Wills and administration (week 1-5) Flashcards
what are the 6 main types of property which will NOT pass under the succession estate?
- Donationes mortis causa (DMC): gift made in contemplation of death
- Discretionary pension scheme benefits
- Insurance policies written in trust
- Statutory nominations
- Property held as beneficial joint tenants
- Some other beneficial interests under trusts
if deceased has simple life insurance policy - do the proceeds of the policy pass in the succession estate?
yes they do
tenant in common property or joint tenants = which one passes via survivorship?
joint tenants = survivorship
how long does spouse need to survive to inherit under intestacy?
at least 28 days
what is an ‘issue’ for the rules of intestacy?
child or remote linear
if the interstate leaves a spouse and an issue - what are the entitlements that the spouse gets?
- personal chattels absolutely
- statutory legacy of £322,000 free of tax and costs plus interest from date of death o the date on which payment is made
other half of the residue (if any) absolutely
what are the intestacy rules - priority if no spouse or issue?
- Parents
- Siblings of whole blood (share both parents) on the statutory trusts
- Siblings of half blood (share one parent) on the statutory trusts
- Grandparents
- Uncles and aunts of whole blood (whole blood siblings of a parent) on the statutory trusts
- Uncles and aunts of half blood (half blood siblings f a parent) on the statutory trusts
- The crown as bona vacantia
is there an obligation on PRs in intestacy to distribute particular assets to particular individuals?
no - up to PRs to distribute assets as they see fit, in fulfilment of individual’s entitlement
what are the 3 things excluded in the definition of ‘personal chattels’?
- money or securities for money
- property used by the interstate at their death solely or mainly for business purposes
- property held at the death of the interstate solely as an investment
do surviving tenants in common need a 2nd trustee?
yes they do
if there is a restriction on the land registry official copies - is the property owned as JT or tenants in common?
tenants in common
what are the legal requirements of a will? (there are 3)
testamentary capacity, knowledge and approval and formal requirements/s9 of wills act 1937
what is the test for testamentary capacity? (banks v goodfellow) (there are 4 factors)
- understand the nature of the act and its effects
- appreciate the extent of the property of which they are disposing
- understand and appreciate the moral claims to which they ought to give effect
- have no disorder of the mind that perverts their sense of right or prevents the exercise of their natural faculties in disposing of property by will
what are the exceptions when a testator doesn’t need to have testamentary capacity AT THE TIME the will is executed?
- they had testamentary capacity AT THE TIME they gave instructions
- the will was prepared in accordance with those instructions
- testator understood they were signing a will for which they had previously given instructions
what is the golden rule in reference to testamentary capacity?
when taking instructions from someone who is elderly or seriously ill, a medical practitioner should be instructed to make an assessment of the testators capacity.
what are the 3 situations when there is no presumption of knowledge and approval?
- testator is blind or illiterate
- will was signed by someone on behalf of testator
- there are suspicious circumstances
who has the burden of proof for undue influence or duress of a will?
the person who asserts must prove and court requires proof
if it is proved then the will is not valid as it doesnt reflect the true intentions of the testator
what happens if evidence is provided that there was grounds for lack of capacity?
if evidence is provided, then the presumption of capacity is rebutted and the burden of proof reverts to the propounder of the will to demonstrate the testator satisfied the banks v good fellow test.
what is an attestation clause?
clause that explains circumstances under which the will was executed
what must happen for a will to comply with section 9 of the wills act 1837?
It must be in writing and signed by the testator (or by someone else on their behalf)
what is a cy-près doctrine?
if a gift in a will is given to a charity that ceases to exist then it can go to another charity of the same general charitable purpose
Is a will valid without a revocation clause?
Yes it is valid however it should be included as a matter of good drafting to avoid uncertainty
what is the minimum number of executives required?
minimum of one executor is required but often better to appoint at least 2
What happens if a testator outlines a specific gift for example, the gift of my blue Hyundai. However at the time of death the testator no longer owns my blue Hyundai?
This gift would fail to take effect and the beneficiary would receive nothing because that specific gift is no longer in the testators possession at the time of death
what is a general legacy?
It is a gift of property which is not distinguished from property of a similar type so for example ‘a’ rather than ‘my’. Eg, I give £1000
what is a residuary gift?
It is a gift of all of that estate as property which has not already been disposed of under the will
who bears the cost of IHT?
the reside estate bears the cost of IHT if it is not explicitly stated in the will. a gift is free of IHT.
Who bears the burden of cost for the cost of delivery of an item or the expense incurred since the date of death in preserving the item to ensure its upkeep?
The person who bears this is the specific beneficiary who is gaining that item
what type of executor / trustee can charge for their time?
professional executor/ trustee can charge for their time and claim reasonable expenses
a lay executor / trustee can claim for reasonable expenses
what is a demonstrative gift?
type of general legacy which directs which specific fund it should be paid out of eg, £500 from my NatWest savings account paid absolutely
when does a will speak from for property / collections and people? (they can be different)
for property and collection it speaks from date of death
for people speaks from the date of execution
if there is no express wording on a class of beneficiary - what happens?
the class closing rules apply which means the class closes when the first beneficiary in the class obtains a vested interest
what happens if a beneficiary dies before the testator?
their gift will lapse
what is the survivorship principle for instance when both die in car crash and both inheriting under their wills?
when the death is unknown of exact order or both die within short period then there is presumption that the oldest died first. (eg, quick succession)
if order of death is unknown what does s4 inheritance tax act 1984 allow?
treats the deaths as simultaneous. for IHT purposes, neither inherit from the other and estates are taxed seperately. (property which passes from first to die to second to die is not taxed again in second estate).
what is vested interest?
given outright and absolutely and there are no conditions
what is contingent interest?
beneficiary needs to satisfy condition before they inherit
what happens if gift is vested for a minor?
the gift is held on trust and until child reaches 18 as cannot give good receipt if under 18
if a gift is given to testator’s issue who is pre-deceased but they have issues - what is the implied substitution under s33 WA?
That there is a substitution in favour of the pre-deceased’s issues
eg, T dies but their child C pre-deceased them who had children then C’s share goes to their children
what is a lifetime chargeable transfer? (LCT)
it is a transfer of value made by a person into a trust. it is chargeable when it is made and IHT is payable not the chargeable value of the LCT at the lifetime rate of 20%. if survive 7 years then no more IHT. if die, within 7 years then LCT is reassessed to tax at the death rate of 40%
Is taxable estate same as succession estate?
no it is different and therefore, different calculation of value of estate for IHT purposes needed
what is cumulation?
it is the total chargeable value of all chargeable transfers made in the previous 7 years - it reduces the NRB available for the transfer under consideration. (used to prevent individuals from reducing or avoiding IHT)
if a person outlives multiple spouses - can they claim all of their previous spouses NRB?
individuals who survive multiple spouses can claim the TNRB in respect of them, subject to a cap of 100% of a full nil rate band being transferred
what is a political party exemption?
IHT is exempt if paid to a party (but needs to have at least 2 MPs elected or at least one MP elected and at least 150,000 votes given to candidates representing that party
it is a lifetime and death exemption
What is the reduced rate for charity purposes?
if leave at least 10% of their net asset to charity then whole estate is charged at 36% instead of 40% and the money to the charity is exempt of iHT.
what is the downsizing rule?
allows an estate to qualify for the RNRB even if the deceased didn’t own a QRI when they died, need to qualify:
- deceased must have given away their QRI or downsized to less valuable QRI on or after July 2015
- former home would have been a QRI if it had been retained
- a direct descendant inherits the replacement QRI and/or other assets
What is the deadline for submitting the IHT account?
12 months from end of the month in which death occurred
when do the downsizing rules not apply?
- There is no loss of RNRB because the value of any new QRI in the estate is the same/more than the max available RNRB or
- The RNRB is not available because the new QRI or assets are not left to a direct descendant
what is the deadline for paying IHT due?
6 months from the end of the month in which the death occurred. anything over this 6 months interest must be paid on top of the IHT.
when can an estate not be accepted? (in what situations)
- The deceased made a GROB that subsists at death (or reservation ended in the 7 years prior to death and the transfer was not exempt)
- The estate includes either more than one trust or a single trust worth more than £250,000
- Foreign assets are worth more than £100,000
- Value of a specified transfer exceeds £250,000
- A claim for RNRB is being made
what are the 7 steps for calculating IHT on death estate?
- calculate cumulative total
- identify assets included in taxable estate
- value the taxable estate
- deduct debts/ expenses
- apply exemptions and reliefs
- apply RNRB
- apply basic NRB and calculate tax
what happens with joint tenants property for IHT purposes?
for IHT purposes deemed severance so are taxed on their share of the property (even though the rule of survivorship applies)
why is a grant needed?
Grant is proof of the executor’s authority of assets within the succession estate
what is a grant of representation?
The court order confirming the authority of the PRs to act (mainly their right to collect the deceased’s assets and distribute the estate).
why is a grant of representation needed?
Because it established the:
- Authority of the PRs to act (mainly, their right to collect assets and distribute the estate) and
- Validity of the deceased’s will, or, that the deceased died interstate
how do solicitors get involved in the administration of estate (3 reasons)?
- Instructed by the PR
- appointed as an executor (professional PR)
- instructed to act on behalf of a party to a contentious probate matter
what is the role of a PR?
PR must administer the estate of the deceased. have statutory duty to collect in the deceased’s assets, ensure deceased’s debts are paid and outstanding tax liabilities are met, and then distribute assets to beneficiaries who are entitled.
what type of nature of duty do PRs have?
their duties are fiduciary in nature
what are the three types of grants of representation?
grant of probate
grant of letters of administration (with will)
grant of letters of administration (died interstate)
when must PRs inform HMRC and pay IHT?
Must do it before the grant is obtained
what is the process that PRs must do?
- death certificate
- notify HMRC about assets and liabilities of estate (completing iHT 400 form)
- pay any IHT due in relation to estate assets within their control (succession estate) - PRs may use estate funds and not required to use personal assets to fund this
what are the statutory powers for PRs?
- sell, charge, or lease
- appropriate
- insure
- invet
- charge for PR services
- delegate powers
- appoint trustees
if a person dies interstate where do the PRs get their powers from?
only statutory powers
If person dies with a will where do they get their powers from?
statutory powers apply to extent these do not conflict with the express provisions in the will
(express provisions in a will take priority over statutory powers)
what are the rules which must be complied with if PRs use their power to appropriate?
- specific beneficiary must not be prejudiced
- consent of the recipient beneficiary is required
- value of the asset must be considered at date of transfer / appropriation rather than death date
can PRs appropriate asset that exceeds beneficiary’s entitlement?
no they cannot
can PRs appropriate asset that is less than the beneficiary’s entitlement?
yes they can but need to make a balancing cash transfer for the remainder
what is a PRs power to invest (statutory)?
have a duty to preserve estate and actively invest
must carry out regular reviews of investment
duty to obtain advice
what is a professional PRs power to charge for services?
they may claim reasonable remuneration for services provided:
- not acting alone; and
- other co-PRs give written consent
if a PR is acting alone can they charge for their services?
lay PR or professional PR needs express power in the will to charge for their services if acting alone
do PRs have the right for reimbursement of PR expenses?
Yes, all PRs (lay and professional) may reimburse themselves for expenses properly occurred when acting on behalf of the estate
(note: not power to charge estate for time spent on administration process even if they had to turn down work)
PRs are permitted to employ agents and delegate their powers, except for what 3 situations?
- how and whether assets should be distributed
- whether fees or costs are payable from income or capital
- the appointment of trustees /nominees / custodians
if delegation is required then what must the PRs do?
- do so in writing to the agent; and
- provide them with a written policy statement which the agent must agree with comply with
if PRs are joint PRs can they lawfully act on their own when selling or transferring an estate asset during administration?
yes they can have the authority to act alone for this but everything else usually requires them to make a decision together and if discretionary power then need to do it unanimously
when is a grant of probate required?
deceased left a valid will which appoints executors
at least one executor appointed will act
when is a grant of letters of administration (with will) appropriate?
deceased left a valid will but will appoints executors who are unwilling/not able to act
when is a grant of letters of administration appropriate?
deceased died interstate
what assets dont need a grant?
bank accounts less than £5,000
many banks and financial institutions will release up to £15,000
household possessions and cash in the home
assets outside of the succession estate
when is an estimate not appropriate for a single chattel item?
if the single item is worth more than £500 (or an unusual item)
how are quoted shares estimated on value?
to establish the date of death value; valued by taking the lower of the 2 prices on the stock exchange daily list and adding ¼ of the difference between the higher and lower value.
what is a grant of double probate?
it means that power can be reserved to any remaining executors (when there was more than 4) who did not manage to become an executor. if the vacancy of executor arose then they would be able to apply at a later date to carry on with the administration.
when is a grant of letter of administration de bonis non issued?
administration is incomplete
there are no remaining PRs
there has been a previous grant of representation
what is clearing off?
applicant must explain why anyone with a better right to become an executor is not doing so
if an executor is unwilling to act what can they do?
renunication
reserve power
appoint an attorney
what is renunciation?
formal renounce, must sign a form of renunciation.
what is reserving power?
if an executor does not want to act initially then they can retain option to do so later. only can be used for grant of probate. reserve power by another executor granting of probate.
what is the PA1P form?
deceased left a valid will (executors act under the will or administrators appointed by NCPR 20)
what is an affidavit?
a formal written statement of fact which a person signs under oath
when is an affidavit required (4 reasons)?
- compliance with s9 Wills act 1837
- knowledge and approval
- date
- physical condition of the will
what happens if the original will is missing?
NCPR 54 permits a copy of the will to be admitted to probate if there is a court order approving this.
who does a PR owe their duties to?
estate beneficiaries and creditors
what does the duty of due diligence consist of for PRs (there are 3)?
- general duty to administer estate with due diligence and within reasonable time
complete - administration within 12 months of the date of death (executor’s year)
- appointment is for life
what are the 2 fiduciary duties that a PR has?
not to place themselves in a position of conflict
no profit rule
is a PR personally liable for losses that result from breach of duty?
yes, personally liable for losses that result from breach of duty which they commit
what does devastavit (wasting assets) mean?
claim of action against a PR for breach of their PR duties. can be brought where there is loss to the estate because of PR’s wrongdoing. C will seek a court order that PR makes good the loss using their personal assets
what can a claim against a PR be based on? (there are 4)?
- maladministration
- misuse of assets
- negligence
- breach of fiduciary duty
what is maladministration (way a PR can have a claim brought against them)?
incorrectly administering the estate by giving it to wrong beneficiaries, using residuary estate to meet liabilities that should have been paid from other parts of the estate and paying legacies before debts without retaining sufficient funds for creditors.
what is misuse of assets? (way a PR can have a claim brought against them)
making personal use of estate assets
what does it mean to breach fiduciary duty (way a PR can have a claim brought against them)?
breach of no conflict rule,
breach of no profit rule,
self-dealing
what is a Benjamin order? (protecting a PR)
when beneficiaries are known to be missing allows the PRs to distribute the assets on the basis that the beneficiaries have died
What is a s27 trustees act 1925 (way of protecting PRs)?
if there are unknown beneficiaries then can publish a notice of intention to distribute estate in an advert in newspaper, London gazette.
must wait 2 months after date of advert to distribute to known beneficiaries
Your firm has been instructed by the PRs of an estate. One of the solicitors has just prepared a set of estate accounts.
Who should approve and sign these?
PRs and residuary beneficiaries (estate accounts should be approved and signed by PRs and residuary beneficiaries)
what can a PR do to protect themselves under presumption of death act 2013?
PRs can make an application for court order declaring that a person tight to have died, or not known to be alive for 7 years or more has died.
(if it has been met may be quicker to do this than Benjamin order)
