wills and administration (week 6-10)

Question 1

who bears the burden of transfer costs and expenses in absence of a relieving provision for a specific gift?

Answer 1

the person who is receiving the specific gift has the burden of the transfer costs and expenses

Question 2

are specific gifts made free of inheritance tax?

Answer 2

yes they are, it is the residuary who pays the IHT

Question 3

if a charity is potentially changing their name, merging with other organisations - what provisions should be made in the will?

Answer 3

make express provisions for the charity name change and merging with other organisations to avoid ambiguity in the gift

Question 4

if a will gives whole estate to A but makes express provision to give a gift of money to B - what are the consequences for IHT purposes?

Answer 4

transfer will be treated as if made by the will so no additional IHT is payable (as make distributions intended by testator within 2 years of T’s death then treated for IHT purposes as gifts made by the will)

Question 5

if a person inherits in a will but is deciding between disclaiming or making a variation - what are the consequences for CGT?

Answer 5

for CGT it doesnt make a difference if they dispose or make a variation because there is a writing back effect to the T’s date of death and treated as having been made by T.

Question 6

for cohabitees what is the key factor that needs to be looked at by the court for a claim in IPFDA 1975?

Answer 6

the length of time they lived together

Question 7

for spouses what is a key factor the court must consider for a claim in IPFDA 1975?

Answer 7

the duration of the marriage and contributions made by the spouse to the family welfare (including any contributions made by looking after the home or caring for the family)

Question 8

can a step-child make a claim under IPFDA 1975?

Answer 8

yes a step-child can make a claim if it can be shown that the T treated the step-child as a child of the family

Question 9

if A inherits under the will but there is an express provision to give a gift to B - what are the consequences for IHT and CGT?

Answer 9

IHT there is a writing back effect so it is treated as if made by the will so no additional IHT due. however, for CGT it is treated as a disposal by A

Question 10

who can apply for a claim under IPFDA 1975?

Answer 10

• spouse/ civil partner
• former spouse/civil partner
• cohabited with deceased as if spouse/civil partner for 2 years prior to death
• child of deceased (adopted children included)
• treated by T as a child of the family (eg, step children)
• any other person maintained (wholly or partly) by T immediately before their death

Question 11

what is the time limit that a claim for IPFDA 1975 has to be made within?

Answer 11

cannot be made more than 6 months after date the grant was made

Question 12

in what circumstance can a court discretionarily extend time limit for making a IPFDA 1975 claim?

Answer 12

onus on applicant to show special reason for having exceeded time limit:
- circumstances surrounding delay
- whether negotiations were commenced within time limit
- if estate had already been distributed before notification of the claim; and
- whether refusal to allow applicant to bring proceedings would leave them without recourse against anyone else

Question 13

what is a variation?

Answer 13

when the original beneficiary transfers property that the beneficiary is entitled to under the will or intestacy rules to another person instead

Question 14

can a beneficiary use variation after an inheritance has been accepted?

Answer 14

yes it is possible to do this

Question 15

what is a disclaimer?

Answer 15

similar to variation but operates as a refusal to accept property to which a beneficiary is entitled either under intestacy rules or under terms of the will

Question 16

can a beneficiary disclaim after acceptance?

Answer 16

no beneficiary can only disclaim before they have accepted and can only disclaim the whole gift

Question 17

what is a precatory trust?

Answer 17

arises where a gift is made to a beneficiary by will with a wish expressed as to how the beneficiary should pass on those assets to others.

Question 18

when do you not need a grant of representation (small payments)?

Answer 18

administration of estates (small payments) act allows payments to be made without grant of representation for individual assets valued up to £5,000 = can be both bank accounts and premium bonds

Question 19

what property passes outside the succession and taxable estate?

Answer 19

life insurance policy written in trust for another

Question 20

what must an executor do before grant of representation is issued?

Answer 20

provide information about the estate to HMRC and pay any inheritance tax due

Question 21

what assets qualify for instalment option to pay IHT?

Answer 21

land qualifies so property - however, if land is sold then instalment option ceases to be available

Question 22

what takes priority specific legacy or general legacy when the estate doesnt have enough money to pay them all?

Answer 22

specific legacies take priority over general legacies. if estate’s value is insufficient to cover all legacies, then specific legacy is paid first and remaining funds are paid afterwards

Question 23

what happens if PRs sell shares that T owned and results in capital gain? who pays CGT - does anyone?

Answer 23

death doesnt exempt CGT liability so PRs must pay CGT on capital gain and income tax

Question 24

if there is a mortgage on a house = what pays the mortgage off?

Answer 24

pay the mortgage off the house using the property that it is secured against, as it bears the primary liability for this debt

Question 25

if a PR wants to formally renounce their duties as executor - what should they do?

Answer 25

complete a form of renunciation and submit it to probate registry

Question 26

if an estate is solvent what pays the debts off first?

Answer 26

under the rules governing the payment of debts in a solvent estate, the residue should be used first to settle any liabilities before distributing specific legacies.

Question 27

what makes an estate an exempt estate for IHT?

Answer 27

the estate would have been an exempt excepted estate if the gross value of estate was below £3 million (which it is) and no inheritance tax is due because of the application of either the charity exemption or the spouse exemption.

Question 28

What is a low value excepted estate for IHT purposes?

Answer 28

when there is no IHT payable on the estate because it is of low value eg, falls within NRB or RNRB or combined NRB from their spouse and their own

Question 29

when do you apply for grant of letters of administration (with will)?

Answer 29

when the will appoints no executors who are able or willing to act

Question 30

when do you apply for a grant of probate?

Answer 30

executor has authority to act as named in the will. executor who is able to act should, therefore, apply for the grant of probate so that the estate administration is not delayed.

Question 31

if T dies and there is a surviving minor child and T’s parent survive but T didn’t leave a valid will - who has the best right to apply for the grant of representation?

Answer 31

the child does (although they are a minor) therefore, an adult will be appointed to act on behalf of the minor for the grant of letters of administration.

Question 32

how is a will validly executed in terms of signatures according to S9 Wills Act?

Answer 32

section 9 of the Wills Act 1837 requires that the will be in writing, the testator’s signature must be made or acknowledged in the presence of two witnesses and the witnesses must sign the will in the presence of the testator.

Question 33

for a codicil to be valid - what needs to occur?

Answer 33

same validlity requirements as a will under S9 WA: must be in writing, signed by T, and witnessed by 2 individuals

Question 34

what needs to happen for a will to make a valid alteration?

Answer 34

testator should add their initials/ attest the amendments and 2 witnesses should add their initials too.

Question 35

if there is a blank space in a will and it is filled in - what is the assumption?

Answer 35

the assumption is when there is a blank space that has been completed it occurred before execution. however, this presumption on timing can be rebutted by internal evidence from within the will or by external evidence (affidavit of plight and condition signed by witnesses)

Question 36

do both witnesses need to be present at the same time when T signs or acknowledge his signature?

Answer 36

yes, when T signs or acknowledges it must be in the presence of 2 witnesses who both must be present

Question 37

what are GROB rules?

Answer 37

when a gift is given but T still reserves a benefit for themselves and was not entirely or virtually excluded from benefiting from the property. eg, gives gift of holiday home but uses it every summer and doesnt pay any rent

Question 38

if you make a gift of a holiday home but pay rent - do GROB rules apply?

Answer 38

no not if you pay market rent as this eliminates the reservation of benefit and therefore, no longer retain benefit at date of death so treated as having made a PET on date the reservation ceased.

Question 39

if you destroy a will but do not intend to destroy the will - so do it by accident = is your will valid?

Answer 39

yes, your will is still valid as to destroy a will you need to have intention to destroy it as well

Question 40

if an alteration is made but the original amount can be seen by natural means = is the alteration effective?

Answer 40

no it is not effective if it can be seen by natural means. it is presumed that the alteration was made after execution, and it has not been attested, rendering it invalid

Question 41

if a clause is obliterated without intention to revoke - what can a beneficiary do to make sure they get their gift?

Answer 41

they can be entitled to the gift that has been obliterated if they obtain extrinsic evidence setting out the original clause in the will

Question 42

what protection does a s27 Trustee act 1925 (putting it in the gazette) offer? (does it protect the PRs and does it protect the other beneficiaries?)

Answer 42

S 27 Trustee Act 1925 only provides protection against unknown beneficiaries, not missing beneficiaries. The protection is for the PRs only. If an unknown or missing beneficiary re-emerges, they can make a claim against other estate beneficiaries who have received more than they are entitled to from the estate.