IHT is due by the end of 6 months after the month in which the deceased died. Interest is charged on unpaid tax after this deadline. At least part of the IHT must be paid before the grant of representation can be issued.

Wills & Administration of Estates Procedures Flashcards by nicholas corion

How do you go about taking instructions from a client wishing to make a will, what key areas should you cover?

Instructions for Making a Will

When taking instructions from a client wishing to make a will, cover the following key areas:

1. Understanding the Estate
Ask:

“Can you tell me about your estate — including any assets such as property, savings, investments, or valuable possessions?”
“Do you have any outstanding debts or liabilities we should be aware of?”
This helps determine the net value of the estate for inheritance tax planning and gift distribution.

2. Family and Beneficiaries
Ask:

“Tell me about your family — do you have a spouse, civil partner, long-term partner, or children?”
“Is there anyone specific you would like to leave part of your estate to, such as friends, charities, or others?”
This ensures you identify potential dependants, claimants under the Inheritance (Provision for Family and Dependants) Act 1975, and intended beneficiaries.

3. Choosing Executors
Explain:

“You’ll need to choose at least one executor — the person who will carry out the instructions in your will and administer your estate.”
“This can be a trusted family member or friend. They don’t get paid, but they can use estate funds to instruct a solicitor to assist them.”
“Alternatively, you can appoint a professional executor such as a solicitor’s firm or a trust corporation. The benefit is that they are experienced and impartial. You also avoid needing substitutes if a lay executor can’t act. However, they will charge fees for their services.”

4. Drafting and Execution
Explain:

“We’ll draft your will based on your instructions and send it to you to review.”
“You can request changes, and once the draft is finalised, we’ll provide the final version for you to sign.”
“The will must be signed in the presence of two independent witnesses — they must be over 18, not named in the will, and not married to or closely related to anyone named in the will.”

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What can an appointed executor do if they don’t want to be an executor?

They can renounce their right to be an executor by submitting a PA15 form, unless they have intermeddles (ie done PR tasks)

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What are the 7 main steps to Obtain a Grant of Probate (Executor named in a Will)?

When must you provide an affidavit or statement of truth?

You must register the death within 5 days (or 7 days in some cases)
Do this at the local register office where the person died
Registrar issues the death certificate immediately after registration
Copies cost around £11 each

Gather Financial information about the estate

Value the estate by collecting details of the deceased’s assets and debts (property, bank accounts, pensions, liabilities, etc.).

Complete inheritance tax forms:

If tax is due or estate is complex: complete IHT400 and submit to HMRC.
If no tax is due and estate is simple: complete IHT205.

Pay any inheritance tax due.
Wait 20 working days after sending IHT400 to HMRC before applying for the grant.
Apply for the grant to His Majesty’s Courts and Tribunal Services HMCTS:

Use form PA1P (for wills with named executors).
Include the original will and two copies.
Submit death certificate and ID documents (proof if identity, proof of address).

Pay court fee:

£273 if estate is over £5,000.
No fee if estate is under £5,000.
Pay £1.50 per additional copy of the grant.

Provide an affidavit or statement of truth if:

There are concerns about the will’s validity (e.g. handwriting, alterations, damaged will, etc.).

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What are the 7 Steps to Obtain Grant of Letters of Administration with Will Annexed (Will exists but no executor)

You must register the death within 5 days (or 7 days in some cases)
Do this at the local register office where the person died
Registrar issues the death certificate immediately after registration
Copies cost around £11 each

Gather Financial information about the estate

Value the estate by collecting details of the deceased’s assets and debts (property, bank accounts, pensions, liabilities, etc.).

Complete appropriate IHT form:

Use IHT400 or IHT205 depending on circumstances.

Pay any tax due and wait 20 working days if IHT400 is submitted.
Apply for the grant using:

Form PA1A, since there is no executor willing or able to act.

Include:

Original will (this will be “annexed” to the grant).
Two copies of the will.
Death certificate.
ID documents.

Pay £273 court fee if estate is over £5,000, plus £1.50 for extra copies.
Provide any additional affidavits as required:

E.g. where someone has renounced probate, or to explain why no executor is applying.

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What are the 7 steps to Obtain Grant of Letters of Administration (No Will / Intestacy)

You must register the death within 5 days (or 7 days in some cases)
Do this at the local register office where the person died
Registrar issues the death certificate immediately after registration
Copies cost around £11 each

Gather Financial information about the estate

Value the estate by collecting details of the deceased’s assets and debts (property, bank accounts, pensions, liabilities, etc.).

Complete inheritance tax forms:

Use IHT205 or IHT400 depending on complexity and tax liability.

Pay inheritance tax if required.
Wait 20 working days if IHT400 was used.
Apply for the grant to HMCTS:

Use form PA1A (no will and no named executor).
Include death certificate and ID documents.

Pay court fee:

£273 if estate is over £5,000.
No fee if estate is under £5,000.
£1.50 per copy.

8. Submit any additional documentation if required:

E.g. renunciations if someone with prior entitlement does not wish to act.

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What is the need for a grant of representation? When is it not needed?

A grant of representation shows authority to deal with the deceased’s assets.

A grant of probate is not needed for:

Payments under £5k if an institution chooses to make payments under the Small Payments Act. This is at the bank’s discretion. The bank makes payment to the person claiming to be entitled to the deceased’s estate — usually a next of kin or the intended personal representative (PR).
Chattel: PR doesn’t need to show grant for dealing with chattel
Cash: no grant needed to deal with cash
no grant needed for dealing with property passing outside will (eg joint property, pension, life policy)

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What are the 3 types of Excepted Estates (IHT form 205 required)?

Low-Value Estate (Gross Small Estate):

The gross value of the estate is below the Nil-Rate Band (NRB) — currently £325,000.
No inheritance tax (IHT) is payable because the estate’s value is under the tax threshold.

Exempt Estate:

The gross estate value is below £3 million, and:
The net estate passing to non-exempt beneficiaries is below the NRB (£325,000).
The rest passes to exempt beneficiaries (e.g. spouse or charity), making it fully exempt from IHT.

Lifetime transfers:

Up to £250,000 in chargeable lifetime transfers (e.g. trusts) within 7 years before death.

Foreign assets:

Up to £100,000 in assets held outside the UK.

Non-UK Domiciled Estate:

The deceased was never domiciled (or deemed domiciled) in the UK.
The estate includes only UK assets, and:
The UK assets are below the NRB threshold.
No IHT is payable as the deceased’s worldwide estate is outside UK IHT scope.

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When is IHT Payable?

IHT is due by the end of 6 months after the month in which the deceased died.
Interest is charged on unpaid tax after this deadline.
At least part of the IHT must be paid before the grant of representation can be issued.

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Main Ways a PR Can Pay IHT

1. Small Payments (<£5,000): Banks may release these without a grant.

2. Direct Payment Scheme (DPS):

Submit IHT423 to instruct the bank to pay HMRC directly from the deceased’s account.
Separately, submit IHT400 to HMRC — this shows the total tax due and which banks/sources will pay it.
HMRC matches payments received from banks against the IHT400 to confirm the tax is covered.

3. Loan: PR may borrow to pay IHT; lender usually requires an undertaking to repay the loan from estate proceeds.

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Other Payment Options for IHT

1. Joint Property or Life Assurance Proceeds

If the deceased held joint property or had life insurance, the proceeds from a joint sale or payout can be used to pay IHT.

2. Personal Funds from a Beneficiary

A beneficiary may pay IHT using personal funds, with the expectation of reimbursement from the estate once funds are available.

3. HMRC Credit Facility (Last Resort)

If all other options are unavailable, HMRC may allow deferred payment by granting credit.
This is typically a last resort, and interest may still accrue.

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Flashcard: What are the main scenarios where Inheritance Tax (IHT) applies?

On death: Charged on the net estate (assets minus liabilities).
PETs: Gifts to individuals that become chargeable if the donor dies within 7 years.
LCTs: Gifts to trusts or companies — immediately chargeable unless exempt.

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Flashcard: What are the four main steps for calculating IHT?

Identify the transfer of value (e.g. gift, death, trust).
Quantify the value transferred (estate value or loss to donor’s estate).
Apply exemptions and reliefs (e.g. spousal, charity, BPR, APR).
Calculate tax at 0%, 20%, or 40% depending on lifetime or death and thresholds.

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What is the Nil-Rate Band (NRB)?

The NRB is a tax free amount representing a proportion of an estate not subject to IHT.
£325,000 (frozen until 2027/28).
Applies to both lifetime and death transfers.
Unused NRB from a predeceased spouse/civil partner can be transferred (max 100%).

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What is the Residence Nil Rate Band (RNRB)?

The RNRB is an additional tax free amount that increases the proportion of an estate not subject to IHT by an additional £175,000
Additional £175,000 (2024/25).
Applies only on death, where a qualifying residence is left to lineal descendants.
Phased out for estates over £2 million.
Transferable between spouses.
Downsizing relief available if residence was sold after 8 July 2015.

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What is tapering relief and when does it apply?

Applies to PETs and LCTs if donor dies 3–7 years after the gift.

Reduces tax (not value transferred) as follows:

3–4 years: Reduces tax owed by 20%
4–5 years: Reduces tax owed by 40%
5–6 years: Reduces tax owed by 60%
6–7 years: Reduces tax owed by 80%

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Who is liable for IHT and who bears the burden?

PRs: Liable for tax on estate.
Trustees: Liable for tax on settled property.
Donee: Liable for PETs that become chargeable.
The will may shift the burden. If silent, tax is paid out of the residue.

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When is IHT due and can it be paid in instalments?

Due 6 months after the end of the month of death, or earlier if applying for a grant.
Can be paid in 10 yearly instalments for:
Land or real property
Business interests
Shares giving control
Interest is charged on unpaid amounts.

What are PETs and how are they taxed?

Gifts made by a donor during their lifetime to individuals or disabled trusts.
Exempt if donor survives 7 years.
Chargeable if donor dies within 7 years.
Value = loss to estate.
Apply annual exemption and other reliefs first.

What are LCTs and how are they taxed?

Any lifetime transfer that is not a PET is a Lifetime Chargeable Transfer (LCT).

Common examples:
* Transfers into trusts (other than disabled trusts).
* Transfers to discretionary trusts or companies.

How are they taxed?

Immediately chargeable at 20% above NRB.
Reassessed at 40% if donor dies within 7 years.
PETs are ignored for cumulation unless they become chargeable.

IHT Calculation Example — Veronica’s Estate

Veronica dies intestate, survived by her partner William (unmarried) and two children. Her assets include:

£95,000 joint bank account with William (This is veronica’s share of the bank account)
£250,000 life assurance payable to her estate
£30,000 life assurance in trust (excluded)
£15,000 unquoted shares (15%) in a trading company
£19,000 in a building society account
£15,000 in chattels
£4,000 in debts and funeral expenses

What is the taxable estate and how much IHT is due?

Gross estate: £394,000
Less debts: £4,000 → Net estate = £390,000
Unquoted shares qualify for 100% BPR → remove £15,000
Adjusted estate = £375,000
NRB: £325,000 → Taxable amount = £50,000
IHT @ 40% = £20,000

Gina made two PETs:

1 Sept 2018: £200,000 to Claire

25 June 2022: £200,000 to James

She dies on 30 August 2024. Her estate (house and bank accounts) is worth £400,000, left equally to Claire and James. She made no other significant gifts. Both PETs become chargeable as she died within 7 years.

How much tax is payable on each PET and her estate?

(1) Tax on 2018 PET to Claire

Loss to estate: £200,000
Less annual exemptions for 2017/18 and 2018/19: £6,000
Chargeable amount: £194,000
No previous transfers before this → full NRB available
Tax: £194,000 @ 0% = £0

(2) Tax on 2022 PET to James

Loss to estate: £200,000
Less annual exemptions for 2021/22 and 2022/23: £6,000
Chargeable amount: £194,000
Cumulative total before this PET = £194,000 (from Claire’s PET)

Remaining NRB: £325,000 – £194,000 = £131,000

Tax:

£131,000 @ 0% = £0
£63,000 @ 40% = £25,200

Payable by James

(3) Tax on Gina’s estate (£400,000)

Full NRB already used up by the PETs → NRB = £0
House qualifies for Residence Nil Rate Band (RNRB) as it’s:
A qualifying residential interest
Closely inherited (to children)
Full RNRB available: £175,000
Taxable estate: £400,000 – £175,000 = £225,000
Tax: £225,000 @ 40% = £90,000
Payable by PRs from the estate

IHT Calculation Example — George’s LCT

Q:
George transfers £381,000 into a discretionary trust on 1 May 2021. He dies on 1 Sept 2024.
He had used his annual exemptions (£6,000 total).
At time of transfer: NRB was £325,000. Trustees paid 20% tax on the excess.
What is the additional tax due on death?

Value transferred: £381,000 – £6,000 = £375,000

At time of transfer:

£325,000 @ 0%
£50,000 @ 20% = £10,000 (trustees paid)

On death within 3–4 years:

£50,000 @ 40% = £20,000
Tapering relief (80%) → tax = £16,000
Additional due = £16,000 – £10,000 = £6,000

Flashcard: What is Business Property Relief (BPR)?

BPR reduces the value of qualifying business property for IHT.

100% relief applies to:

A business or interest in a business
Unquoted company shares

50% relief applies to:

Quoted shares with voting control
Land/buildings used for the business but owned separately
Must be owned for 2 years before death or transfer
Spouses can combine their ownership periods

What is Agricultural Property Relief (APR)?

APR reduces the value of agricultural property used for farming

100% relief:

Vacant possession or qualifying lease after 1 Sept 1995

50% relief:

Other agricultural land cases

Conditions:

Occupied for agriculture for 2 years by owner
Or owned for 7 years and occupied by another for agriculture

When do you use IHT205 vs IHT400?

IHT205: Used when the estate is excepted (no tax payable and straightforward) * E.g. estate is under NRB or all to spouse/charity IHT400: Used when the estate is chargeable or more complex * E.g. estate exceeds NRB, includes trusts, or large lifetime gifts * Submitted to HMRC with relevant schedules (e.g. IHT403 for gifts, IHT417 for instalments)

When can IHT be paid by instalments?

Available for: * Land/property * Business interests * Shares giving control of a company - Tax can be paid over 10 annual instalments - First instalment due 6 months after end of month of death - Interest charged on outstanding tax from second instalment onwards

What happens if instalment property is sold?

If property (e.g. land) is sold before all instalments are paid: * The remaining IHT becomes immediately due * This includes all unpaid tax and accrued interest

What is the difference between liability and burden in IHT?

* Liability refers to who is responsible for paying IHT to HMRC. * Burden refers to who ultimately bears the cost of the tax. * Liability is fixed by statute, while burden can be altered by the will.

Who is liable to pay IHT on death?

1. Personal Representatives (PRs) * Pay IHT on the free estate (under will or intestacy). * Also liable for tax on jointly owned property. * Liability capped at the estate's value unless there’s negligence. Trustees * Pay IHT on settled property where the deceased had a qualifying interest in possession (e.g. life tenancy). * Beneficiaries can be secondarily liable if tax goes unpaid.

Who is liable for IHT on a PET that becomes chargeable?

* The donee (recipient) of the PET is primarily liable. * If unpaid after 12 months from end of month of death, the PRs become secondarily liable. * PRs may have to pay from estate and recover from the donee.

Who is liable for IHT on a Lifetime Chargeable Transfer (LCT)?

* Trustees are usually liable and pay from trust property. * If the transferor pays, the value transferred is grossed up to reflect that tax is included in the gift. * On death within 7 years, additional tax may arise at 40%, and trustees remain liable.

What is the 'estate rate' and how is it used?

* Formula: Estate rate = (Total IHT payable ÷ Total chargeable estate) × 100 Used to: * Calculate IHT payable on instalment option property * Apportion tax between PRs and trustees * Allocate tax on specific legacies

Flashcard: Example – Estate Rate Calculation

Graham’s estate: £400,000 Taxable amount: £75,000 @ 40% = £30,000 Estate rate = £30,000 ÷ £400,000 = 7.5% * Henry inherits a house worth £210,000 → 210,000 × 7.5% = £15,750 * Ian receives residue worth £190,000 → 190,000 × 7.5% = £14,250

Who bears the burden of IHT in default?

If the will is silent, default burden rules apply: * IHT on estate assets: Paid from the residue as a testamentary expense. * Joint property: Tax falls on the surviving joint tenant. * PETs or LCTs: Borne by recipient or trustees respectively.

Are PRs liable to Income Tax during administration of the estate? What income tax rates do PR's pay on savings income, dividend income and other income?

Yes. PRs must account for Income Tax on income received by the estate between the date of death and the end of the administration period. This includes: * Bank interest * Rental income * Dividends * Any other income-producing assets PRs pay income tax at** basic rates** during administration: Savings income: 20% Dividends: 8.75% Other income: 20% * No personal allowance applies.

Are PRs liable to Capital Gains Tax (CGT) during administration?

Yes. PRs are liable for CGT on any disposals of estate assets made during the administration period (e.g. sale of shares, land). Key points: Annual CGT exemption for PRs = same as individuals (£3,000 for 2024/25). CGT rate: * Gains made by trustees and PR's are all taxed at 20% OR * For residential properties gains will be taxed at 24%.

Can joint property be used to pay IHT if one joint tenant is still alive and refuses to sell?

Yes, but with limitations. * For joint property (e.g. joint tenancy), the deceased’s share of the property passes automatically to the surviving joint tenant by survivorship, outside the will or intestacy. * However, HMRC can still seek payment of IHT attributable to the deceased’s share. Key Point: * The surviving joint tenant cannot be forced to sell, but the personal representatives (PRs) can: * Request the survivor to contribute funds from other sources; Negotiate with the survivor; * If necessary, apply for an IHT instalment plan (e.g. s.227 IHTA 1984), especially if the IHT relates to non-liquid assets like land. HMRC’s Position: * HMRC may seek payment from the survivor to the extent they benefited from the deceased’s share. * PRs must still ensure IHT is paid — failure to do so risks interest and penalties.

What is the CGT acquisition value for PRs?

* For CGT purposes, PRs are treated as acquiring assets at the probate value (i.e. market value at date of death). * Any gain on sale is measured from this probate value, not the original cost to the deceased.

When are beneficiaries liable to CGT?

* Beneficiaries are not liable to CGT when they receive an inheritance. * But they may become liable if they later dispose of inherited assets (e.g. sell shares, property).

What is the beneficiary’s CGT base cost for inherited assets?

* The probate value (i.e. market value at date of death) becomes the beneficiary’s acquisition cost for CGT purposes. * This is known as the tax-free uplift on death.