Wrong answers Flashcards
What happens if an individual gives away an asset but continues to benefit from it during their lifetime?
The asset is generally treated as part of their estate for inheritance tax purposes (gift with reservation of benefit).
To avoid this, the individual must:
Stop benefiting from the asset, or
Pay full market rent (if they continue to use it, e.g., living in a gifted house).
What happens if a reversionary beneficiary (life trust and the person it goes to after) dies before the trust interest vests in them?
The reversionary interest lapses and does not form part of the deceased beneficiary’s estate.
Instead, the trust property passes according to the terms of the trust or to the next eligible beneficiary.
How can a joint tenancy be severed, and what is the effect of mutual wills on joint tenancy?
Mutual Wills: Alice and Bob agree to leave 50% of the house to their respective children in mutual wills. This agreement also severs the joint tenancy because they’ve contracted to treat the property as separate shares. 50% share Automatically passes to children on death of one of parents.
How are insurance policy proceeds treated for inheritance tax purposes?
Part of the Taxable Estate unless written in trust.
Exemptions: Spouse exemption applies if proceeds pass to a spouse.
Trusts: Writing the policy in trust avoids inheritance ta
How is a death in service payment handled when a beneficiary is nominated?
They can choose to pay the nominee or make the payment to the estate.
If Paid to the Estate:
The payment is subject to the terms of the deceased’s will and forms part of the taxable estate.
What happens when a power of appointment in a trust is exercised in a will?
Power of Appointment: The woman can appoint the next beneficiary under the terms of the trust.
Not Part of Her Estate: The trust property is disposed of according to the trust, not her will.
Limitation: Her power is restricted by the trust instrument’s terms, even if exercised via her will.
What happens to property subject to a proprietary estoppel claim?
If the claim is successful, the beneficial interest cannot be left to another beneficiary under the will.
The property passes outside the will and does not form part of the estate for probate purposes
Can private limited company shares be listed, and what relief is available for unlisted shares under inheritance tax rules?
Private limited company shares cannot be listed.
For unlisted shares, 100% relief is available under inheritance tax rules, provided the shares have been owned for at least two years.
What are the rules for claiming the Transferable Nil Rate Band (TNRB)?
Who makes the claim?
Deadline for the claim?
The personal representatives (PRs) of the surviving spouse must make the claim.
If the PRs fail, anyone liable to pay IHT on the surviving spouse’s death can claim it.
Within two years of the end of the month of death, or
Within three months of the PRs first acting, whichever is later.
Why might a transferor want to separate assets, and how do related property rules prevent this?
A transferor might try to separate assets to lower their individual value and reduce IHT liability.
Related property rules prevent this by valuing the assets as part of the set, even if ownership is split between spouses or exempt entities.
A man makes a series of lifetime gifts of £10,000 to his son in each of the eight years prior to his death. Which of the following correctly states the amount of his nil rate band which will be used by the gifts?
The gift given 8 years ago is exempt.
Each gift can use £3,000 of the annual exemption for the year it was made.
7×£7,000=£49,000 deducted from NRB.
When must inheritance tax be paid, and what are the rules for paying IHT on a house if it is not sold?
General rule: Inheritance tax must be paid before a grant of representation is issued, but no later than the end of the sixth month following the month of death.
For a house (not sold):
Tax may be paid in instalments, starting on the same date as the original payment deadline.
Interest: Payable on all but the first instalment, unless the instalment is paid late.
How should properties and valuable assets, such as rare books or jewellery, be valued for inheritance tax purposes?
Valuable assets (e.g., rare books, jewellery): Should be valued by a specialist or expert to ensure their full market value is included in the estate in writing.
What happens if there is a valid will but no executors are willing or able to act?
The residuary legatee (the person entitled to the residue of the estate) may apply for a grant of letters of administration with the will annexed.
Do executors need a beneficiary’s consent to sell assets in order to discharge the liabilities of an estate?
No, Executors have the power to dispose of assets, unless they are the subject of a specific gift, to discharge the estate’s liabilities, including inheritance tax
