Questions and Answers
What does the court determine regarding the testator's actions?
Whether the provision itself is reasonable.
What are the two standards used to determine reasonable provision?
Surviving spouse standard and maintenance standard.
What is the nil rate band for inheritance tax as per the Inheritance Tax Act 1984?
£325,000.
True or False: Inheritance tax applies to all transfers regardless of the relationship between the parties.
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What tax rate is applied to chargeable transfers made within the seven years before death?
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Taper relief applies to transfers made between _____ and _____ years before death.
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What is the purpose of taper relief?
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What kind of relief is applicable solely upon death and relates to growing timber?
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Which of the following is an example of an exempt transfer?
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What are mirror wills?
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What do mutual wills prevent after one party's death?
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Mere labeling a will as the ‘last will’ constitutes express revocation.
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What must be documented for revocation to be valid according to s9 WA 1837?
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What is required for the destruction of a will to be considered revocation?
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What is 'conditional revocation'?
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The presumption of revocation applies when the original will is found in a mutilated condition.
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What happens if a will known to be in the possession of the testator cannot be found after their death?
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The procedure for evidencing a lost or destroyed will is outlined in _____ of the Non-Contentious Probate Rules 1987.
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What must be proven for a lost or destroyed will according to the procedure outlined in r54 NCPR 1987?
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What is a contingent gift in a will?
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The closing of the class occurs when none of the beneficiaries meet the specified contingency.
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What can cause a deferred contingent gift to become immediate?
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Which act had significant implications for wills regarding marriage-related terms?
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What is the Forfeiture Rule?
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Section 15 of the Wills Act 1837 addresses issues concerning attesting witnesses who are also _____ of a beneficiary.
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What initiates automatic revocation of a will under Section 18 of the Wills Act 1837?
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Same-sex marriages automatically revoke a will made prior to the Marriage (Same Sex Couples) Act 2013.
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What is ademption in the context of wills?
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Which phrase describes a situation where a beneficiary does not inherit due to the way a will is structured?
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What is the primary purpose of a grant of representation?
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What are the three main types of grant of representation?
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Not all situations require a grant of representation.
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A grant of representation is a legal document issued by the _____ that establishes authority over a deceased person's estate.
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Which rule outlines the hierarchy of persons entitled to obtain a grant of probate?
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Which court typically handles contentious probate matters when the estate's net value is below £30,000?
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What is the maximum amount for which payments can be made without a grant of representation under the Administration of Estates (Small Payments) Act 1965?
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The executor takes precedence when applying for a grant of probate.
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In cases of intestacy, priority for obtaining a grant of administration is given to beneficiaries with a __________ interest in the estate.
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What must accompany each application for a grant of representation?
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Which affidavits may be required if there are doubts about the will's execution?
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Inheritance tax must be paid before a grant of representation can be issued.
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Who can claim for family provision under the Inheritance (Provision for Family and Dependants) Act 1975?
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Study Notes
Grants of Representation
- A grant of representation is a legal document from the Court that authorizes an individual to manage the deceased's estate.
- Essential for estate administration, not always required; certain payments can bypass this under the Administration of Estates (Small Payments) Act 1965 for amounts up to £5,000.
- Three main types of grants include:
- Grant of probate: For estates with a valid will, allowing the executor to fulfill the deceased's wishes.
- Grant of letters of administration: For intestate estates, appointing an administrator to distribute assets per intestacy rules.
- Grant of letters of administration with the will annexed: For invalid wills, allowing an administrator to manage the estate.
Non-Contentious Probate Rules (NCPR)
- Rule 20 details the order of entitlement for obtaining a grant of probate, prioritizing:
- The Executor named in the will.
- Residuary legatees or devisees.
- Other legatees or creditors.
- Personal representatives of deceased beneficiaries.
- For intestate individuals, Rule 22 prioritizes beneficiaries with legal interests, starting with spouses and children.
Application Procedure
- Obtaining a grant generally involves a straightforward process categorized as contentious or non-contentious.
- Contentious matters involve disputes; handled by County Courts if the estate value is under £30,000.
- Standardized applications are submitted using forms PA1P (with will) or PA1A (without will), requiring a statement of truth as per NCPR.
- As of January 2021, less complex probate applications must be submitted online.
Affidavit Evidence
- May be required if doubts arise about the will's execution or if a physical copy of the original will is missing.
- Common affidavits include:
- Affidavit of due execution: Addresses concerns over will execution.
- Affidavit of plight and condition: Explains any damage to the will.
- Affidavit in support of a copy: Validates copies when the original is unavailable.
Valuation of Assets and Liabilities
- Involves obtaining open market valuations of the deceased's assets as of their date of death.
- Debts owed by the deceased can be deducted from the gross estate value, impacting Inheritance Tax (IHT) liability.
- Information compiled is submitted with the Inheritance Tax form to assess the estate's total value.
Funding Inheritance Tax
- Initial IHT payments may be funded through:
- Sale of assets: Essential assets can be liquidated to cover tax liabilities.
- Personal loans or loans from beneficiaries: Funds provided to cover IHT, potentially with favorable terms.
- Direct payment via insurance policies: Some life insurance policies might settle IHT directly with HMRC.
Inheritance Tax Responsibility
- The burden of IHT falls on personal representatives and the beneficiaries, determined by:
- Personal representatives are liable for the deceased's estate taxes.
- Trusts and discretionary beneficiaries are also responsible for tax on received assets.
- No grant of representation is issued until confirmation of IHT payment is provided to the Court.
Duties of Personal Representatives
- Governed by the Administration of Estates Acts 1925 and 1971, personal representatives handle the estate on behalf of the deceased, with core responsibilities including:
- Collecting debts owed to the estate.
- Controlling and safeguarding estate assets.
- Settling outstanding debts and liabilities.
- Distributing assets according to the terms of the will or intestacy laws.
- To mitigate claims under the Inheritance (Provision for Family and Dependents) Act 1975, distribution should be delayed for at least six months post-grant issuance.### Estate Administration
- Protection from unknown creditors is achieved by publishing a notice in the London Gazette and a local newspaper under section 27 of the Trustee Act 1925.
- Sales of a deceased's assets typically create a residuary estate, which is then distributed to beneficiaries, excluding items specifically bequeathed in the will.
- Personal representatives must consult with beneficiaries before selling land assets, as mandated by the Trusts of Land and Appointment of Trustees Act 1996.
- Legal and equitable rules govern the distribution of estates, with specific focus on apportionment for life interests under the Apportionment Act 1870.
Legal and Equitable Rules of Distribution
- Legal rules determine income allocation from the residuary estate before and after death, even if a will excludes them.
- Equitable rules aim for fairness between life tenants and remaindermen, facilitating the sale of assets like property to protect beneficiaries' interests.
- Receipts must be obtained from beneficiaries for legacies paid after settling debts and funeral expenses before distributing the estate residue.
Family Provision in Wills and Estates
- Family provision law navigates the balance between testamentary freedom and society's expectations for fair estate distribution, governed by the Inheritance (Provision for Family and Dependants) Act 1975.
- The Act applies only if the deceased was domiciled in England or Wales, not in Scotland or Northern Ireland, which follow different legal frameworks.
- Domicile, which connects individuals to a jurisdiction, can be assessed as domicile of origin, choice, or dependency.
Time Limits and Eligible Applicants
- Family provision applications must typically be submitted within six months of taking out representation for the deceased's estate, ensuring efficient distribution.
- Eligible applicants under section 1 of the IPFD include surviving spouses, former spouses, cohabitants (having lived together for two years), children (including unborn), and children of the family.
Grounds for Family Provision
- Claims can be made if the deceased's estate distribution does not reasonably provide for the applicant.
- The court assesses claims in a two-stage process, initially determining whether reasonable financial provision was made and subsequently what would be deemed reasonable.
Assessment of Financial Provision
- Objective assessment evaluates whether the estate provision is reasonable, independent of the testator's intentions.
- Different standards apply: surviving spouse provision focuses on what would be reasonable in divorce, while maintenance standards apply to all other applicants, balancing support needs and overall welfare.
Inheritance Tax (IHT) Overview
- Inheritance tax is set at 40% on estate values exceeding £325,000 (nil rate band), with foundational laws outlined in the Inheritance Tax Act 1984.
- Includes a concept of 'transfers of value' and recognizes exempt transfers like those between spouses and limited gifts.
Lifetime Transfers and Tax Implications
- Lifetime chargeable transfers (LCT) incur immediate tax, while potentially exempt transfers (PET) become taxable only if the donor dies within seven years.
- Taper relief reduces tax rates for gifts given three to seven years prior to death, providing graduated relief based on the timing of the gift relative to the donor's death.
Transfers on Death
- Transfers of all estate assets occur immediately before death, treating previous PETs and LCTs as chargeable transfers for tax purposes.
- Special valuation rules apply, particularly for stocks, and simultaneous deaths are considered as occurring at the same time to avoid double taxation.
Exemptions and Reliefs
- Significant exemptions from inheritance tax include:
- Spouse exemption for gifts between spouses regardless of domicile.
- Normal expenditure out of income allows gifts that don't affect donor’s standard of living.
- Charitable contributions are exempt, provided they meet specific criteria.
- An annual exemption allows gifts up to £3,000 to be exempt within a tax year.### Inheritance Tax Overview
- Any excess gifts are taxable; unused exemptions can be carried forward for one year.
- Gifts made before or during marriages and civil partnerships have specific exemptions based on donor-recipient relationship.
Small Gifts Exemption
- Donors may give gifts up to £250 per recipient per tax year without incurring inheritance tax.
- Gifts exceeding this limit result in taxation on the entire amount.
Agricultural Property Relief
- Provides 50% or 100% reduction on agricultural property tax.
- Agricultural property includes land, pasture, woodland, and related structures integral to agriculture.
- To qualify, property must be occupied by the transferor for two years or owned for seven years.
- Full relief is granted if ownership or right to possession exists within 12 months prior to transfer.
Business Property Relief
- Available for relevant business properties, offering 100% or 50% relief.
- Full 100% relief granted for businesses where the transferor controls the company.
- Ownership for qualifying properties should typically cover two years preceding transfer.
Quick Succession Relief
- Applies if an individual dies within five years of receiving a transfer.
- Relief percentage: 100% within 1 year, 80% within 2 years, diminishing to 20% within 5 years.
- Is applicable regardless of whether the property was owned by the deceased during the five-year period.
Woodlands Relief
- Applicable only upon death for growing timber properties.
- The deceased must have been entitled to the land for five years prior to death.
- Relief claimed within two years of death; it reduces the estate's value for inheritance tax purposes.
Taper Relief
- Offers a tax reduction if the donor survives seven years post-gift.
- Applies only if inheritance tax is due on the chargeable transfer.
- Taper relief does not decrease the value of the transfer itself.
Anti-avoidance Provisions
- Under the Inheritance (Provision for Family and Dependants) Act 1975, prevents evading family provision by gifting assets prior to death.
- Courts may mandate the return of gifted values if it’s established that gifts were made to defeat family provisions.
Estate Planning: Wills and Gifts
- Estate planning ensures distribution of assets reflects personal wishes after death.
- Mirror Wills: Created simultaneously by couples with similar intentions, allowing easy amendments.
- Mutual Wills: Binding agreements preventing alterations post the first partner's death and establishing a constructive trust.
Class Gifts and Closing Rules
- Class gifts refer to property given to a group (e.g., "the children of X").
- Class closing rules set a date for when beneficiaries qualify, affecting distribution if new members enter the class post-closure.
Immediate vs. Deferred Vested Gifts
- Immediate vested gifts allow beneficiaries to ascertain their shares when the class closes.
- Deferred vested gifts wait for beneficiaries to meet certain conditions (e.g., reaching a specified age) before sharing assets.
Conclusion
- Understanding the complexities of inheritance tax and estate planning is essential for effective asset distribution and tax liability reduction.
- Legal advice is recommended to navigate intricate estate planning processes efficiently.
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Description
Explore the legal processes involved in handling a deceased person's assets and liabilities. Learn about grants of representation and estate administration.
