Wills and estates 7

Question 1

What is the IHT charge on gifts to charity?

Answer 1

They’re fully exempt

Question 2

What % of their estate must a testator leave to charity to benefit from a reduce IHT rate

Answer 2

10%

Question 3

What is the reduced IHT rate following a gift of 10% of the estate to charity?

Answer 3

36%

Question 4

should a testator be discouraged from making specific gifts of qualifying assets (BPR an APR) to exempt beneficiaries (charities and spouse)

Answer 4

Yes. As the relief follows the asset there’s no saving on gifting them to an already exempt entity if there are other non-exempt beneficiaries.

Question 5

How best can qualifying assets be gifted to a spouse?

Answer 5

Possibly gifting them to a discretionary trust of which she is a beneficiary.

Question 6

What happens if qualifying assets are not specifically given away but fall into the residuary estate?

Answer 6

APR/BPR do not attach to the assets but the benefit of the relief is apportioned between the taxable and non-taxable beneficiaries.

Question 7

Who are exempt beneficiaries?

Answer 7

charities
spouse

Question 8

What are qualifying assets

Answer 8

Assets that qualify for BPR or APR

Question 9

what’s the risk of gifting to a non-exempt person ‘free of tax’ when there is an exempt beneficiary?

Answer 9

The gift to the non-exempt person will be ‘grossed up’ meaning the gift is actually more than the headline rate and so is the IHT. The tax will be paid from the residuary estate which passed to the exempt person.

Question 9

If there re no statements to the contrary, who pays IHT on gifts?

Answer 9

The beneficiary of the gift.

Question 10

what considerations are there if a testator is gifting to their unmarried partner?

Answer 10

No spousal exemption will apply, therefore it may make sense to gift to kids Or a D Trust, rather than to partner (taxed) and then from partner to kids (taxed again).

Question 11

who can benefit from the RNRB?

Answer 11

Only direct lineal descendants

Question 11

If there re no statements to the contrary, who pays IHT on gifts?

Answer 11

The beneficiary of the gift.

Question 11

What is a trust created on death called?

Answer 11

A will trust

Question 12

what document is the trust deed in a will trust?

Answer 12

the will

Question 13

who is the settlor of a will trust

Answer 13

the testator

Question 14

when does a trust deed come into existence?

Answer 14

on the date of death of the testator (not when the will was executed).

Question 15

are the assets of a discretionary trust included in the beneficiaries’ estate?

Answer 15

no

Question 16

if a residence is gifted to a discretionary trust for the benefit of the children, will the RNRB apply

Answer 16

No

Question 17

what’s special about a 2 year DT?

Answer 17

As long as the assets are distributed within 2 years of the date of death, they are treated as passing by the testator’s will not the trustees. Gives a lot of flexibility.

Question 18

Can the spousal exemption apply to life interest trusts?

Answer 18

Yes, if the spouse is the life tenant. There is no benefit if the spouse is the remainder beneficiary.

Question 19

what is the advantage of a life interest trust

Answer 19

allows the testator to control the ultimate destination of the estate (if the surviving spouse say, remarries or has further children).

Question 20

who does a solicitor act for

Answer 20

their client or someone properly authorised to provide instructions on their behalf

Question 21

Should you ensure that your service to clients is competent and delivered in a timely manner?

Answer 21

Yes

Question 22

should a will be prepared if testamentary capacity cannot be confirmed?

Answer 22

no

Question 23

If there re no statements to the contrary, who pays IHT on gifts?

Answer 23

The beneficiary of the gift.

Question 23

There is no absolute prohibition, but solicitors should refuse to act where the client is proposing to make a gift of significant value to them or a member of their family/firm. How much is ‘significant’?

Answer 23

£500