Wills and Estate Administration Flashcards
Requirements for a valid will
Testator must have:
1. Had capacity when will was made
2. Intended to make a will
3. Executed will in accordance with formalities
Capacity + intent + execution
Testator’s capacity
At least 18
Had mental capacity (presumed but rebuttable)
Test for capacity
Testator understood:
- Nature of act
- Extent off assets
- Claims to which they ought to give effect
Testator’s intention
- General intention to make a will
- Specific intention to make the particular will
General rebuttable presumption of both BUT two exceptions:
1. Testator is blind or illiterate or will signed on their behalf
2. Suspicious circumstances
Grounds to challenge a will
- Force
- Fear
- Fraud
- Undue influence: someone (usually recipient of a large gift under the will) used their position with respect to the testator to overpower the volition of the testator
Will execution - formalities
- In writing
- Signed by testator
- Signed or acknowledged by testaor in presence of two or more witnesses
- The witnesses do not have to be in each other’s presence - Signed by witness in presence of testator
Attestation clauses
Clauses that witnesses sign to attest or state “signed by us in his presence and by him in our presence”
An external document can be read as part of a will provided it existed when the will was executed as referred to in the will as being in existence at that date
Will alteration: valid alterations
Must prove:
1. Alteration made before will was executed or executed like a will
AND
2. Will reads naturally after alteration
How?
- Witness statements
- Testator and two witnesses sign their initals next to the change
Unattested alterations
- Not signed or initialled
- Presumed to have been made after execution unless filling in blank space
Codicil
Document that adds to, amends or partially revokes existing will
Must be executed with the same four formalities of a will
Will revocation through law
- Marriage: automatically revokes a will BUT exceptions is that if the testator was expecting to marry a specific person and they intended that all or part of the will should not be revoked by that marriage which will be shown by an appropriate clause in the will
- Divorce:
- Former spouse treated as dead (any gifts revoked and property won’t pass)
- Former spouse’s appointment as executor or trustee ineffective
- The entire will is not revoked only the provisions relating to the spouse
Will revocation by testator’s act
- Later will revokes earlier will to extent that later will is inconsistent with earlier will
- Destruction:
- Burning, tearing or otherwise destroying with intention to destroy the will (intention must accompany act)
- Another person can do the above but it must be in the presence of the testator and by their direction
- Writing cancelled or revoked across the will is NOT sufficient to revoke
- Putting a line through parts of the will is NOT sufficient to revoke
- If a will is found mutilated at the date of death it is presumed the testator mutilated the will with the intention of revoking it
Mutual wills
A contract to make idential wills and also not to revoke without the consent of the other
The agreement creates a constructive trust in favour of beneficiaries and will normally be referred to in wills themselves
Constructive trust
Equitable remedy to prevent unjust enrichment of one person at expense of another as a consequence of wrongful conduct
Only duty of trustee is to convey estate to beneficiaries who should have received it
Will interpretation: when does the will speak?
Gifts: date of testator’s death
Beneficiaries: date of will’s execution
Types of gifts
- Legacy: gifts of personal property
- Devise: gifts of real property
Types of legacies
- Specific:
- gift of particular asset identified in will
- gift fails if no longer part of estate - General:
- Gift that does not identify particular item
- if the subject of the legacy is not in the general estate at the time of death the executors have to purchase it if they have sufficient funds - Pecuinary: gift of cash
- Demonstrative:
- general legacy which identifies source of gift e.g. specific bank account
- if insufficient funds in specific source then the executors have to use alternative sources of funds from the estate to meet the gift - Residuary: gift of rest of deceased’s estate
Failure of gifts: specific gifts
- Is no longer part of the estate
- Is subject to binding contract for sale
- No longer meet description in will
- Change in substance of subject causes it to adeem/fail
- Change in name or form does not cause the subject to adeem/fail
An exception to the general rule that a gift speaks at the date of death, for gifts that refer to the word ‘my’ e.g. my car or my ring then instead it is presumed that the testator wanted the beneficiary to receive the gift as it was on the day of the will’s execution
Ademption = fails
Failure of gifts: lapse
Lapse: if beneficiary dies before testator the gift will lapse (fail)
The gift will fall into the residual estate
Gifts can be made conditional upon the survival of a beneficiary
Simultaneous death
Older person assumed to have died first
Failure of gifts: exception to lapse
Gifts to deceased descendants are saved for their issue
Example: if a testator’s child has died before them, then that child’s children (issue) are entitled to the legacy instead. if more than one then they will take equal shares
Descendants of testator
Children
Grandchildren
Great grandchildren
Etc…
If a gift in a will is made to a beneficiary who is no longer alive when the testaor dies, the gift to the beneficiary will fail (lapse) UNLESS the gift was to issue (the children, grandchildren, great-grandchildren) of the testator
Interested witnesses
Gifts to witness or witness’s spouse fails UNLESS there are at least two other witnesses
Will remains valid
Definition of children does not include step-children but does include adopted children
Gifts to children
Class gifts are gifts of property to be divided between those beneficiaries who meet the class description
Class closing rules
Class closes when at least one beneficiary has vested interest
Vested interest: when the benficairy does not have to satisfy any condition to receive the interest
A will can exclude the class closing rules
Intestacy
State of dying without a will
Intestator
Deceased person who has died without a will
Intestate succession
Method of distributing the deceased person’s assets who has died without a will
Residue of intestaor’s estate is distributed according to intestacy rules
Intestacy can be whole or partial
Administrators and personal representatives
People who settle estate after someones estate
Intestacy rules: surviving spouse
If the deceased is survived by a spouse for at least 28 days and if there is no issue (children) then spouse gets everything
If the deceased is survived by a spouse for at least 28 days and there are issue (children) then spouse is entitled to:
- Personal chattels (tangible, moveable property e.g. car)
- Monetary sum of £270,000 (assuming deceased has that much)
- 50% of remaining assets
issue entitled to
- 50% of remaining assets
Spouse can get personal representatives to transfer matrimonial home to them in partial or total satisfaction of their interest. If house is worth more than their interest they can still request the house and repay the excess value back to the estate.
Order of entitlement
- Issue
- Parents
- Brothers and sisters of whole blood
- Brothers and sisters of half blood
Statutory trusts
If class member dies before intestate, their issues takes their parent’s share per stirpes
A beneficiary must be 18 to inherit by intestacy
Adopted children treated as children of adoptive parents in intestacy
Intestacy rules apply regardless of child’s parent’s marital status in intestacy and wills
Step-children are not considered issue in intestacy and wills
Property passing outside will or intestacy: joint tenancy
- Right of survivorship
- Surviving joint tenant entitled to asset when other dies
- Any clauses in will to the contrary are disregard
Property passing outside will or intestacy: life assurance policy
Policy proceeds can normally be paid out on production of a death certificate only
Proceeds do not form part of deceased’s estate for inheritance tax purposes
Any clauses in testator’s will to the contrary are disregarded
Property passing outside will or intestacy: pension scheme death benefits
Proceeds do not form part of deceased’s taxable estate for inheritance tax
Any clauses in testator’s will to the contrary are disregarded
Property passing outside will or intestacy: life interest trusts
May be subjecto to inheritance tax
Do not pass by will or intestacy
Property passing outside will or intestacy: gift in which donor retained benefit
Treated as part of deceased’s estate in inheritance tax
Does not pass by will or intestacy
Personal representatives
Executors: appointed in will
Administrators: needed when there is no will or no executor able or prepared to act
Testator appoints an executor through an express clause in a will or codicil to administer their estate according to law and provisions of the will
Executors can renounce if they did not intermeddle in estate
Renouncing executorship
In writing
Include statement that they have not intermeddled in estate
Statement must be witnesses by someone with no interest in estate
Executor can ask for power to be reserved and they can apply for a grant of probate at a later stage. There would be no automatic substitution
Reserving executorship
Named executor does not want to be involved now but if the substitute executor fails in their duties, the executor whose power is reserved is willing to step in and take over
Grants of representation
Legal document that confirms person’s ability to administer an estate
Which court deals with contentious probabte matters?
Chancery divison of High Court
or
County Court if estate below 350,000
Types of grants of representation
- Probabte
- Letter of administration with will annexed
- Letter of administration
Grant of probabte
Valid will names one or more executors who are willing and able to act
Only one executor needed but up to four can apply for grant of probate
Testator’s property vests in executor at point of death and executor has authority to deal with testator’s property at that point, grant is needed to legally sell property owned in the estate name, access bank account, transfer or sell shares etc.
Grant of letter of administration with will annexed - used when?
- Valid will but no executor able and willing to act
or - Estate is partially intestate
Testator applies for grant of letter of administration with will annexed
Order of entitlement to grant
- Executor
- Trustee of residuary estate
- Residuary beneficiary or anyone entitled to residue
Vested interest does not depend on any conditions occurring
Contingent interest is subject to one or more conditions
Clearing off
Accounting for anyone with better right to grant
Two administrators required if there is a life interest or minor beneficiary
Anyone entitled to apply for a grant can renounce. The right is not lost by intermeddling in the estate
Letters of administration
Deceased died without a valid will
Grant gives named administrators the legal authority to administer estate in accordance with statutory rules of intestacy
Administrators do not have legal authority to administer estate from date of death. They only gain authority when grant is issued to them.
Order of entitlement for grants of letters of administration
- Surviving spouse
- Children
- Parents
If there is more than one person in the same class entitled to apply for a grant they may apply without giving notice to the others in that class
Grants of letters of administration can only be issued to a maximum of four administrators and no power can be reserved
Types of grant of representation
- Grant of probate - the deceased left a valid will
- Grant of letters of administration with will annexed - the deceased left a valid will but there is no executor
- Grant of letters of administration - the deceased did not leave a valid will
Grants de bonis non
Second grant needed when last PR dies or previous grant revoked
BUT no such grant is necessary if a chain of representation exists
Chain of representation
Executor dies and executor’s executor takes grant of probate
Only applies to a chain of executors and not administrators
If any administrators are involved a grant de bonis non will be required
Minors cannot take a grant of representation but if they are one of several executors power may be reserved to the minor
A minimum of two administrators is required if there is a minor beneficiary or a life interest under a will
Pre-grant procedure
- Gather full details of deceased family members and beneficiaries
- Full details of assets and liabilities
- Register death with various
institutions banks, insurance, HMRC etc. - If there is a will consider the validity of will
Ways to pay tax liability
- PR could ask deceased’s bank to pay to HMRC - voluntary scheme
- PR can apply for a loan from bank or beneficiary - many banks will grant loan but will require undertaking that loan will be repaid in priority
- Life assurance policy proceeds
- Sell estate assets that can be sold without a grant
Applying for grant application
- Will plus two copies
- Official copy of death certificate
- Further supporting documents
- Tax form
- Payment for probate fees
Further evidence for grant
- Evidence of due execution of will
- Affidavit confirming deceased’s full name
- Affidavit of knowledge and approval
- Affidavit confirming timing of alterations
- Documents referred to in will
- Affidavit of plight and condition
Caveat prevents issue of grant of representation
Citation
Citation to take probate: wehn executor has lost opportunity to renounce probate by intermeddling in estate but have not applied for grant and do not intend to do so
Citation to take probate = force an executor to accept probate
Citation to accept or refuse a grant = clear off a person with a prior grant
Caveat = prevent the issue of a grant
Inheritance tax
PR’s have to deliver an account to HMRC within 12 months from the end of the month of the deceased’s death
In practice earlier as interest on IHT due on the estate runs from 6 months
Excepted estate
- No inheritance tax due
- Formal account not needed
Transferable nil rate band
- Deceased spouse
- Spouse did not use all their nil rate band
- Unused nil rate band transferable to spouse
Transfers between spouses are exempt from inheritance tax
If there are multiple PRs they are not generally liable for another PR’s breach
Court can relieve PR from liability if PR acted honestly and reasonably and ought fairly to be excused
Testator can exclude PR’s liability for breach
Appropriation
Using asset to satisfy legacy or share of estate
Legacies to minors
PRs can appoint trustees of property for minor has vested interest
If interest not vested, PR must hold property or transfer it to Court
Power to maintain minor
Trustee may apply income for minor’s maintenance, education or benefit
Power to advance capital
Trustees may advance capital to beneficiary with vested or contingent interest in capital
Beneficiary with prior life interest must consent
Express will clauses may override or amend the rules on the power to apply income on behalf of the minor
If there’s more than one PR, they have joint and several liability so the act of one binds the others BUT exception all PRs must join to transfer land or shares
Notice to beneficiaries and creditors
- PR place adverts in:
- London Gazette
- Newspapers local to where deceased owned land
- Trade publications (if relevant) - Creditors and beneficiaries must have at least 2 months to to respond
Protections from claims of missing beneficiaries or creditors
- Make payment into court
- Take out insurance against alter claim
- Apply to court Benjamin Order
PRs should wait at least six months from date of grant before distributing the estate
Solvent estate
Sufficient funds to pay all debts, expenses and creditors even if insufficient funds to pay legacies and bequests
Payment of debts: secured debts discharged from property against which it is secured
Order assets should be used to pay debts
- Property not disposed of in will
- Property which forms part of residue
- Property given for payment of debts
- Property specifically charged with debt payments
- Fund for pecuniary legacies
- Property specifically bequeathed or devised
Insolvent estate
Insufficient funds to pay all expenses, debts and liabilities
Order to pay creditors
- Funeral, testamentary and administration expenses
- Preferred debts
- Ordinary debts
- Deferred debts
If PRs pay a category of debt knowing that there are higher ranking debts the PRs are personally liable if there are insufficient assets to pay the higher ranking debts BUT they are not liable if they paid an inferior debt without notice of a debt in a higher category as long as they did not do so with undue haste
Disclaimers
Beneficiary can disclaim gift unless they accepted any benefit from it
Gift falls into residue
Does not prevent person disclaiming from receiving the property under the intestacy rules
Variation
Beneficiary changes who receives their inheritance
Variation can be made even if original beneficiary has accepted a benefit
Payment of legacies
Chattels: handed over
Stocks and shares: require completed transfer form
Land: conveyance by deed BUT exception PR has power to assent to the vesting of an interest in land in any person entitled to that land
Costs of transfer are absorbed by beneficiary unless will says otherwise
Pecuniary legacies paid from residue BUT will can dictate otherwise
Abatement
When assets are insufficient, debts and legacies reduce proportionately
A beneficiary can ask PR to use a particular asset to satisfy pecuniary legacy = appropriation
PRs should obtain a receipt from the beneficiary to prove the PRs have satisfied their obligations
Options for gifts to minors
- Hold property until minor reaches 18
- Use power of appropriation
- Appoint trustees to hold property until child reaches 18
- Pay legacy into Court
PRs need to consider whether legacies are subject to or free of tax as this is relevant to determine who suffered the burden of IHT on a legacy - recipient or residuary beneficiary?
Certificate of discharge
Discharge from further inheritance tax liability
Limited certificate of discharge
Issued when there is still some inheritance tax due but PRs have decided to pay IHT in instalments
No certificate of discharge is required for an accepted estate as there is no IHT liability
PRs must be authorised to charge for their services through express clause in will, beneficiaries approval or court approval
PRs prepare estate accounts to demonstrate to residuary beneficiaries what assets and liabilities were compromised in estate and IHT paid, expenses incurred and how assets have been shared and also income to show how much is available for distribution
Estate accounts
- Income account
- Capital account
- Distribution account
Residuary beneficiaries approve the estate accounts by signing them and acknowledges receipts of amounts due which discharges PRs from liability
If a residuary beneficiary is a minor or an indvidual who lacks mental capacity they cannot sign the estate accounts
Assent
Vests the legal estate in a named person
Assents for land
In writing
Signed by PRs
Name person in whose favour it is given
Beneficiaries’ rights and remedies
Until the administration of the estate is complete the beneficaries do not have any legal or equitable interest in the estate
Beneficiaries have a chose in action = right to ensure estate is administered properly
Recipients of specific gifts have the right to income from the asset concerned accruing from death e.g. rent from investment property
Residuary beneficiaries have the right to income from the residue assets
Beneficiaries remedies
- Administration proceedings
- Action to recover losses, including personal action against PRs
Claims under 1975 Act
Allows a person to ask the court to set aside the terms of a will or vary and intestacy on the grounds reasonable financial provision has not been made for them
Applications under 1975 Act
Must be made within 6 months from issue of grant
Made by:
- Spouse or civil partner
- Ex-spouse who has not remarried
- Child or person treated as child of the family (adult child in employment unlikely to succeed)
- Person maintained by the deceased e.g. mistress
- Person who cohabited with deceased for at least two years before death
Tests court consider under the 1975 Act
Has the will or intestacy rules failed to make reasonable financial provision for the applicant?
If so what would be such provision
Standard for spouses under the 1975 Act
Such financial provision as would be reasonable in all the circumstances, whether or not required for maintenance
Standard for applicants other than spouses under the 1975 Act
Such financial provision required for their maintenance such that they can live decently and comfortably according to their situation
