Will and Inheritance Tax Planning Flashcards
Why make a will?
- To select and appoint executors/trustees.
- To select and appoint guardians of minor children.
- To control disposal of property.
- To alter/add to the statutory powers of executors/trustees.
- To provide instructions for burial/cremation.
- To enable tax planning.
- To provide peace of mind.
What are the 6 steps to a calculation for IHT on death?
Step one - Calculate the cumulative total.
Step two - Identify the taxable death estate.
Step three - Value the taxable death estate.
Step four - Deduct any debts.
Step five - Deduct any available exemptions/reliefs.
Step six - Calculate the inhertance tax.
What are the 6 items that are excluded from the deceased’s distribution estate?
- Property held as beneficial joint tenants. 2. Insurance policies written in trust. 3. Discretionary pension schemes. 4. Statutory nominations. 5. DMC. 6. Settlements.
What are the 3 items that are excluded from the deceased’s taxable estate?
- Excluded property. 2. Insurance policies written in trust. 3. Discretionary pension scheme.
- What is excluded property?
- Why are insurance policies written in trust and discretionary pension schemes not included in the estate for IHT purposes?
- Excluded property is:
- property situated outside the UK, where the person beneficially entitled toit is domiciled outside the UK.
- Where the decd is the remainderman of the life interest trust and on his/her death, the life tenant is alive and recieving income from the trust from the trust.
- Not included in the estate for IHT purpsoses because:
- The insured person has divested him/herself (or his/her estate) of any benefit in favour of the beneficiaries under the trust.
- The decd is not deemed to have any entitlement to any payment from the scheme.
What additional right does a surviving spouse have in addition to the distribution under the intestacy rules?
- Right to require the presonal representatives to appropriate the dwelling house in the which they were resident at the time of the intestates death, to them, in total or partial satisfaction of their entitlement under the intestacy rules - Schedule 2 of the Intestates Estates Act 1952. (s. 1 (1))
- It is the right to buy the house, not the right to be given it.
- Where the money comes from is up to the surviving spouse and they can use the entitlements under the intestacy to buy the house.
- The price is the value at the date it is transfered to the surviving spouse not the date of death value.
- s.1 (3) - nothing in subsection (5) of section 41 of the AEA 1925 shall prevent the PRs from giving effect to the right.
- s.3 (1) (a) - The right shall not be exercisable after the expiration of 12 months from the first taking out of representation.
What happens if two people die in a common accident?
- s. 46(2A) AEA provides that a spouse or civil partner must survive by a period of 28 days in order to inherit under the intestacy rules.
- The eldest is deemed to die first.
What steps need to be taken to satisfy the SRA Code of Conduct 2011 when instructed by a new client?
O (1.13) - clients must recieve the best possible information, both at the time of engagement and when approriate as their matter progresses, about the likely overall cost of their matter.
O(1.9) - clients must be informed in writing at the outset of their matter of their right to complain and how complaints can be made. This information is usually given at a first interview and then confirmed to the cient in writing i.e. in a client care letter.
For new clients - two additional things:
- undertake customer due diligence (CDD), pursuant to your obligations under the Money Laundering Regulations 2007 (MLR 2007).
- Carry out a conflicts check.
Where do the 6 items of the that are excluded from the deceased’s distribution estate go?
- Property held as beneficial joint tenants - passes through survivorship.
- Insurance policies written in trust - passes through the terms of the trust.
- Discretionary pension schemes - passes through the trust.
- Statutory nominations - passes through the nomination.
- DMC - already gifted to the beneficiary.
- Settlements - Where the decesed was a beneficiary under a trust any future benefit passes through the trust.
What is the definition of a personal chattel?
s. 55(1)(x) AEA defines personal chattels as tangible moveable property except cash, items used soley or mainly for business purposes and items held soley as an investment.
There are no other limitations (i.e. financial) on personal chattels.
How can a person tax plan?
- General tax planning methods including PETs and investing in AIM.
- Write Insurance policies in trust.
- Utilise nil rate bands.
- Consider business property relief.
What exemptions and reliefs are available in a person’s lifetime?
- Annual exemption.
- Small gift exemption.
- Normal expenditure out of income.
- Gifts in consideration of marriage.
- Family maintenance.
- Spouse, charity, APR, BPR.
What exemptions and reliefs are available on death?
- Not the AE.
- Taper relief but only in relation to lifetime gifts that have become taxable by virtue of death.
- Spouse, charity, APR, BPR.
What are the reservation of benefit rules?
- The statutory provision is s.102 Finance Act 1986.
- Property is regarded as subject to a reservation if after gifting the property, the transferor still enjoys or retains some benefit in the property.
- Often called a GROB.
- Value of the assest will be a part of the IHT estate when the transferor dies.
- Value of asset is as at date of death.
What are the related property rules?
- The statutory provision is s.161 IHTA 1984.
- Some assests are worth more when they are valued together, than if they were owned by more than one person. e.g. collection of rare prints or half shares in a business.
- There to stop people saving IHT.
- The rules apply where there is relevant property owned by married couples or civil partners (not e.g. brother and sister where joint property reduction can apply).
