Wills and administration of estates

A general legacy

A non-specific gift of personal property e.g. "a BMW car". Ademption does not apply: if the Testator does not own a BMW at the time of their death, the personal representatives may buy one from the estate property.

How are executors appointed

In the will - sensible to have more than one.

Caveat

Prevents grant of probate where someone wishes to challenge a will.

Points to remember for the probate attendance note "next steps" section

- Client to provide copies of wills - Client to provide death certificates - Client to provide details of assets, liabilities and funeral expenses - Send a follow up letter of advice to the client

Lifetime gifts exempt from IHT

- Gifts between spouses - Gifts to UK charities - Up to £250 to any number of donees in any tax year - Gifts on marriage (parent £5,000, grandparent £2,500, bride-groom £2,500, anyone else £1,000) - Normal expenditure out of income - £3,000 annual expenditure

Examples of chargeable lifetime transfers

- Gifts to trusts - Gifts to companies These gifts will utilize the NRB of £325,000.

Pre-grant procedure

- Obtain full details of deceased's assets and liabilities - Register death with banks, Ins Cos and HMRC - Advertise if certain Bs need to be found - Pay IHT in order to apply for grant

Lifetime transfer exempt from IHT

- Transfers to a spouse - Gifts to EU/EEA charities - Lifetime gifts up to £250 each tax year - Gifts on marriage (limits apply) - Normal expenditure out of income

Letters of administration with will annexed

- Where the appointment of the executor was not correctly drafted, there is a will but the testator did not name an executor or the executor is unable/unwilling to act or predeceased the testator - There is a list of people who may apply for grant: trustee of the residuary estate, residuary beneficiary, anyone else entitled to residue - If multiple people are entitled to grant, the Court will prefer someone with a vested interest over contingent - If there is a life interest under the will, or a minor beneficiary, two administrators must be appointed.

Letters of administration

- Where there is no valid will - administrators are appointed - Order of entitlement = surviving spouse, children, parents - Max of 4 administrators

Three types of grant

1. Probate 2. Letters of administration with will annexed 3. Letters of administration

Business relief for IHT

100% relief: - A sole-trade business or partnership - Shares in an unlisted trading Co 50% relief: - Shares in a quoted trading Co if the donor has voting control - Land/buildings/plant/machinery owned by an individual and used in a partnership or a Co which they control

Deadline for PRs to account to HMRC

12 months from the end of the month in which the testator died. Normally done before this, because interest on the IHT due runs from 6 months after death.

Deadline for the PRs to deliver the IHT account to HMRC

12 months from the end of the month of the deceased's death. However, interest is payable from 6 months and so it is normally paid before then (and the PRs cannot obtain a grant until IHT is paid).

Define a potential exempt transfer

A gift given by one individual to another within the donor's lifetime which does not fall within any of the exemptions (in full or in part). If the donor dies within 7 years of giving the gift, it will become chargeable.

A pecuniary legacy

A gift of money

A legacy

A gift of personal property by will

A devise

A gift of real estate

A specific legacy

A gift of specific personal property e.g. "my BMW registration SKDFH"

What is a grant of representation

A legal document needed for the personal representatives to deal with administration of the estate.

Ademption of a gift

A specific gift will fail if it is no longer part of the Testor's estate at the time of death. A change in the substance of the item will cause ademption, but a change of name will not.

What is a codicil

Adds to, amends or partially revokes an existing will. Must meet the 4 formalities and must make reference to the will.

How can an executor refuse to act?

By renouncing in writing, including a statement that they have not intermeddled with the estate. Must be signed by a witness and filed at the probate registry.

Three requirements for a valid will

T had capacity T intended to create the Will The will was executed in accordance with the formalities

Duties of personal representatives

Duty to collect property vested in them Duty to administer the estate Duty to convert assets to cash where necessary Duty to distribute the estate as per the will or laws of intestacy Must act with reasonable care and skill

Meaning of statutory trust in intestacy

For all classes other than parents and grandparents, if a member of that class predeceases the testator, their issues will take their share (equally, if more than one issue).

Reservation of an executor's power

Executor can reserve, saying that they will act only if another appointment fails.

Grounds on which a will may be challenged

Force Fear Fraud - e.g. telling T that one of the other beneficiaries has died when they are still alive. Undue influence - must be more than mere persuasion

Outcome of a successful application under I(PFD)A 1975

For a spouse: such provision as would be reasonable in all the circumstances whether or not required for maintenance For anyone else: such provision as is required for their maintenance such that they can live decently and comfortably according to their situation.

Liability of a PR for loss/breach

Generally one PR is not liable for the breach of another unless there has been negligence. The Court can relieve a PR of liability if it is satisfied that they acted honestly and reasonably and ought to be excused for the breach.

Test applied by Court for the I(PFD)A 1975

Has the will/intestacy rules failed to make reasonable financial provision for the applicant? What would be such reasonable provision?

How can PRs protect themselves from claims by unknown beneficiaries?

s27 Trustee Act 1925 Place a notice in the London Gazette plus local newspaper(s) and possibly trade publications. Ad asks potential creditors to contact the PRs with a minimum deadline of 2 months.

Can a testator leave a gift to their solicitor in their will?

If it's a substantial gift, they must take independent advice with regard to making the gift. If it's not substantial, the gift is acceptable.

Formalities for a valid will

In writing Executed by the Testator Executed in the presence of two witnesses (who are present with the Testator at the same time) Signed by each witness in the presence of the Testator (but need not be in the presence of each other)

How can a beneficiary vary a will?

In writing, made within 2 years of death and not for monetary consideration. Can be made even if the original beneficiary has accepted a benefit.

Order of entitlement on intestacy if there is no surviving spouse

Issue Parents Brothers and sisters of the whole blood Brothers and sisters of the half blood If there is more than one person in a class, they share equally.

What property passes outside the will/rules of intestacy?

Joint property (home or bank account) Pension scheme death benefits Life insurance policy An interest in a trust.

Can a beneficiary witness a will

No; if a beneficiary or their spouse witnesses a will their gift will fail unless there are at least two other witnesses who are not beneficiaries/spouses of beneficiaries.

Requirements for a validly destroyed will

Must be destroyed by the Testator or by someone else in the Testator's presence

How can a beneficiary disclaim a gift?

Orally or in writing, as long as they have not accepted any benefit from the gift. Must be in writing to be effective for IHT and CGT purposes.

Administrative powers of personal representatives

Power to sell, mortgage or lease assets Power to appropriate Power to appoint trustees where a beneficiary is under 18 (only if the minor is absolutely entitled) Power of maintenance Power to advance capital

Inheritance (provision for family and dependants) Act 1975

Someone can apply to court on the grounds that reasonable financial provision has not been made to them. Must be within 6 months from grant of representation (or later with leave of the Court). Must be spouse, ex-spouse who is not married, children/dependent, someone who was being maintained by the deceased or co-habited with the deceased for 2 years prior to death.

How are assets shared between spouse and issue in intestacy

Spouse takes personal belongings, GBP270,000 and 50% of the remainder of the estate. Issue takes the other 50%, held on trust if they are under 18.

Rules for investment which PRs must follow

Standard investment criteria (Trustee Act 2000) - investment decisions can be reviewed in terms of: - The suitability of the investment to the trust; and - The need to diversify.

Date on which the beneficiaries of a will are taken

The date of execution

What happens to a gift if its beneficiary dies before the testator?

The gift will lapse/fail and will fall into the residue of the estate unless the beneficiary is an issue, in which case it will go to their issue per sterpes.

Intestacy where there is a spouse and an issue

The spouse receives personal chattels, GBP 270,000 and 50% of the remaining assets. Issue receives the other 50%. If they are a minor, it will be held on trust until they are 18.

Alterations to the will

These will be valid where they are initialled. If not initialled, they are presumed to have taken place after execution and will not be valid - if the original wording is still visible, it will stand.

Citation to accept or refuse grant

Used to clear off a person with a prior right who has said they do not intend to apply for grant of probate.

Citation to take probate

Used to compel someone named as a PR who has already intermeddled in the estate to accept grant. If they still refuse, the Court can grant an Order passing over that PR.

The residence nil rate band

When a home which was at some point used as the deceased's private residence is transferred under their will to lineal descendants or spouses of such dependants, there is a RNRB of £175,000.

Power of maintenance

Where a minor B has an interest in capital or income, the trustees may at their discretion advance income to them for their maintenance, education or benefit. If trustees continue to hold the property once B turns 18, they must pay all income to B from age 18 onwards. B is entitled as of right at age 18.

Power to advance capital

Where a minor B has an interest in trust capital, trustees have a discretion to advance that capital to them up to 100% of their interest. Will not apply where B has only a life interest as this only entitles B to income.

Partial intestacy

Where the testator's will does not dispose of the whole estate or where part of the will fails.

A grant of probate

Where there is a valid will with validly appointed executors

Annual exemption for IHT

£3,000 Unused annual exemptions can be brought forward by one tax year only.