WE 4 & 5 - Paying Out Flashcards
Note - Administration: Applying for the grant is not covered in these notes…
What must be supplied to the Probate office
- registry fee (no fee if estate worth less than £5k)
- A certified copy of the death certificate (not photocopy)
- original will (probate confirms validity)
- if IHT 400 required (goes to HMRC), HMRC will send confirmation to probate registry.
- power of attorney docs (if required).
- forms of renunciation (if applicable).
When is an estate solvent?
If the assets are sufficient to pay funeral, testamentary and administration expenses, debts and liabilities.
(Doesn’t matter if legacies can be paid)
What are the rules regarding secured debts?
Charged property will bear primary liability for payment of the debt unless a contrary intention is shown in the will (must be clear & specific).
If the debt is less than the value of the asset, no other estate assets can be used to repay the debt.
How are unsecured debts / expenses paid?
a) property not disposed of by a will
b) residue (subject to retention of a legacy fund - I.e specific gifts made in cash)
c) property the will set aside (for payment of debt)
d) £ in the pecuniary legacy fund
e) property specifically given (e.g. chattels)
(where gifts are in unequal amounts, debts are paid proportionately).
How can PRs protect themselves against a claim under 1975 against the estate
If a claim under IPFDA 1975 may be made, PRs may wish to delay distribution until 10 months of the grant being issued (there is a six month deadline for issuing a claim and a further four months to serve notice of this).
How can PRs protect themselves from unknown credits
Get a s.27 notice in
- the gazette
AND
- local newspaper of land owned by
- any other appropriate newspaper (e.g trade paper for D’s business)
and wait 2 months from date of the advert.
Does a s.27 notice protect the beneficiaries?
No just the PR’s. If a PR receives a gift, a wronged creditor may still have a claim against it notwithstanding the notice.
What if PRs pay debts out of order?
Beneficiary can apply for marshalling and claim against a beneficiary who received assets that should have been used to pay the debts.
Are taxes owed at the date of death payable from estate assets?
are they deductible when valuing the estate for IHT?
- yes
- yes
Is death a disposal for CGT?
No. Assets are valued at D.o.D. Any gain is ignored.
What happens to income after death?
PR’s are liable at basic rate but with no personal allowance.
When do PRs not have to account for Estate income?
If only income is savings interest of less than £500.
What happens to Estate income tax when distributed to beneficiaries?
If B pays no tax, they can request a refund,
If B pays higher rate, they will need to top-up the tax suffered by the PRs
Estate Gains - do the PRs have a personal allowance?
Yes
CGT - are transfers to beneficiaries taxable on the PRs?
No, they are not disposals for CGT purposes. B acquires the asset at Probate value (d.o.d) not the value when the asset was transferred.
What order are legacies paid in?
- specific
- general
- residuary
When can PRs ascertain the value of the residue?
When all debts, testamentary expenses and other legacies have been paid.
Which assets must PRs use to settle general and residual legacies?
PRs are free to choose.
-Cannot give an asset valued more than the entitlement of a beneficiary
-Can give asset valued less than entitlement and top-up.
If there is tax to pay, will the estate be excepted?
No
How can you get money to pay IHT and apply for grant?
- Send a copy of the IHT 400 to the bank so that they can pay HMRC directly.
- Then send the IHT400 to HMRC.
- HMRC will then forward the IHT 421 to the Probate office directly.
- Wait 14 days.
- Apply for grant with application fee and a fee per sealed copy.
Who signs off the trust accounts off?
The PRs, the beneficiaries are entitled to a copy.
Are administration expenses deductible for IHT?
No - except reasonable funeral costs + Headstone
When do you get executors
If appointed by the Will. Otherwise, they will be administrators.
What is the chattel exemption?
No CGT on disposals of moveable asset for consideration of £6,000 or less
