2 year period but there must have been a business for all of that time.
100% BPR applies in respect of all private company shares, partnership interests and to a sole trader business.
50% BPR applies to quoted shareholdings (if the taxpayer had control of the company) and also to assets owned by a taxpayer but used for business purposes.
For APR to apply the property must have been occupied for agricultural purposes for at least 2 years (if transferor occupied) or 7 years (if someone else occupied).
APR of 100% of the agricultural value of the property can be claimed in most cases (but if the property was subject to a tenancy that started before September 1995, 50% relief would usually apply).
Where APR and BPR both apply, APR takes priority.
Inheritance tax – death – step 6
Step 6: Identify and apply available Residence NRB
RNRB: 175k
direct (absolutely not trusts + limited to value of residence) + lineal descendant
proportion unused deceased spouse
2M: reduced ( value -2m then half to get reduction amount then deduct reduction amount from RNRB)
2.35M (single): excluded
2.7 (double): excluded
- Apply the total RNRB available at 0%
- Amount of the RNRB is £175,000 (or the value of the Qualifying Residential Interest (QRI) if lower).
- It can be claimed where a QRI is closely inherited by a direct (lineal) descendant. QRI: includes the deceased’s home or interest in their home (and excludes commercial and let property). Closely inherited usually means absolutely, rather than by e.g. trust. Lineal descendant: includes the deceased’s children and grandchildren but has a wider definition which you should know of. Note: the deceased’s spouse/civil partner, sibling or parent are NOT direct descendants.
- Does the deceased have a spouse/civil partner who died before them and who did not use their RNRB at the time? If yes, the unused proportion can be claimed by the survivor’s estate.
- The RNRB is reduced for estate worth £2m+ . There is no RNRB available for estates worth more than £2.35M (single RNRB) or £2.7M (if double RNRB applies).
inheritance tax – death – step 7
325 k
deceased spouse unused proportion?
0% then 40%
Step 7: Identify and apply basic NRB and calculate Inheritance Tax
* Amount of basic NRB is £325,000
* Does the deceased have a spouse/civil partner who died before them and who did not use their own NRB at the time? If yes, the unused proportion can be claimed by the survivor’s estate.
* Reduce the total NRB by the value of the cumulative total (from Step 1).
* Apply rate of 0% to the value of the remaining taxable estate up to the total NRB amount.
* Apply death rate of 40% to the remainder – this is the IHT due.
The following transfers made during a person’s lifetime are chargeable to IHT:
- PET (transfer to another person) which has failed because the donor died within 7 years of making the transfer.
- LCT (transfer to a trust), which is chargeable when it is made @ 0/20%, and later, charged again @ 0/40% if the donor dies within 7 years of making the transfer
inheritance tax – lifetime – steps
5- 7 steps (A-F)
If, after the donor dies, IHT becomes payable in respect of lifetime transfers (failed PETs and re-assessed LCTs) this IHT is in addition and separate to the IHT due in respect of the death estate assets.
A – cumulative total
B – identify value transferred
C – apply exemptions and reliefs
D – Apply NRB and calculate tax
Steps E and F are only considered if the donor has died
E – Taper
F – Credit for tax already paid
IHT – life – A
Step A: Cumulative Total
* Cumulative total = the total chargeable value of all the chargeable transfers made in the 7 years before the transfer being taxed i.e. chargeable value of any failed PETs or LCTs.
* Chargeable value = the value of a chargeable transfer after exemptions and reliefs have been applied – so is unlikely to be same figure as the amount transferred.
* The effect of the cumulative total is to reduce the NRB for the lifetime transfer under consideration.
* The cumulative total from Step A is taken into account later at Step D.
IHT – life – B
- The value of a transfer is assessed by reference to the loss to the donor at the date of the transfer.
- If the transfer is cash the loss to the donor will be the same as the amount transferred. For other assets, it will usually be the market value of the item / same as the value received by the donee.
- Where there is a transfer for less than full consideration the “loss” to the donor is the difference between the price paid and the market value.
- If IHT is payable when an LCT is made and the donor pays the IHT (in addition to the gift itself), the reduction in the value of his estate includes the amount of IHT paid as well as the gift itself and the amount of the gift must be ‘grossed up’ to find the total ‘value transferred’ for IHT purposes before the tax due is calculated. You are not required to carry out any calculation where grossing up is required, but should be aware of the legal principles.
IHT – life – C
exempt beneficiaries: spouse+ charity
reliefs:
AE 3000 (x2?) (6-5 April)
small gifts MAX 250 per
per marriage per donor: 5000 (parent), 2500 grandparent, 1000 (other)
BPR 2 years (not investment eg let property)
– 100% private company shares, partnership interests or sole trader business
– 50% quoted shares if donor had control or owned assets used by a business.
APR 2/7 years 100% or 50% (tenancy pre 1955°
- Reduce the value of the transfer by deducting the value of any exemptions or reliefs that apply – the chargeable value is what remains after the exemptions and reliefs have been applied.
- Consider the following for lifetime transfers:
o Spouse/civil partner exemption: 100% of value of the transfer.
o Charity exemption: 100% value of the transfer.
o Family maintenance exemption : uncapped amount – transfer to a) child for maintenance, education, or training (full time required if child is over 18), or b) to provide care for dependent relative
o Annual exemption: £3,000 per tax year (6 April – 5 April). Use tax year of gift first, and if more is needed, use of any from previous tax year that is still available – ie. maximum of £6,000
o Small gifts allowance: £250 per tax year per person (no limit to number of different people). Cannot be combined with any other exemptions / does not apply at all if transfer is more than £250.
o Normal expenditure from income: uncapped amount. Transfers are exempt provided they are made from income (not capital), part of a regular pattern of giving and do not affect the donor’s standard of living.
o Marriage exemption : £5,000 if made by parent, £2,500 re grandparent, £1,000 re everyone else. Relief applies per marriage, and per donor.
o Business property relief: 2 year qualifying period of ownership (unless special rules following death apply).
o Relief at 100% for private company shares, partnership interests or sole trader business. Relief at 50% for quoted shares but only if donor had control, or if the donor owned the assets which were used by a business. NB: no relief for investment assets e.g. let property. Further detail can be found in the adapt element.
o Agricultural property relief: 2/7 year qualifying period of ownership, depending on whether donor occupied the land for agricultural purposes, or if it was owned by the donor but occupied by someone else for agricultural purposes.
o Relief applies to the agricultural value of the land (usually less than the market value). Most often at a rate of 100%, but in limited circumstances a 50% rate applies (for detail see adapt element).
IHT – life – D
Step D: Apply NRB and calculate tax
* Establish the value of the NRB (and any transferred NRB if calculating IHT due following death of the donor).
* Reduce the total NRB by the value of the cumulative total (from Step A).
* Apply a rate of 0% to the chargeable value of the transfer up to the total NRB amount.
* Apply the lifetime rate of 20% (LCT when made) or death rate of 40% (for failed PET or re-assessed LCT) to the balance to establish the IHT due.
* RNRB does not apply to lifetime transfers.
* NRB amount applicable to an LCT when it is first made is the NRB at the date of the transfer. The NRB that applies to a failed PET or re-assessed LCT is the NRB amount at the date of death.
IHT – life – E
Step E (Taper)
<3 years 100% payable then every year after an extra 20% less
- If, following the donor’s death, a failed PET or re-assessed LCT results in IHT becoming due (i.e. at Step D the NRB is used up and there is a tax charge) taper should be considered. If there is no tax payable at Step D there is nothing to taper so Steps E and F are irrelevant.
- Taper relief reduces the tax charge by a % based on the number of years the donor survived after making the lifetime gift:
Up to 3 years before death
- reduction in IHT: nil
- amount of IHT still payable: 100%
3 to 4 years before death
- reduction in IHT: 20%
- amount of IHT still payable: 80%
4 to 5 years before death
- reduction in IHT: 40%
- amount of IHT still payable: 60%
5 to 6 years before death
- reduction in IHT: 60%
- amount of IHT still payable: 40%
6 to 7 years before death
- reduction in IHT: 80%
- amount of IHT still payable: 20%
IHT – life – F
Step F (Credit for tax already paid) no refund!
- If an LCT is being reassessed following the donor’s death any tax that was paid at the lifetime rate can be deducted from the amount still due after Step E. Only the balance then needs to be paid to HMRC.
- If the balance is nil after crediting the lifetime amount already paid, there will be no further tax to pay.
- It is not possible to obtain a refund for the lifetime payment if the balance is negative.
Testamentary capacity
no stat presume
yes common law presume if validly executed, rational, raise no doubt
if doubt raised, no common law and propounded (eg PR) must prove
- There is no statutory presumption of testamentary capacity unlike the general test for capacity in the Mental Capacity Act 2005.
- The burden of proving testamentary capacity lies with those propounding the will i.e. usually the PRs when submitting the will for probate.
- However, there is a common law presumption of testamentary capacity if the will is properly executed, rational on its face, and there is no reason to doubt the testator’s testamentary capacity.
- If real doubt is raised, the common law presumption does not apply and the propounder must demonstrate testamentary capacity was present.
Knowledge & Approval (intention)
burden of proof: propounder
presume: duly executed + testamentary capacity + signed after read
no presume: blind/illiterate; foreign language; signed on behalf; suspicious
sol: attestation clause, if not then affidavit evidence for probate application
- The burden of proof lies with the propounder of the will. However, there is a presumption of knowledge and approval where the will is duly executed, the testator had testamentary capacity, and the testator signed their own will having had the opportunity to read it.
- The presumption does not apply (and the propounder must prove knowledge and approval) if:
o the testator is blind or illiterate, or the will is written in a language the testator cannot read and understand
o someone else signs the will on behalf of the testator
o there are suspicious circumstances - If the presumption will not apply, the attestation clause should be amended to reflect any steps taken to ensure the testator had knowledge and approval. For example, where a will is read out loud to a blind testator who confirms their understanding and approval before signing. In this way, the attestation clause acts as evidence of knowledge and approval.
- If the presumption does not apply, and the attestation clause does not expressly confirm that appropriate steps were taken, an affidavit of knowledge and approval should be submitted to the probate registry as part of the application for probate.
Knowledge & Approval – Duress/ Undue Influence
burden of proof: claimant
invalid if so as no intention
A will executed under the duress or undue influence does not reflect the true intention of the testator and therefore knowledge and approval will not be present, and the will is invalid. The burden of proof is with the person alleging duress or undue influence occurred.
s.9 Wills Act 1837
attestation clause not legally required
but lack may require affidavit if no due execution
o Compliance with s.9 is a matter of fact. There is no legal obligation to include an attestation clause nor is any specific form of attestation required.
o However, a properly drafted attestation clause raises a presumption that the will was executed in accordance with the requirements of s 9 (a presumption of due execution). In the absence of, or a poorly worded, attestation clause proof of due execution is required, usually by way of an affidavit of due execution sworn by the witnesses.
commencement
- Identifies testator and purpose of document
- Date can be included in the commencement or at the end of the will.
- A will is valid without a date but a missing date causes confusion if there is more than one will /codicil
revocation
implied revocation for inconsistencies with latest
- ensures all previous wills/codicils are revoked so there is only one valid will
- a will is valid without a revocation clause
- if a testator has more than one will, the later will impliedly revokes the earlier will but only to the extent that it is inconsistent with the earlier will
Executors and trustees
max 4 + divorce nullifies + no = NCPR 20 + lay: no money
- An executor’s power derives from their appointment under the will
- Any adult with mental capacity may be appointed (solely or jointly)
- A testator may name a substitute executor in the event that an original executor does not act
- A sole executor may act even if life or minor interests arise, but a maximum of four may be named on the grant
- Executors are often also appointed as trustees
- S.18A/C WA: the appointment of the testator’s spouse/civil partner is ineffective if the testator later divorces/dissolves the civil partnership
- If no executor is named/able/willing to act, NCPR 20 applies and an administrator will be appointed
- Lay executors cannot charge for their time so an express charging clause should be considered
- S.15 WA has no effect on the appointment of a beneficiary as executor
Guardians for children
- A testator with parental responsibility can appoint a legal guardian for their infant children by will
- The appointment would not normally take effect until after the death of the surviving parent
Specific legacy
- Gift of a specific item which is distinguished from other property of a similar type
- The subject matter is identified at the date of the will because the word “my” demonstrates a contrary intention to the general rule in s.24 WA
- The gift will therefore adeem (fail) if the item is not owned by the deceased at the date of death and the beneficiary receives nothing unless an express substitution clause is as included
- Unlike a gift of a specific item, a gift of a specific collection (“my chattels”, “my shares in [ ] plc”, “my rosewood antique furniture”) takes effect with reference to the items in the collection on the date of death
general legacy
- A gift of property which is not distinguished from property of a similar type. In this example, it does not matter which shares are given.
- If the deceased does not own the items referred to the gift does not adeem, instead the PRs would have to buy the specified property
- Most pecuniary legacies (gifts of cash) are general in nature e.g. “I give £1,000 to [ ]”
demonstrative legacy
- Where the will directs that the gift should be paid out of a specified fund
- The legacy will not fail if there are insufficient assets in the specified fund
- To the extent the specified fund is inadequate the balance is paid as a general legacy from other assets in the estate
gift of residue
- A gift of all of the testator’s property capable of passing by the will which has not already been disposed of under the will or any later codicil and is not needed to meet debts, liabilities, taxes and expenses.
- The residue estate will often be defined before the terms of the gift are stated
- If the residue clause or any part of it fails e.g. if a beneficiary of a specific share has pre-deceased there may be a partial intestacy if no substitution provisions apply
[Administrative Powers]
- If no express administrative powers are included only statutory and common law powers will apply
- If express powers are included, they take priority over the default powers to the extent of any discrepancy
attestation clause
Signed by [ ] in our joint presence and then by us in hers
Date: [ ]
- The attestation describes the circumstances in which the will was signed and confirms the requirements of s. 9 WA are met. It should be amended to note special circumstances surrounding the execution e.g. if the will was read out loud.
- A will is valid without an attestation clause but affidavit evidence may be required to demonstrate s.9 compliance.
- If beneficiary (or their spouse) witnesses the will although the will remains valid, the beneficiary loses their entitlement under the will (s 15 WA)
- The date usually appears with the attestation or commencement. A will is valid without a date but results in confusion if there is more than one will/codicil.
Relevant to all dispositive clauses
beneficiary ID: from date of execution unless class (1st vested interest = closed)
no IHT but yes costs
codicil republishes (date)
issue to issue substitution
- Objects of a gift (i.e. identity of the beneficiary): the will is deemed to speak from the date of execution, unless there is express wording to the contrary. If a gift is given to a “class” of beneficiaries, unless express words clarify when members of the class are identified, ‘class closing’ rules apply and the class closes when the first beneficiary in the class obtains a vested interest.
- Effect of codicils: a codicil republishes the will it amends to the date the codicil is signed.
- IHT: gifts are made free of tax unless otherwise stated
- Transfer costs: gifts are subject to transfer costs unless otherwise stated
- Charges: a charged asset bears liability for payment of the secured loan unless will directs otherwise s.35 AEA
- Survivorship provisions: there are no deemed survivorship provisions, so these need to be expressly drafted
- Substitution provisions: there is no deemed substitution effect and a gift to a beneficiary who has pre-deceased would usually fail if there is no express substitution clause. However, s.33 WA is an exception; if a testator makes a gift to issue (children, grandchildren, great-grandchildren etc) who pre-decease, leaving their own issue, that issue can take by way of substitution the share the original beneficiary would have taken
- Legacies can be drafted as contingent or vested - the most common contingency is the requirement to reach a specific age
Trusts law: the equitable rules in relation to creation of a valid gift or express trust apply to the dispositive clauses within a will. You should be able to review these and conclude whether a valid gift/ fixed interest trust/ discretionary trust/ power of appointment has been created.
different types of grants
grant of probate
grant of administration (with will)
grant of administration
grant of probate
The grant of probate is required for estates where:
The deceased left a valid will
The will appoints executors
At least one of the executors appointed is going to act
power of attorney okay
The grant of probate is issued in the name(s) of those executors who apply.
A grant of probate is required even if the will does not dispose of any/all of the deceased’s property.
For example, the whole or part of the estate is left to a pre-deceased family member by will and no substitution provisions apply.
If the appointment of an executor under the will is limited e.g. to specific assets, jurisdiction or by time, then this will be reflected in the authority conferred by the grant.
Only those named may take out the grant and they cannot simply give that right to someone else. Yet a named executor may formally appoint someone to act on their behalf under a power of attorney.
Grant of Letters of Administration (with will)
A grant of letters of Administration (with will) is the appropriate grant where:
the deceased left a valid will
but the will appoints no executors who are willing/able to act.
This is the correct grant even if the will fails to dispose of all the estate.
Administrators are appointed under the Non-Contentious Probate Rules 1987 (‘NCPR’). Rule 20 applies and lists, in order of priority, those entitled to apply for the grant.
Administrators (not executors) are appointed. Their entitlement to apply derives from Rule 20 NCPR not the will.
Rule 20 lists, in order of priority, those entitled to make an application for the grant.
The order in Rule 20 broadly follows the entitlement to the estate assets
Grant of Letters of Administration
A grant of Letters of Administration is the appropriate grant where the deceased died without having made a valid will (i.e. died intestate).
This may be because they did not make a will at all, had revoked a will they did make, or the will they made is invalid.
Administrators are appointed under NCPR 22 which lists, in order of priority, those entitled to apply for the grant.
Administrators (not executors) are appointed.
Their entitlement to apply derives from Rule 22 NCPR.
Rule 22 lists, in order of priority, those entitled to make an application for the grant.
The order in Rule 22 follows the entitlement to the estate under intestacy.
Administration: Assets without a grant
Where the following assets are included in the succession estate, no grant is required for the PRs to deal with them:
- Assets which can be distributed under Administration of Estates (Small Payments) Act 1965
- Personal household possessions
- Cash
Administration of Estates (Small Payments) Act 1965
Administration: Assets without a grant
Orders made under this Act permit payments to be made to persons who appear to be beneficially entitled to the assets without formal proof of title.
There is a restricted category of assets to which the Act applies.
National Savings (inc. Bank accounts, Savings Certificates and Premium Bonds)
Friendly Society and Industrial and Provident Society deposit accounts.
Arrears of salary and wages
Pensions where the deceased was a member of the police, fire authority, air force or army.
Building society accounts
There is an upper financial limit of £5,000 per asset. If the value of the asset is greater than £5,000 a grant is required to establish title to the whole sum, not just that in excess of £5,000. The provisions only make payments permissible, they do not compel those holding the assets to do so.
In practice, these statutory provisions are rarely required because most banks and financial institutions adopt their own policy and will release sums (commonly up to £15,000 but sometimes larger amounts) without sight of the grant.
Each institution will have its own evidential requirements before closing an account. Most will require sight of the death certificate and will (or confirmation of entitlement under intestacy) as evidence that the recipient is entitled to the money. The PRs may also be expected to sign an undertaking confirming their right to administer and give an indemnity to the bank in the event the payment is made to the wrong person.
Example:
An estate incudes a
Building Society account worth £60,000
Premium Bonds worth £2,000
High street bank current account worth £10,000
Building Society Account: A grant is required because the value is greater than the statutory limit under the Act.
Premium Bonds: The Act would apply and these could be administered without a grant.
Current Account: although technically not subject to the Small Payments Act, the bank, following its own polices, may agree to close the account without sight of the grant.
Personal possessions & cash
Administration: Assets without a grant
Title to personal household possessions passes by delivery and proof of ownership is not required when they are sold (with the exception of cars where registration documents are needed).
Therefore, PRs are normally able to dispose of chattels without having to produce formal proof of their authority.
This applies where items were owned solely by the deceased. If there was a joint owner they would need to consent before the PRs could effect a sale.
Before any items are sold PRs should check whether any particular items were gifted specifically by the deceased’s will.
A PR does not need a grant to take possession of cash found at the deceased’s home.
Property that does not devolve on PRs
Assets which pass outside of the succession estate (in other words, cannot pass by a will or intestacy) do not require a grant in order for them to be released.
For these assets the PRs will need to produce the death certificate, together with any other documentation the asset holder requires.
Items passing outside of the succession estate and process for dealing with these following death: x4
- Property owned as joint tenants(commonly land and bank accounts): On the death of one owner the property passes automatically to the survivor under the rules of survivorship and this does not rely on the issue of a grant. The land registry / bank will transfer title into the name of the surviving owner.
- Donationes mortis causa(DMC): Here the deceased would have transferred ownership or control of the asset to the beneficiary during their lifetime.
- Life policieswritten in trust,discretionary pension lump sumsnominated for a third party, and other nominated assets. On production of the death certificate these funds would be payable to the named beneficiary.
- Assets held in a trust in which the deceased had an interest:The trustee should be notified of the death. The trust deed will determine what happens to the trust fund (if anything) following the death of a beneficiary.
