Wills and Administration of Estates

Question 1

Test for testator having capacity

Answer 1

By statute, a testator lack opacity if:

At the material time.
The person is unable to make decisions for themselves in relation to the matter in question.
Because of impairment or a disturbance in the functioning of the mind or brain

Question 2

Test for testator having intention

Answer 2

a general intention to make a Will
A specific intention to make a particular - The testator must have read and approved its contents when they executed it.

Question 3

Factors courts will consider regarding with knowledge and approval

Answer 3

Deciding whether a Will was invalid for want of knowledge and approval need to establish:

If the Will is short and easy to understand
If the Testator was illiterate
Surrounding facts - Did the Testator ask for two witnesses to be present
Any suspicious circumstances such as if a a beneficiary procured the Will

Question 4

What is Duress

Answer 4

A will is made as a result of force, fear, fraud, or undue influence. Occurs when the testator is injured or threatened with injury to make a Will.

A Will can only be admitted for probate if the pronounces it valid and issues a grant in solemn form

Question 5

What is undue influence

Answer 5

Something that overpowers the volition of the Testator. Persuasion is permissible but not coarse a testator, so anyone claiming undue influence must prove it went beyond persuasion

Question 6

Alteration to Wills

Answer 6

Must prove it was made before Execution. If it is made without proper formalities the original gift under the Will will stand if the original words are still legible. If they are ‘obligated’ then the gift Will be read a blank statement i.e no gift applies.

Question 7

What requirements are for alteration and Amendments to Wills

Answer 7

The same formalities for signing a Will apply

Question 8

Destruction of a Will

Answer 8

If a Will is destroyed by burning, tearing, or otherwise destroying by the testator or by some person in the presence and by their direction with the intention of revoking the same.

Question 9

What does not constitute destruction

Answer 9

merely writing across the Will nor putting lines through it will be sufficient. If part of a Will is destroyed this will only revoke said part of the Will. A complete revocation would be done by destruction of a sufficient substantial or vital part of the Will i.e. testator’s signature.

Question 10

Intention to revoke

Answer 10

Testator must have intention to revoke the Will:

If a Will is found mutilated at the testator’s death, the rebuttal presumption is it was done by the testator with the intention to revoke
Further rebuttal being if a previous Will was in the testator’s possession and cannot be find after their death, the Will is presumed to be revoked

Question 11

Gifts under the Will

Answer 11

General rule is a gift is usually interpreted as being intended at the time the testator made the Will rather then on death. So if a specific gift is in a Will and the gift does not exist at the date of death, the gift will fail.

Question 12

Gifts to joint tenants

Answer 12

If a gift is made to two people jointly, if one dies the survivor will receive the whole share. If a gift is made to two people in equal shares, if one dies the survivor will only receive their half share and the other share Will pass under the intestacy rules

Question 13

Renouncing of Executors under a Will

Answer 13

Executors can do this if they have not already inter-meddled with the estate. In addition this is an all or nothing appoint i.e an Executor cannot pick and choose which parts to renounce. Also, renouncing Executorship does not revoke trusteeship of the estate as well.

Once renounced they cannot reclaim probate unless the courts allow them to do so.

Question 14

Types of Grants:

Answer 14

Grant of Probate: Valid Will with Executor(s) appointed
Letter of Administration with Will annexed: Valid Will but issue appointment of Executor(s)
Letters of Administration: Deceased died intestate
Grant De bonis Non: Second grant made is made if sole or last surviving PR dies (not needed with chain of representation

Question 15

Clearing off principal for letter of administration

Answer 15

If there is a personal representative who would act as the administrator of an estate then they must ‘clear off’ any other party who has a higher claim to administrator an estate I.e an executor who has renounced. They do not need to notify anyone of equal ranking or lower as only one is required.

Question 16

If minors are included in a Will, how many administrators are needed?

Answer 16

Minimum of 2

Question 17

Persons of equal rank for administrating

Answer 17

If there are two people of same rank qualify for administration. The courts prefer the those who have already vested interest in the estate against a contingent interest

Question 18

Grants and inheritance tax

Answer 18

If any IHT is due, it is required to paid off before a grant is obtained

Question 19

Citations for probate

Answer 19

Citations can be used to clear off Executor who do not take out a grant or have no intention of doing so. The courts can look to appoint a PR who would be willing over then unwilling party

Question 20

When must an account be sent to HMRC

Answer 20

Within 12 months of date of death

Question 21

Exemption to accounts submitted to HMRC

Answer 21

If the estate is below the nil rate band (£325,000) this is a small estate or;

If the estate is below £3mil, and the net chargeable estate (after deduction of liabilities and any spousal or charity exemptions on death) does not exceed iht threshold this is a exempt estate

Question 22

Duty of personal Representatives

Answer 22

Duty to collect Deceased’s assets
Duty to administer the estate
Duty of care - A PR is not liable for another PR’s breach unless negligence is an issue

Question 23

PR cannot satisfy cash gift in Will

Answer 23

Pr may use items that reflect the monetary value that was left to a beneficiary under a Will and gift them that item. Unless the Will provides otherwise, the beneficiary must consent to this.

Question 24

Claims against unknown beneficiaries or creditors

Answer 24

PRs must place advertisements in the London Gazette, a local newspaper, and any other appropriate newspapers. The request must be allowed to stand for 2 months from the date of the notice

Question 25

Claims for missing beneficiaries or creditor

Answer 25

PR’s have a few options:

Make payment owed to the beneficiary/creditor into the court and distribute the remainder of the estate

Distribute everything in the estate to the beneficiaries with indemnity from them

Seek a Benjamin order - This gives full protection for PRs

Purchase insurance

Question 26

Claims for financial provision

Answer 26

PRs should wait at least 6 months from issue of the grant before distribution

Question 27

Payments of debts -solvent estate

Answer 27

Secured debts should be paid form the property in which it is latched to. Unsecured debts should be paid from items which have not been predisposed under the Will and from the residuary estate.

Question 28

Payment of debts if residue is to be exempt

Answer 28

If the residue is not to bare any payment of debts, then the debts must be settled by the follwing:

Property specifically mentioned to settled any debts
Property specifically charged with a debt
Pecuniary legacy fund - unless specified, each legatee will bare a share of the payment
Property specifically devised or bequeathed

Question 29

Payment of debts - insolvent estate

Answer 29

There is insufficient funds to pay expenses, debts, and liabilities in full. Beneficiaries will receive nothing. PRs will pay secured creditors first and then unsecured creditors as follows:

Reasonable funeral and administration expenses
Preferred debts - wages and salaries of employers at date of death up to £800 each
Ordinary debts - money owed to HMRC and balance on preferred debts
Interest on preferred and ordinary debts
Deferred debts - loans from deceased spouse

Question 30

Method of vesting specific legacies under the Will by a PR

Answer 30

Chattels - transfer effective upon delivery
Company shares - Transfer form signed and completed and sent back with a copy of the grant and the share certificate
Land - Transfer requires an assent in writing

Question 31

Method of vesting pecuniary legacies under the Will by a PR

Answer 31

The method of payment is generally from the residue. Same with debts, if there is not enough funds to satisfy the legacies then they will abate in proportion

Question 32

Certificate of discharge

Answer 32

HMRC will issue these to indicate no further IHT is due. It is crucial to get before the administration can proceed. A certificate is not needed with an excepted estate. There is an automatic discharge 35 days after a grant of representation unless circumstances change.

Question 33

Costs for funeral expenses and legal/professional fees

Answer 33

Must be fair and reasonable

Question 34

PR charges and estate accounts

Answer 34

PRs cannot charge for adminstireing the estate unless one of the following apply:

Legacy left to proving Executor
Express charging clauses
Agreement with beneficiaries

PRs must also prepare estate accounts for the beneficiaries, PRs usually endorse them and send them to beneficiaries for endorsing as well. Beneficiaries do not have to endorse the accounts but the PR may seek endorsement from the courts if this arises.

Question 35

Beneficiaries rights and remedies

Answer 35

Rights:

To have the deceased’s estate properly administered
Specific gifts give rights to income accrued after death (regardless of vested or contingent interest)
Pecuniary contingent interests do not carry this right unless they over 18

Remedies:

Beneficiary can bring a personal claim to a PR, however if they acted honestly, reasonably, and ought fairly to be excused then the courts may absolve them

Can trace and recover property from the PRs or any other recipient of it

Can bring action against those who have wrongly received assets from the estate

Question 36

Applicants who can claim against an estate

Answer 36

People who would qualify in making a claim against a deceased’s estate are:

The surviving spouse or civil partner who was married or in partnership at the date of death.
A former spouse or civil partner who has not remarried or entered into a civil partnership (could be barred from making a claim through a ‘clean break’ divorce).
A child or someone treated as a child of the deceased (adult children unlikely to be successful in able-bodied and in employment).
A person who was being maintained, wholly or partially, by the deceased before death.
A person living with the deceased during the whole two years before death. Either spouse, civil-partner, or same-sex partner of deceased

Question 37

Two part question to the claim

Answer 37

Did the Will make reasonable financial provision?
If so, what would be such reasonable provision?

Question 38

Financial provision standard

Answer 38

Spouses: If financial provision was reasonable in all circumstances (whether or not it is for maintenance).

For all other applicants: If financial provision is required for their maintenance such they can live comfortably and recently in their situation

Question 39

Effect of Domicile for IHT

Answer 39

Domicile in UK: Assets worldwide are subject to IHT

Domicile outside UK: Liable for IHT only on UK assets

Non domiciled person owns assets outside UK: Assets are excluded for IHT

Question 40

The loss to Donor principle

Answer 40

If a deceased gifted something to someone where it’s value fluctuates based on a percentage owed (i.e. shares) the loss will be calculated (at the time of the gift) as being the difference between what the value was originally owned and what the new value owned is after the gift. The loss will NOT be the gift itself).

Example: A owns 60% shares and gifts 20% to B. The gift will be the difference in the value of 60% at the time of gift and what 40% was at the time of the gift. The gift is not the 20%

Question 41

Exempt gifts

Answer 41

Lifetime gifts up to £250 within a tax year. No limit to recipients.

Marriage gifts:

Parent - up to £5,000
Grandparent - up to £2,500
Bride to Groom & vice versa - £2,500
All others: £1,000

Annual exemption: £3,000 available each tax year, any unused exemption can carry over one tax year.

Question 42

Tax applicable on chargeable lifetime transfers

Answer 42

20% - Trustees
25% - Donor

Question 43

Business relief

Answer 43

100% - sole trader or partnership interest /shares in unlisted trading company
50% - shares in quoted company and they own more than 50% of ordinary shares

Must have owned the property for two years and the business must be trading

Question 44

Nil-rate band and residence Nil-rate band

Answer 44

These are transferred to surviving spouses as a percentage rather than as the amount after deduction.

i.e if a deceased person died and used 40% of their bands, then the surviving spouse could only claim 60% of the unused bands. Meaning they would have 160% available for the purposes of their estate.