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SQE1 ULAW Style > Wills and Estates 4 & 5 > Flashcards

Wills and Estates 4 & 5 Flashcards

1
Q

What does a ‘Grant of representation’ do?

A

Establishes the:
- Authority of the PR’s to act,
- Validity of the deceased’s will
Only covers assets in the succession estate

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2
Q

What date can an executor act from?

A

Executors are Personal Representatives appointed by the Will. They can act from the date of death. The grant confirms their authority.

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3
Q

What date can an administrator act from?

A

Administrators are Personal Representatives appointed by the Grant. They have no authority until the grant is issued

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4
Q

What is the role of a Personal Representative?

A
  • collect deceased assets
  • ensure deceased’s debts are paid
  • ensure tax is paid
  • distribute assets to beneficiaries
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5
Q

When will PR’s become trustees?

A
  • The will expressly appoints them,
  • There is an intestacy (the estate is held on trust with a power to sell)
  • A statutory trust arises under intestacy where there is a minor beneficiary
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6
Q

Is a Personal Representative personally liable for a breach of duty?

A

Yes

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7
Q

What are the duties of a Personal Representative before the issue of Grant?

A
  • dispose of the deceased’s body,
  • Provide information about the estate to HMRC and pay IHT (grant will not be issued until tax is paid)
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8
Q

What’s involved in ‘collecting in’?

A
  • identify and locate the deceased’s estate.
  • Identify the deceased’s liabilities and creditors.
  • Obtain control, possession or legal ownership of the assets.
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9
Q

What’s involved in ‘administering the estate’?

A
  • Keep assets secure
  • Pay deceased liabilities
  • Meeting administration expenses,
  • Paying legacies,
  • distributing the residue to those legally entitled.
  • must also keep Estate accounts (show assets & values, record of steps taken whilst administering. Court can order PR’s produce an inventory and accounts.

(Note: only succession estate)

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10
Q
  • What are the general duties on PR’s?
  • When should they complete administration?
A
  • act with due diligence,
  • act within a reasonable time
  • administration should be completed within 12 months (if longer PR’s are required to justify the delay).
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11
Q

Does the appointment to be a PR end once the administration is finalised?

A

No - the appointment is life long

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12
Q

Can PR’s purchase assets from the estate at fair value?

A

Yes but only with an order from the court or with agreement of the beneficiaries. PR’s must not place themselves in a position of conflict of interest.

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13
Q

Can PR’s profit from their position?

A

No - but payments will not be a breach if the PR acts in a professional capacity and the payments are authorised under the will or s.29 TA 2000

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14
Q

Powers granted by Statute take precedence over powers granted by the will true or false?

A

False - The will takes precedence.

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15
Q

Do PR’s have a statutory power to sell, charge or lease?

A

Yes

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16
Q

When do PR’s have the statutory power to appropriate an asset in satisfaction of a beneficiary’s entitlement?

A

As long as:
- A specific beneficiary has not been prejudiced (e.g. was the asset promised to someone else)
- The recipient beneficiary has consented
- The value of the asset is considered at the date of transfer, not the date of death

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17
Q

Can PR’s appropriate an asset valued in excess of the beneficiaries entitlement

A

No (if the values is the PR’s can ‘top up with cash’

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18
Q

Do PR’s have a statutory power to insure?

A

Yes - PRs are authorised to pay the insurance premiums out of either estate income or capital.

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19
Q

Do PR’s have a statutory power to invest?

A

Yes, they have a duty to preserve the estate and actively invest
- must have regard to the standard investment criteria?
- have a duty to obtain advice unless they reasonably conclude that it is unnecessary or inappropriate.

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20
Q

What does a professional PR need in order to charge for services?

A
  • needs to be reasonable,
  • Cannot be acting alone,
  • co-PRs must give written consent
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21
Q

Can PR’s charge for expenses when acting on behalf of the estate

A

Yes - but not for time (e.g. if could have earned elsewhere if not working for the estate)

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22
Q

What statutory powers can’t a PR delegate?

A
  • How and when assets should be distributed,
  • whether fees or costs are payable from income or capital,
  • The appointment of trustees
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23
Q

What formalities are required for PR’s to delegate?

A
  • must be done in writing
  • agent’s must be provided with a written policy statement which the agent must agree to.
  • the use of an agent and the policy doc must be kept under review.
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24
Q

What are PRs statutory powers in respect of sole trades run by the deceased

A

There is a common law power to sell the business as a going concern within a year of death.
PRs are personally responsible to business creditors.

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25
Q

How do joint PRs make decisions?

A

They are required to make decisions together and agree unanimously.

However, when using the power to sell or transfer, they usually have the authority to act alone.

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26
Q

Can PRs distribute to minors?

A

No - they cannot give good receipt. However, they can distribute to a trust set up for the minor’s benefit.

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27
Q

How can a PR protect themselves from liability for a breach?

A
  • Court direction,
  • s.48 order (distribute in accordance with a written legal opinion)
  • s27 notice (only protects from unknown beneficiaries and creditors & beneficiaries may still be liable).
  • Benjamin Order - (used where there is a known but missing beneficiary)
  • Presumption of Death Act - PRs apply for a court order that someone thought to have died for 7 years is dead
  • Insurance
  • Indemnity from beneficiaries
  • Payment into court - e.g. where beneficiary can be located but won’t accept their inheritance
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28
Q

When might a PR be exonerated by the court?

A
  • acted honestly and reasonably,

-ought to be excused for:
– The breach of trust, and
– Omitting to obtain a direction from the court on the matter

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29
Q

what information is contained in a grant?

A

-identity and date of death of the deceased.
- Deceased left a valid will.
- Identity of executors appointed.
- Value of estate to which the grant applies.

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30
Q

what are the three types of Grant?

A
  • Grant of Probate.
  • Grant of letters of administration (with will).
  • Grant of letters of administration.
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31
Q

When is a grant of probate made?

A
  • the deceased left a valid will.
  • the will appoints executors.
  • at least one of the executors appointed is going to act.
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32
Q

Do you still need a grant of probate if the will does not dispose of any of the deceased’s property?

A

Yes

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33
Q

When is a Grant of letters of administration (with will) made?

A
  • the deceased left a valid will
  • but the will appoints no executors who are willing to act

(administrators are appointed. Rule 20 lists those in order of priority who can apply for the grant).

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34
Q

When is a Grant letters of Administration made?

A

The deceased died without making a will.

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35
Q

what assets in a succession estate don’t need a grant for the PRs to deal with them?

A
  • Assets distributed under the Administration of estates (Small Payments) Act.
  • Personal household possessions
  • cash
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36
Q

What assets are covered by the Administration of Estates (Small Payments) Act?

A
  • National Savings
    -Friendly, Industrial and Provident deposit accounts.
  • Arrears of salary and wages
    -Pensions where the deceased was police, fire, air force or army.
  • Building society accounts
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37
Q

What is the upper financial limit of assets in the Administration of Estates (Small Payments) Act 1965?

A

£5,000 per asset (if exceeds this, a grant is needed for the whole sum, not just the excess).

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38
Q

What are the PRs duties to HMRC?

A
  • Deliver an account to HMRC regarding the deceased’s estate.
  • Pay any IHT due
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39
Q

What is included in the account delivered to HMRC?

A
  • all property and the value of each item at the date of death.
  • the exemptions and reliefs that apply.
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40
Q

What’s the deadline for the submitting the account to HMRC?

A

12 months from the end of the month in which the death occurred

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41
Q

What is the deadline for paying IHT due?

A

6 months from the end of the month in which the death occurred, after which interest becomes payable on the unpaid tax.

42
Q

What are the rules regarding instalment payments?

A

Tax can be paid in 10 instalments, the first due on the normal payment date and the remainder on each anniversary date. Interest is charged.

43
Q

What assets can the instalment option be used for?

A
  • land and buildings,
  • Comapny shares/securities giving the deceased control.
    -Some unquoted shares without control but where payment would cause undue hardship.
  • farms / interest in farming business.
  • business or interest in a business
  • Timber
44
Q

what happens if an asset which is the subject of an instalment plan is sold?

A

The tax becomes due immediately.

45
Q

Which form is used to account to HMRC about an estates assets / liabilities?

A

IHT 400

46
Q

What are the two types of excepted estates?

A
  • Low value
  • Exempt
47
Q

What is a ‘Low Value’ estate?

A
  • No IHT payable because the gross value of the estate is below NRB

(gross value = taxable estate + specified transfers- those made in the last 7 years)

(NRB includes any transferred NRB but does not include RNRB).

48
Q

What is an ‘Exempt excepted estate’?

A
  • Gross value is no more than £3m but no IHT is payable because after debts, spouse/charity exemption the net value of the estate is below the NRB.

(note: ONLY spouse/charity exemption count).

(gross value = taxable estate + specified transfers- those made in the last 7 years)

(NRB includes any transferred NRB but does not include RNRB).

49
Q

What factors prevent an estate from being ‘low value’ or ‘exempt’ excepted estates?

A
  • trusts: more than one trust, or a single trust worth more than £250k
  • Foreign assets worth more than £100k
  • specified transfers exceeds £250k
  • gift with reservation
  • RNRB claim.
50
Q

When is form C4 used?

A
  • additional assets liabilities are discovered.
  • corrections to values.
    changes to exemptions / reliefs
  • a variation of the original beneficiary entitlements which affect the IHT liability.
51
Q

Is there a legal duty for the PRs to follow the funeral wishes set out in a will? Who will pay?

A

No. Payment is made from the post-death administration expenses payable from estate funds.

52
Q

When should a formal valuation be sought?

A

For items valued over £500

53
Q

Where does the entitlement to act as an executor derive?

A

from the will

54
Q

Can an executor give their right to take out the grant to someone else?

A

No - although they may appoint someone to act on their behalf.

55
Q

When is an executor unable to act?

A
  • if they pre-deceased the testator.
  • are a minor.
  • lack capacity
  • are the testators former spouse/civil partner and the divorce/dissolution took place after the will was made.
56
Q

How many executors are required?

How many executors can be named on the grant?

A
  • One.
  • A maximum of 4 can be named on the grant
57
Q

What happens if the sole executor dies after grant?

A
  • Chain of representation applies (essentially the PR of the deceased PR take over - no additional grant needed), or
  • Grant of letters of administration de bonis non is issued.
58
Q

There is no will. Where does an administrator get their authority?

A

Administrators are appointed under the NCPR and their authority to act derives from the grant.

59
Q

When will a Grant of Letters of Administration (with Will) apply?

A

Where the deceased left a will but there are no executors willing/able to act.

60
Q

What is the statutory order of entitlement to be appointed as administrator under a grant of letters (with will)?

A

a) executor
b) trustee of the residuary estate,
c) any residuary beneficiary or, where there is a partial intestacy, a beneficiary of the estate under intestacy.
d) the PRs of anyone in (c) other than a trustee of a life tenant of the residue.
e) any other beneficiary or a creditor.
f) PRs of anyone in (e).

those within the same category have an equal right to apply

61
Q

what is ‘clearing off’

A

The applicants for administrator of grant of letters (with will) must explain why anyone with a better right to apply is not doing so.

Note - no need to clear off people in the same category.

62
Q

When will a Grant of Letters of Administration apply?

A

Where the deceased dies without a will

63
Q

What is the statutory order of entitlement to be appointed as administrator under a grant of letters?

A

Must have a beneficial entitlement under the estate:-
a) surviving spouse/civil partner
b) children of the deceased
c) father and mother of deceased
d) whole blood siblings.
e) half-blood siblings
f) grandparents
g) Uncles/Aunts of whole blood
h) Uncles/Aunts of half blood

  • The crown
  • If the crown does not apply, a creditor, of person who does not receive a benefit (but would have done had the estate been larger).
64
Q

what if an applicant survived the deceased but dies before the grant?

A

The applicant’s PRs can apply, but living person is preferred.

65
Q

Can a minor act as an administrator?

A

No, but someone can apply for a grant on their behalf. However, an adult of equal entitlement will take preference.

An application may be appropriate where:
- no adult of equal or greater entitlement will act, or all people within the most entitled category are children.

66
Q
  • How many administrators are required under letters of administration / letters of administration (with will)?
A
  • One
67
Q

How many administrators are required under letters of administration / letters of administration (with will) if there is a life interest in the estate or a minor?

A
  • Two
68
Q

What is the maximum number of applicants to be administrators are required under letters of administration / letters of administration (with will)

A
  • Four
69
Q

What are the options if an executor is unwilling to act?

A
  • Renunciation
  • Reserving power
  • Appointing an attorney
70
Q

How does an executor formally renounce their right?

A
  • sign a form of renunciation.
  • those applying for the grant must submit the form to the probate registry
    -the renunciation will be noted on the grant
    _Renunciation is final, they cannot later change their mind without the court’s approval.
71
Q

When can’t an executor Renounce?

A

When they have intermeddled - taken steps to indicate that they have accepted their appointment.

72
Q

When considering when can’t an executor Renounce, is arranging a funeral Intermeddling?

A

No

73
Q

What is ‘Reserving Power’ by an executor?

A
  • an executor who may want to act later can reserve the power.
  • must be one other executor who does take out the grant of probate.
  • to act later the executor can apply for a grant of double probate (if administration is not yet complete).
74
Q

What is required to ‘reserve power’ by an executor?

A
  • no formal reservation.
  • other executors must notify him that they are applying for probate.
  • grant will note the reservation.
75
Q

How is an attorney appointed by an executor?

A

After grant - PR may delegate for a max of 12 months.

Before grant - other executors apply for a grant of probate / attorney applies for letters of administration (with will) - attorney can’t apply for probate as he is not named on the will.

76
Q

What can an administrator do if they are unwilling to act?

A
  • Renounce
  • Appoint an attorney

ADMINSTRATORS CANNOT RESERVE POWER

77
Q

How does an administrator renunciate?

A
  • A form of renunciation must be signed and submitted to the probate registry with the application for grant.
  • Administrator may do so any time before grant is issued - INTERMEDDLING RULE DOES NOT APPLY.

Note: Executors who renounces their right to apply for grant do not automatically renounce their right to apply as an administrator.

78
Q

How does an administrator appoint an attorney?

A

After the administrator has been appointed under grant - the PR may delegate their functions.

Before a grant has been issued - The power to apply for grant can be delegated. The power of attorney must be provided to the probate registry as part of the application.

79
Q

Note - Administration: Applying for the grant is not covered in these notes…

A
80
Q

What must be supplied to the Probate office

A
  • registry fee (no fee if estate worth less than £5k)
  • A certified copy of the death certificate (not photocopy)
  • original will (probate confirms validity)
  • if IHT 400 required (goes to HMRC), HMRC will send confirmation to probate registry.
  • power of attorney docs (if required).
  • forms of renunciation (if applicable).
81
Q

What is an affidavit?

A

A formal statement of fact.

  • signed by all parties and dated,
  • completed and signed by the person witnessing (independent solicitor/commissioner for oaths) inc. name/address & qualification.
    -must follow on immediately from the text and not on a separate page.
82
Q

When is an estate solvent?

A

If the assets are sufficient to pay funeral, testamentary and administration expenses, debts and liabilities.

83
Q

What are the rules regarding secured debts?

A

Charged property will bear primary liability for payment of the debt unless a contrary intention is shown in the will (must be clear & specific).

If the debt is less than the value of the asset, no other estate assets can be used to repay the debt.

84
Q

How are unsecured debts / expenses paid?

A

a) property not disposed of by a will

b) residue (subject to retention of a legacy fund)

c) property the will set aside

d) £ in the pecuniary legacy fund

e) property specifically given (e.g. chattels)

(where gifts are in unequal amounts, debts are paid proportionately).

85
Q

How can PRs protect themselves against a claim under 1975 against the estate

A

If a claim under IPFDA 1975 may be made, PRs may wish to delay distribution until 10 months of the grant being issued (there is a six month deadline for issuing a claim and a further four months to serve notice of this).

86
Q

How can PRs protect themselves from unknown creditors

A

Get a s.27 notice in the gazette (and local newspaper if estate includes land) and wait 2 months

87
Q

What if PRs pay debts out of order?

A

Beneficiary can apply for marshalling and claim against a beneficiary who received assets that should have been used to pay the debts.

88
Q

Are taxes owed at the date of death payable from estate assets?

are they deductible when valuing the estate for IHT?

A
  • yes
  • yes
89
Q

Is death a disposal for CGT?

A

No. Assets are valued at D.o.D. Any gain is ignored.

90
Q

What happens to income/gains after death?

A

PR’s are liable at basic rate but with no personal allowance.

91
Q

When do PRs not have to account for Estate income?

A

If only income is savings interest of less than £500.

92
Q

What happens to Estate income tax when distributed to beneficiaries?

A

If B pays no tax, they can request a refund,

If B pays higher rate, they will need to top-up the tax suffered by the PRs

93
Q

Estate Gains - do the PRs have a personal allowance?

A

Yes

94
Q

CGT - are transfers to beneficiaries taxable on the PRs?

A

No, they are not disposals for CGT purposes. B acquires the asset at Probate value (d.o.d) not the value when the asset was transferred.

95
Q

What order are legacies paid in?

A
  • specific
  • general
  • residuary
96
Q

When can PRs ascertain the value of the residue?

A

When all debts, testamentary expenses and other legacies have been paid.

97
Q

Which assets must PRs use to settle general and residual legacies?

A

PRs are free to choose.

-Cannot give an asset valued more than the entitlement of a beneficiary

-Can give asset valued less than entitlement and top-up.

98
Q

If there is tax to pay, will the estate be excepted?

A

No

99
Q

How can you get money to pay IHT and apply for grant?

A
  • Send a copy of the IHT 400 to the bank so that they can pay HMRC directly.
  • Then send the IHT400 to HMRC.
  • HMRC will then forward the IHT 421 to the Probate office directly.
  • Wait 14 days.
  • Apply for grant with application fee and a fee per sealed copy.
100
Q

Who signs off the trust accounts off?

A

The PRs, the beneficiaries are entitled to a copy.

101
Q

Are administration expenses deductible for IHT?

A

No - except reasonable funeral costs + Headstone

102
Q

When do you get executors

A

If appointed by the Will. Otherwise, they will be administrators.

SQE1 ULAW Style (149 decks)

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