Wills and trusts missing bits

Question 1

What happens to the will if undue influence is proved?

Answer 1

It is deemed invalid

Question 2

How is a partnership appointed as executor?

Answer 2

As it doesn’t have a separate legal personality (unliked LLP for example), it cannot be appointed. Instead must appoint all the partners (or specifying one or two partners - but can’t specify which partners as the may leave partnership).

Question 3

What is a general legacy? What if not part of estate at death?
Example of a demonstrative gift? What if not part of estate at death?

Answer 3

‘a’ camera - not distinguished from property of similar type (unlike a specific gift - ‘my’). If not available at death, PRs can buy property

Type of general legacy paid out of specific fund (£500 from X account) - will not fail if not available, can receive the money as a general legacy if X account no longer exists/not enough funds

Question 4

When can a copy of a will be admitted to probate?
What has to be destroyed with an intention to revoke for the revocation to be valid?
What should be used when admitting copy of will if court order approving this?

Answer 4

If there is evidence that testator didn’t have an intention to revoke the will when it was destroyed

The original will (not a copy!)

Affadavit confirming:
-evidence that will/codicil existed after deceased’s death,
-Confirmation will/codicil was correctly executed
-Copy of document accurately records testamentary wishes of deceased

Question 5

What can extrinsic evidence be used to find an original gift in a will?

Answer 5

Where there is a conditional intent to revoke
Presumed where a testator attempts to substitute a gift for another gift, if the new gift fails (made after execution, cannot be proved to have been made before), then it was conditional upon that new gift being successful.
Therefore, extrinsic evidence can be used to find original gift (e.g. where it has been obliterated)

Question 6

What is the related property rule?

Answer 6

If assets owned by SPOUSES are worth more when valued together, each party’s share is valued at their proportionate share of the combined pair

Question 7

Who is included as lineal descendants for the RNRB?

Answer 7

(1) Lineal descendants -children, grandchildren, great-grandchildren (includes step-children, adopted children, foster children, children for whom deceased was a guardian)
-Spouse or civil partner of anyone in (1)
-Widow, widower or surviving civil partner of (1) (who has not remarried before deceased dies)

Question 8

When is the cap in value of estates of RNRB? TRNRB? What is not a QRI?

Answer 8

No RNRB for net estates worth £2,350,000 or more (or £2.7mn where full transferred RNRB applies)

Does not include rental investment properties where deceased did not live

Question 9

When can IHT be paid in 10 equal annual instalments? What is included in payments?

Answer 9

Land and buildings,
company shares giving deceased control,
unquoted shares which did not give control but payment cannot be made without undue hardship
Farms or interest in farming business
Business or interest in a business
Timber

Interest charged on any IHT remaining outstanding after initial deadline date

Question 10

What is NOT included in taxable estate?

Answer 10

Remainder interest in a life interest (life interest in a life interest would be included)
Insurance policy written in trust
Discretionary pension schemes

Question 11

What is quick succession relief?

Answer 11

Where death estate includes assets by way of gift or inheritance
in the 5 years before their death
Those assets were subject to IHT charge when transferred to deceased

Reduces IHT payable on assets previously charged to IHT

Question 12

What is the rule regarding valuation of chattels?

Answer 12

PRs can estimate value but if worth more than £500 - formal probate valuation should be obtained

Question 13

What is the direct payment scheme?

Answer 13

Cannot obtain a grant without payment of IHT
Therefore, dps allows bank to pay HMRC directly for IHT without a grant

Question 14

When would an affidavit of plight and condition be needed? Who should sign affadavit?

Answer 14

Physical signs that will is incomplete or tampered with e.g.
Pin holes, paperclip indentations, non-consecutive pages/clause numbering, burning or tearing of will

Signed by someone who is able to confirm condition of affidavit when executed + its condition later when it was found following death of testator

Question 15

What is the chain of representation? When does it operate? If this does not operate, what does?

Answer 15

If a PR dies before admin is complete, then remaining PRs can continue to act (and appoint new PR if fall below min needed)
If no PR remains:
Chain of representation - if last surviving executor (E1) dies appointing their own executor (E2), then E2 will automatically become executor of original testator as well as E1’s estate (no additional grant required - only applied to EXECUTORS)

If chain of representation not acting, then grant of letters of admin de bonis non (with will) (second grant) - where admin is incomplete, no remaining PRs, + has been a previous grant of representation

Question 16

Where should two trustees (or trust corporation) act?

Answer 16

Where an express trust or minor beneficiaries

Question 17

When executor wants to appoint an attorney what are the rules related to before and after grant obtained? Max period?

Answer 17

After executor obtained grant - delegate functions to attorney for max 12 months (can be extended). Notice should be provided to other executors.

Before grant obtained - executor cannot apply for grant of probate as not named in will. Must apply for letters of administration (with will) alongside executors applying for grant of probate

Question 18

When administrator wants to appoint an attorney, what are the rules for before and after grant of representation?

Answer 18

After admin appointed under grant - can delegate for max 12 months (can be extended)

Before grant - allowed as admin is delegating power to apply for grant to power of attorney

Question 19

When can an appropriation of the marital home take place? Time limit? What if the appropriation is more than they are entitled to? When is the home valued?

Court permission?

Answer 19

Where spouse owns share of house as tenant in common with deceased, then can elect to appropriate the deceased’s share of marital home in full or partial satisfaction of their entitlement (with their consent).

In writing within 12 months

If entitlement is lower than value then are appropriating, they must pay the difference from their personal funds (home is valued at date of appropriation, NOT date of death)

Only need court consent where home is part of building owned by deceased or home is part of farm or other business premises

Question 20

What is IHT usually paid out of? What about specific items or charges?

Answer 20

The residue of the estate (whereas beneficiary has to pay for costs of transfer/upkeep since death of specific gifts + will take property subject to a charge)

Question 21

Why should multiple copies of a grant be obtained?

Answer 21

When administering estate, executor must send a copy of grant of probate to each relevant organisation or person when requesting transfer of asset (will not usually accept a photocopy or certified copy)

Question 22

What is the Administration of Estate (Small Payments) Act 1965?

Answer 22

Allow payments without sight of grant related to:

National Savings
Friendly Society and Industrial and Provident Society
Arrears of salary and wages
Pensions (police, fire authority, air force, army)
Building society accounts

upper financial limit of £5,000 per asset

Question 23

What are the categories for IPFDA claims?

Answer 23

Spouse/civil partner
Formed spouse/civil partner who has not remarried
Cohabitee as if spouse for 2 years prior to death
Child (inc. adopted)
Treated as child (e.g. step-child)
Any other person maintained wholly or partly by deceased immediately before death (substantial contribution)

Question 24

What is the surviving spouse + maintenance standard under IPFDA? Who does surviving spouse apply to?

Answer 24

Surviving spouse: financial provision as would be reasonable whether or not it is required for their maintenance (applies to spouse and former spouse who not remarried and where divorce took place within 12 months of death)

Maintenance: financial provision as would be reasonable for their maintenance

Question 25

What is the main principle in Re Rose?
Mascall v Mascall?
Pennington v Waine? When would this apply?

Answer 25

General rule: court will not perfect an imperfect gift (but will not try and defeat a gift)

Re Rose: needs to have done everything in their power to effect transfer (including ensuring the documentation was in the hands of person capable of effecting the legal transfer)
Mascall: extends Re Rose where does not have to be in hands of person capable of effecting transfer, but as long as correct method of transfer is used and the documents are put beyond their own control (to the person capable of completing the transfer - i.e. so that the person can sending them on to Land Registry), then this will be valid and the gift irrevocable.
Pennington v Waine: will be perfect an imperfect gift where it would be unconscionable (even if it had not put it beyond own control) - only follow in cases similar to Pennington v Waine itself (transferring shares to person appointed as director who needs to hold shares)

Question 26

What is the only exception to the personal nexus rule?

Answer 26

Where it relates to the relief of poverty - as long as it is for a particular description of poor persons (and not particular poor persons)

Question 27

What is a Quistclose trust? Type of trust?

Answer 27

Where a debt from a bank is combined with a trust because the money is lent for a specific purpose (and the debtor isn’t able to freely dispose of it)
Where purpose has failed, the money is held on resulting trust and can be recovered by bank

Question 28

What can an object of fixed/ discretionary trust do where the trustee misappropriates a trust asset and gives to a third party?

Answer 28

Sue the third party on BEHALF of the trust (not on behalf of themselves)

Question 29

What is the definition of following, tracing and claiming?

Answer 29

Following - following same assets as it moves from hand to hand
Tracing - identifying new asset as substitute for the old
Claiming - assertion of personal or proprietary right in relation misapplied trust property or its traceable proceeds

Question 30

In an unmixed fund, what can the beneficiary do? What about in a wrongful mixture (trustee and beneficiary money)? What about in an innocent mixture?

Answer 30

1. Beneficial ownership of asset itself or personal claim and enforcing equitable lien (i.e. beneficiary becomes secured creditor)
2. Claim proportionate share of asset
   Enforcing a lien for amount of misapplied money
3. Only proportionate asset (innocent parties must be treated equally)

Question 31

What is a defence to misapplication of trust property regarding third parties? What about where money was used to improve an innocent third party’s property/asset?

Answer 31

If third party buys property which was purchased with misapplied trust property (or property straight from trust) and they provided consideration in good faith + had no notice of breach - cannot make proprietary claim

Only can make a claim in sale proceeds (if not dissipated)

Improve 3rd p property: cannot assert claim to the asset

Question 32

Where there is a wrongful mixture and there are multiple assets which the beneficiary could trace, what can the beneficiary do? When can this not take place?

Answer 32

Trace into the most profitable applications e.g. if took £1000 (added to account with already £1000) and used £500 for shares which increased in value to £1000 - can claim £1500 (£500 in account + (£500+500 for shares)

This can’t take place where competing with unsecured creditors - would only be able to claim £1000 in account (leaving shares for creditors)

Question 33

Is a new trustee liable for breach of trust?

Answer 33

Not for breaches that took place before appointment - but if they discover the breach, they must take steps to recover property otherwise they may become liable

Question 34

What is the limitation period for bringing a claim for breach of trust? When does this run from? When does the limitation period not apply?

Answer 34

6 years from breach
When a beneficiary has an interest vested in possession - limitation only starts to run when interest vests in possession for beneficiaries with future interests

Not apply to fraudulent breaches or proprietary claims

Question 35

When can a trustee not rely on an exemption clause?

Answer 35

When they have committed a fraudulent breach or acted dishonestly

Question 36

When can a trustee seek beneficiary consent for a breach of trust? What if consent is only obtained from some beneficiaries? What about after breach?

Answer 36

Full protection if all beneficiaries are adults and of sound mind
Given full information to provide consent

Partial consent to those beneficiaries who consented

Beneficiaries can affirm action of the trustees after breach or acquiesce

Question 37

When can a variation take place?

What are the IHT and CGT consequences?

Where would no formal variation be needed?

Answer 37

Vary gift within 2 years following death by original beneficiary in writing without approval of PRs (if no additional IHT is required)
-Can take place after an inheritance has been accepted

IHT: deemed made in will so not PET but may have to pay more or less IHT - where additional IHT, PRs should sign variation and provide HMRC with copy of written variation and amount due

CGT: writing-back effect can be used as to be treated as a gift in the will so that no additional CGT needs to be paid, deemed made on death (gifts of cash are exempt from CGT so do not need to be considered)

No formal variation needed where writing back is not required for either IHT or CGT - can just gift beneficiary

Question 38

Variation restrictions

Answer 38

-can’t be minor or lack mental capacity to vary without permission from court (which is expensive + time consuming)
-No limit but can only vary each asset once
-Cannot vary:
where deceased was life tenant(trust deed will determine where assets go), or gift which was a GRoB (as deceased is not legal owner of property)

Question 39

What is a disclaimer? What are the IHT and CGT implications?

Answer 39

Refusal to accept property - can only disclaim whole gift and before acceptance + cannot choose who gets gift

IHT + CGT: as if person ultimately entitled had been entitled at death

Question 40

What is a precatory trust? IHT + CGT?

Answer 40

Where gift made with a wish express as to how beneficiary should pass it on (not binding though as a trust)

IHT: if beneficiary make intended distribution within 2 years of death - testator treated as made gift originally

CGT: will be treated as disposal by beneficiary (not usually a problem though in short periods)

Question 41

What is a solvent estate?

Answer 41

Assets sufficient to pay all funeral, testamentary and admin expenses, debts and liabilities (immaterial whether legacies can be paid or not)

Question 42

What happens with secured debts?

Is it a concern how debts are paid for solvent estates?

Answer 42

Charged property itself can repay the debt (if loan greater than asset - creditor will rank as unsecured on leftover)

Chronological order not primary concern - although how it is paid can affect beneficiary entitlement

Question 43

What is the chronological order for unsecured debts?

Answer 43

1) Property not disposed of by will(i.e. passing by full/partial intestacy) but subject to retention of £ for pecuniary legacies (pecuniary legacy fund)
2) residue (subject to pecuniary legacy fund if not already done)
3) property will sets aside for repayment of debts
4) £ in pecuniary legacy fund (if not sufficient, reduce legacies proportionately)
5) Property specifically given (e.g. chattels)

Question 44

When is knowledge and approval presumed? When is it not?

If no presumption, what will be needed if attestation clause doesn’t deal with?

Answer 44

Rebuttable presumption if testator has testamentary capacity

No presumption where:
-Testator blind or illiterate
-Will signed by someone on behalf of testator
-Suspicious circumstances (e.g. prepare by key beneficiary)

Affadavit of knowledge and approval when submitting will to probate

Question 45

When can the s19 TLATA power for beneficiaries to compel trustee to retire not be used?

Answer 45

Where there will less than 2 trustees leftover and there is an express power to appoint trustees in trust instrument

Question 46

When can a PR appoint a trustee?

Answer 46

Where all trustees have died - the PRs of last to die can appoint (as there are no remaining alive trustees to appoint)

Question 47

When does s 33 wills act apply?

Answer 47

When a gift to the testator’s issue and the predecease leaving issue of their own

Question 48

What is self-dealing and is it allowed? Fair-dealing?

Answer 48

Self-dealing - trustee purchasing assets from trust or selling assets to trust (not allowed under any circumstances SUBJECT to anything in trust instrument authorising transaction)
Transaction is voidable - can be rescinded by beneficiaries

Fair-dealing - when trustee buys beneficiaries beneficial interest under trust
Allowed if trustee can demonstrate it was conducted fairly
Transaction is voidable unless trustee can show that they made full disclosure to beneficiary, acted honestly and fairly, and did not take advantage of beneficiary