wills and intestacy key terms Flashcards
inheritance tax
revocation
formalities
administration
testator capacity
nature of their act - that they are making a will
extent of their property (doesn’t need to be precise)
who a testator would usually give gifts to
what happens if a will is made under duress or undue influence?
will is not regarded as an act b the testator - the whole will fails and will not be admitted to probate.
duress?
will is made due to the fear of force or fear of force / injury
undue influence
if influence overpowers the testator’s volition - beyond mere persuasion.
formal requirements for a will to validly be executed
- in writing
- signed by the testator or another in the presence and in direction from the testator - a mark intended as a signature is sufficient
- singed by the testator in the presence of two more witnesses (don’t need to read the will or know that they are witnessing a will)
- signed by each witness in the presence of the testator but not necessarily in the presence of the other witness.
attestation clause
if there is no attestation clause, proof will have to be supplied to the proof that the requirements of the will have been met.
e.g. “signed by the testator in our presence and then by us in his”
requirements for other documents to be included with the will?
will must identify the document, it must exist at the date of the will and be referred to as existing.
effect of including a future intention to make a list, sechdule or memorandum
it does not become part of the will
difference between executors and administrators
executors administer estate and get power from the will, administrators receive their power from intestacy rules.
what is the effect of divorce on a will?
the will is read as though the ex spouse has predeceased the testator.
how does someone named as an executor accept office?
either by taking the grant of probate (applying for it) or by intermeddling (i.e taking any steps to administer the estate) e.g. notifying the bank of the deceased’s death.
how can an executor not act?
they can renounce their right if they haven’t already intermeddler.
is the role of executor all or nothing?
yes
what is the process of renouncing acting as an executor?
filed at the probate registry - usually by another person seeking grant of probate.
reservation of power by an executor - what is the point?
an executor who does not wish to act can have power reserved - this means they will not be involved for no but if the circumstances change they can apply for a grant of probate at a later stage.h
how can you prove an alteration of a will was made before execution?
Statements from the witnesses or the initials of the testator and their witnesses next to the alteration, provided the will reads naturally after the amendment.
how should amendments to a will be made after execution?
change must be witnessed in the same manner as an entire will is witnessed.
what is a codicil?
A separate document which refers to the will and is executed like one. codicils were popular when wills were handwritten and long.
how can codicils be utilised?
to amend, or partially revoke a will
methods of revoking a will
automatic: marriage
destruction of the will by burning, tearing or destroying
a new will revokes an earlier will to the extent it is inconsistent with the earlier will - will often include clause in will to ensure previous wills are revoked to prevent this.
conditions for revoking by destroying a will
- intention to revoke at the time of destruction
- if a will is found destroyed after death, it will be presumed that the testator did so with intention to revoke unless evidence to the contrary
- destroyed will might be given effect if proved that destruction was contingent on a future event that didn’t occur for example destroyed intending to make a new one but wasn’t able to.
4 categories of gift
- specific gifts - my engagement ring
- general legacy
- pecuniary legacy e.g. a gift of cash
- residuary legacy - gift of everything left in the estate after the giving of the other gifts, and paying the expense of administering the estate.
what happens if a specific legacy is no longer in the estate .
the gift fails and the named beneficiary doesn’t take anything under the gift.
what happens if the general legacy is no longer in the estate
PRS will use estate funds if sufficient to purchase the item
when will a class of beneficiaries close to new members?
the moment any members of the class satisfies the condition. this means no new members can be added but anyone who is alive and within the class will share in the gift if they eventually satisfy the condition
what happens if a beneficiary dies before the testator?
the gift will fail
1. if there isn’t an alternative beneficiary need on the will it falls into the residue.
- if the residuary gift lapses as beneficiary dies then the residuary passes through the laws of intestacy
what is the exception for gifts failing when a beneficiary dies before the testator?
if the gift was made to an issue of the testator (direct descendant) and that beneficiary dies before the testator, but leaves an issue themselves, then the gift won’t lapse but will pass to the issue instead.
what is intestacy?
statutory method of distributing assets not disposed of under the will - includes if will failed to give away all of their property e.g. the residuary gift failed.
what are the intestacy rules when there is a spouse and no issue?
spouse is entitled to all of the property - must survive 28 days
what happens when there is no spouse but an issue ?
spouse and issue
spouse takes:
- all chattels other than money, stocks and property used for business
- statutory legacy £322,000
- half of the remaining property
the children split the other remaining half in equal shares.
what order does property pass under the inestatcu rules when there is no spouse?
- children - if child predeceases the dependent but have their own issue the issue will take on trust and split their parent’s share.
- parents
- full siblings
- half siblings
- grandparents
- aunts and unless (full blood)
7.” full blood - to the crown.
what happens to a house under intestacy rules? s46 administration estate act
spouse can require the PR to give them the couple’s matrimonial home on partial or total satisfaction of their interest - if the home is worth more than their share they will have to pay the difference to make back up the estate.
what property passes outside of the estate?
- joint property
- life policy - passes to the beneficiary named in the policy under contract law.
- pension scheme benefits - can nominate someone to take property so it will pass to them
- trust property - passes according to the terms of the trust.
where does the burden of proof lie with allegations of duress or undue influence?
the burden lies with the person making the allegation
statutory trusts
enables the issue of a deceased’s child of the dead to be entitled to a share as if all of them were living at the date of the death. the issue of the deceased must reach 18 or marry to inherit.
what is a grant of representation
a legal document which confirms a person’s right to administer the estate of a deceased person
which courts deal with grants of representation?
family division in the high court
rule 20 (what is the prescribed preferential order for who may apply for the letters of administration with he will annexed?)
- trustee of the residuary estate
- any other residuary beneficiary
- pre of ny residuary beneficiary
- any other beneficiary or creditor of the estate
- pre of any other beneficiary or creditor of the estate.
What should a person applying for letters of administration confirm in their application?
People with higher entitlement have renounced
how many administrators are needed?
if a minor beneficiary - at least 2
when are letters of administration used?
where there is no will
order of preference for who may apply for letters of administration
surving spouse, children, parents, siblings, grandparents.
when must IHT be paid?
prior to obtaining a grant - application will need to also prove this e.g. iht400
how to pay IHT?
ask banks / building societies to release the deceased’s funds directly to HMRC to pay IHT. this is at the institutions discretion.
ask the beneficiaries.
how should potential PRS pay for funeral expenses
same as above
how should potential prs raise funds for IHT?
potential pr can seek a loan from a bank or beneficiary to pay IHT or sell estate assets that can be sold by showing a death certificate e.g. cars, clothing, chattels) things that don’t require a grant to deal with
by when must IHT be paid
must file an inheritance account with HMRC within 112 months of death.
typically filed sooner, as interest starts accruing on taxes owed after 6 months and cannot obtain the letters or grant until tax has been paid.
what should a grant of probate include?
- two copies of the will
- official copy of the death certificate
- tax form to show either no IHT was payable ir that it has been paid
- probate court fees (an application for letters is similar although with or without a copy of the will)
what should a party interested in applying to the court do?
ask the probate registry to issue a citation to accept or refuse a grant to a person with a prior grant who has not applied, and shows no intention to apply
when should valuation of assets and liabilities be done?
before apply to the court for the grant so know the value of the estate for IHT purposes
what estates are considered excepted?
estate of a deceased who was non - uk domiciled is excepted if their uk estate consists solely of cash/quoted shares which total no more than £150,000.
duties of personal representatives?
- take reasonable steps to preserve the assets of the deceased’s estate and release any investments
- must pay of the estate’s debts using estate funds and distribute assets as set out in the will/intestacy rules.
- acting in the best interests of the beneficiaries - including exercising reasonable care and skill taking into account any specialist knowledge they have
- under statute, thy have the power to sell, mortgage or lease estate property
what is the power to appropriate
the PR’s ability to use an estate asset to satisfy a legacy or other interest in the estate provided the beneficiary consents.
what three accounts do the prs usually keep for the estate
- capital account - dealing with assets in the estate
- distribution account - keeping track of the amount each beneficiary is entitled ti
- income account - keep track of income received by the prs during administration
liability of PR’S
May be liable to the estate for losses resulting from their breach of duty.
Personally liable to any unpaid beneficiary or creditor even if not known when a distribution is made unless they comply with s27 Trustee Act 1925.
How do PRs protect against personal liability for not being able to locate beneficiary?
- make payment of the amount owed into the court and distribute the rest of the estate
- distribute everything, but ask for an indemnity from the other beneficiaries
- Benjamin order - court order which gives prs leave to distribute the estate based on the assumption set out in the order e.g. that the beneficiary deed before the deceased
- insure against risk of missing claimant appearing
when does a beneficiary gain legal or equitable interest in the estate assets
only after administration is complete - before they only have a right for the estate to be PROPERLY ADMINISTERED.
when will a pr not be liable to a beneficiary?
a beneficiary can bring a personal action against a pr but a pr will not be liable if they acted honestly, reasonably and ought fairly to be excused.
how should company shares be distributed
stock transfer form completed and sent with an official copy of the grant and share certificate
who pays for the distribution of the estate
the beneficiary unless the will states otherwise
what happens if estate funds or assets are not sufficient to pay legacies in full?
will abate in proportion unless there’s priority given to any particular legacy
because minors cannot generally give good recipes for a gift what may the prs do to circumvent this?
accept receipt from the minor’s parents, hold the property until the minor is 18 or appoint a trustee to receive and hold the property until the minor is 18.
inheritance (provision for family and dependants) act 1975 - what does it enable
it enables an applicant to apply to the court to set aside the terms of a will or vary an intestacy of a person who domiciled in England and Wales on th grounds that reasonable financial provision was not made for the applicant.
when must claims be made under the provision for family and dependants act 1975?
6 months from the date of the grant
who can make a claim under the 1975 act?
- surviving spouse or civil partner
- former spouse who has not remarried (may be barred if a clean break divorce)
- child of the deceased or treated as a child of the family - caselaw suggests however that applications made by able bodied adults capable of earning their own living have not been treated sympathetically by the courts unless in full time education).
- person being maintained by the deceased wholly or partly by the deceased immediately before their death
- person living with the deceased for the whole two year period immediately before the death as spouse, civil partner, or same sex partner of the deceased
what will the court consider under a claim under the 1975 act?
- financial resources and needs of the application other applicants and beneficiaries
- obligations and responsibilities of deceased towards the applicant
- size and nature of the net estate
- physical or mental disability of the application
- for spouse: age, duration of marriage, contribution to marriage
- manner of education and training for children
- cohabitant: age, length of cohabitation, contribution to welfare of the family
- maintained: assumption of responsibility and length of time for which deceased discharged the responsibility.
what is the standard of REASONABLE FINANCIAL PROVISION UNDER THE 1975 ACT?
spouse: what would be reasonable in all of the circumstances whether or not required for maintenance
other applicants: provision required for their maintenance such that they can live decently and comfortably according to their situation.
what types of powers do the courts have if a successful claim under the 1975 act?
wide discretion and powers:
- transfer of property
- payment of a lump sum
- payment of income
- settlement of property on trust
why might a beneficiary wish to disclaim or vary their inheritance ?
variations and disclaimers - beneficiaries can disclaim or vary their inheritance under a will after the death of a testator
1) moral - they believe another party deserves a legacy
2) statutory provision - they may do so to negotiate a settlement of a statutory provision
3) tax advantage 0 it may be tax advantageous to do so.
how can an inheritance be changed?
there are three potential arrangements
1) disclaimer - the gift is disclaimed and passed as if the beneficiary had predeceased the testator
however must apply to the whole gift - cannot occur if the gift was accepted.
2) variation
the gift is redirected to a chose recipient
beneficiary must be suit juris, unless court orders others
what is reading back of tax
unless ‘read back’ variations and disclaimers are pets of the original beneficiary and are subject to IHT and capital gains tax.
if read back they are treated as being made by the testator which is generally more tax advantageous.
1) written and signed - must be in writing and signed by the original beneficiary.
2) must be made within 2 years of death
3) applicable law: must state which tax law is to apply
IHT: s142(1)
capital gains: s62(6)
MUST NOT BE MADE FOR CONSIDERATION.
what business property qualifies for 100% relief?
a business or an interest in a business including partnership share and company shares THAT ARE NOT LISTED ON A RECOGNISED STOCK EXCHANGE
What are caveats, citations and passing over
potential applicants or beneficiaries may object to the issuing of a grant, compel and issue of a grant or attempt to have a grant passed over by a prospective party in favour of themselves
how are grants challenged?
challenging the grant - parties may object to an issue of a grant by submitting form PA8A TO HMCTS
caveat
HMCTS will issue a caveat which prevents the issue of grant until it is removed or expires.
removal - applicants can issue a warning o the caveat or giving them 14 days to outline their opposition.
expiry - it expires if unchallenged following a warning and automatically after 6 months (so 14 days after a warning and 6 months if nothing else is done).
challenge - following a warning, a caveat or can submit a document called an appearance at the probate registry - this makes the caveat permanent and can only be removed by court proceedings or the seeking of removal
caveats initiate the process to challenge the validity of the will
how are applicants compelled to make a decision as to obtaining grant?
citation
citation to probate - compels an executor who has intermeddler with the estate to apply for a grant. the effect is that they must apply within a reasonable time and if they fail to do so without good reason - the court can pass over them.
passing over
the court has the discretion to pass over if necessary or expedient to do so
how are assets collected and preserved?
collection: prs must collect assets that pass under the will or intestacy and preserve their value until they are distributed. as soon as practicable - on death for executors on grant for administrators.
preserve: prs should preserve asset value through investment insurance and proper storage. owe a duty of care and have all the same investment powers as trustees.ho
how do the prs deal with the debts and expenses of the estate ?
Debts and Expenses: Debts and expenses must be paid from the estate before distribution of legacies. The source of funding differs by solvency (and the direction of the will).
(1) Debts: Outstanding bills and tax liabilities of deceased (late payment may incur personal liability for PRs).
(2) Funeral: A reasonable sum paid towards a funeral symbolic of the deceased’s position and circumstance in life.
(3) Testamentary Expenses: Expenses of the administration process: a) costs of grant; b) costs of asset management; c) associated professional fees; d) inheritance tax paid by PRs (s211 IHT).
(4) Power of Sale: PRs have the power to sell estate assets to pay expenses (s31 AEA).
Considerations: Must consider tax consequences and wishes of beneficiaries.
Solvent Estate
Solvent Estate: Solvent estates are those sufficient to pay all debts and expenses (if unclear, treat as insolvent).
(1) Secured Debts: Funded by secured asset, unless will states otherwise with specific reference to asset (s35 AEA).
(2) Unsecured Debts/Expenses: Other debts and expenses disposed of in statutory order, unless stated otherwise:
* Undisposed property (lapsed residue);
* Residuary estate;
* Property specifically to be used for debts;
* Property charged with debts;
* Pecuniary legacy funds;
* Specific legacies (rateably according to value);
* Property appointed under a ‘general power’ (RAtV).
Insolvent Estate
Insolvent Estate: Insolvent estates are those insufficient to pay all debts and expenses in full.
(1) Secured Debts: Funded by secured assets (surplus returned; deficit sought as unsecured debt).
(2) Unsecured Debts: Unsecured debts are paid in the following order (ranked and abating equally):
* Funeral/Administration Expenses;
* Preferential Creditors (Employees Last 4 Months’ Wages Up To £800);
* Ordinary Creditors;
* Postponed Creditors (i.e. Spouse of Deceased).
how should prs distribute non residue legacies?
legacies: after payments of debts, prs should distribute non residue legacies subject to waiting 6 months from the grant.
specific legacies:
1) transfer - typically by physical transfer
land: vested by an asset
shares - stock transfer form and share certificate.
2) income 0 held for beneficiaries and only distributed alongside a gift. beneficiaries must pay income tax on any income generated.
costs of gifts - the cost of transferring the gift - beneficiary.
pecuniary legacies:
1) source of funds: sourced according to the will otherwise at the prs discretion usually from the residue
asset swap - prs can satisfy a pecuniary legacy by gift of non cash assets of equivalent value provided beneficiary consents. requirement for consent can be removed by the will
what are estate accounts?
prs should produce estate accounts - when signed by the residuary beneficiary, they are discharged.
1) contents - lists of all assets, expenses, debt payments, gifts, interim payments and residue balance. should be clear and concise.
2) signature - residuary beneficiaries must sign approval releasing the prs form liability bar fraud or non disclosure.
3) income and capital - accounts should distinguish income from capital - useful for determining life and minority interest responsibilities if vesting to trustees.
