Wills and estates 7 Flashcards
What is the IHT charge on gifts to charity?
They’re fully exempt
What % of their estate must a testator leave to charity to benefit from a reduce IHT rate
10%
What is the reduced IHT rate following a gift of 10% of the estate to charity?
36%
should a testator be discouraged from making specific gifts of qualifying assets (BPR an APR) to exempt beneficiaries (charities and spouse)
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.
How best can qualifying assets be gifted to a spouse?
Possibly gifting them to a discretionary trust of which she is a beneficiary.
What happens if qualifying assets are not specifically given away but fall into the residuary estate?
APR/BPR do not attach to the assets but the benefit of the relief is apportioned between the taxable and non-taxable beneficiaries.
Who are exempt beneficiaries?
charities
spouse
What are qualifying assets
Assets that qualify for BPR or APR
what’s the risk of gifting to a non-exempt person ‘free of tax’ when there is an exempt beneficiary?
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.
If there re no statements to the contrary, who pays IHT on gifts?
The beneficiary of the gift.
what considerations are there if a testator is gifting to their unmarried partner?
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).
who can benefit from the RNRB?
Only direct lineal descendants
If there re no statements to the contrary, who pays IHT on gifts?
The beneficiary of the gift.
What is a trust created on death called?
A will trust
what document is the trust deed in a will trust?
the will
who is the settlor of a will trust
the testator
when does a trust deed come into existence?
on the date of death of the testator (not when the will was executed).
are the assets of a discretionary trust included in the beneficiaries’ estate?
no
if a residence is gifted to a discretionary trust for the benefit of the children, will the RNRB apply
No
what’s special about a 2 year DT?
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.
Can the spousal exemption apply to life interest trusts?
Yes, if the spouse is the life tenant. There is no benefit if the spouse is the remainder beneficiary.
what is the advantage of a life interest trust
allows the testator to control the ultimate destination of the estate (if the surviving spouse say, remarries or has further children).
who does a solicitor act for
their client or someone properly authorised to provide instructions on their behalf
Should you ensure that your service to clients is competent and delivered in a timely manner?
Yes
should a will be prepared if testamentary capacity cannot be confirmed?
no
If there re no statements to the contrary, who pays IHT on gifts?
The beneficiary of the gift.
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’?
£500
