Wills - Errors

What is the effect of Business Property Relief?

It reduces the value of an asset by either 50% or 100% when calculating the total value of the estate

What is the annual exemption for gifts for the purposes of inheritance tax?

£3 000

Can the £3 000 gift exemption for inheritance tax be rolled over?

Yes it can be rolled over into the next year

What is the rate of income tax on the lowest bracket?

20%

What are deductibles are available for capital gains tax?

Expenditure on the item which is not routine

What is the current rate of capital gains tax for residential property?

24%

Should interest on assets be reported to HMRC?

Yes

When must Capital Gains Tax be paid to HMRC?

Within 60 days of completion

What business property is subject to 100% relief?

• Transfers of a business or interest in a business

• Any unquoted shares in a company

Which business property is subject to 50% relief?

• Quoted shares and securities in a company

• Plant and machinery

When does taper relief begin to apply?

When the gift is made more than three years before death

When can Business Property Relief not apply to shares?

When they are shares in a public company

Does the £3000 gift exemption apply if no gifts are made?

NO

What options are there when wishing to acquire property from a will?

1. Deed of Variation signed by the beneficiary in question to alter the gift

2. Purchase the property from the estate

3. The beneficiaries gift the property once received

4. Purchase the property from the beneficiaries

What are the requirements for a Deed of Variation?

1. Beneficiaries agree

2. Personal Representatives agree

What is the position of gifting property to direct descendants in a will?

The Nil-Rate band will be increased by £175 000

What is the condition for purchasing property from an estate to which you are not entitled?

The beneficiary must agree

When will equity perfect an imperfect gift on death?

When the deceased has done everything in their power to divest the trust property to the beneficiary, despite not completing all of the formalities

What is the position on the value of a property held in common shares for the purpose of Inheritance Tax?

It is valued at 15% lower (must be agreed with HMRC)

Do insurance policies contribute to the estate for Inheritance Tax?

Yes, unless they are written in trust for specific persons

Do interests as a life tenant and there are remainderman still count as part of the estate for Inheritance Tax purposes?

Yes, including where the remaindermen are the beneficiaries

How long does business property have to be owned for to count for Business Property Relief?

2 years

Do gifts to spouses attract Inheritance Tax?

No, they are completely tax free

Can an executor pay Inheritance Tax in instalments?

They may pay in 10 equal annual instalments (usually subject to interest) with the first due 6 months from death

Who is liable to pay inheritance tax?

The personal representatives (and trustees/ joint owners where property passes to them)

Which assets do not form part of the will?

1. Jointly owned assets

2. Insurance policies written in trust

3. Trusts funds to which the deceased is life tenant

What is Quick Succession Relief?

Where a person dies within 5 years of receiving a transfer, the value is written down

How does Taper Relief apply for the value of gifts made 7 years before death?

1. 0-3 years before death - 100% value

2. 4-5 years before death - 60% value

3. 5-6 years before death - 40% value

4. 6-7 years before death - 20% value

When does a gift not amount to a transfer if made 7 years before death?

If less than £250

When is Inheritance Tax reduced to 36%?

When the deceased donates 10% or more of their estate to charity or an amateur sports club

What is the effect of gifts made 7 years or less before death?

They reduce the Nil-Rate Band, not increase the value of the estate

How does a spouse inherit assets in intestacy (if there are children)?

1. They inherit all personal chattels

2. They inherit a statutory legacy of £322,000

3. They inherit a half share of the residue of the estate

How long must a spouse survive the deceased to inherit their estate/ entitlement?

28 days

Why should someone make a will?

1. Choose executors and trustees

2. If they have children, appoint guardians

3. Control over who benefits and how they benefit from the estate

4. Ensure specific gifts are made

5. Mitigate inheritance tax

6. Appoint people to help with business interests

What is the best way to ensure there is no undue influence when writing a will?

See the Testator alone

What should you ensure when a Testator is very elderly or suffering a medical condition which may affect capacity?

Ensure a medical practitioner witnesses the will

Where should a Testator note that they wish to show contrary intention (ie to an IPFDA claim) in their will?

In their letter of wishes

How should all names be written in a will?

IN FULL AND IN CAPITALS

What is the standard position on capacity?

The testator is presumed to have capacity but if challenged, the person supporting the will must prove capacity

When is capacity not presumed from the outset?

When the testator has a long-term mental illness or disability

What is the test for whether a testator had capacity?

The testator should:

• Understand the nature of the act and its effects;

• Understand the extent of the property being disposed of; and

• Be able to comprehend and appreciate the claims to which a person making a will ought to give effect

What is the exception for when a Testator may not have capacity when signing the will?

1. The required capacity existed at the date the will instructions were given;

2. The will was prepared in accordance with those instructions; and

3. The testator understood at the time of executing the will that they are executing a will that accords with the instructions previously given

When is there a presumption of knowledge and approval?

Where the will has been attested correctly

Is there ever a presumption of undue influence?

No, it must be alleged

What are the formalities for a will as per s9 Wills Act 1837?

1. In writing

2. Signed by testator (or another person at their direction and in their presence)

3. Testators intended by his signature to give effect to the will

4. Signature is attested by two or more witnesses present at the same time

How do gifts in a will abate when there is insufficient capital to pay each gift after paying off the debts?

1. Residue

2. General Legacies

3. Demonstrative Legacy

4. Specific Legacy

What is a general legacy?

A gift made of only money, not a specific source of money or a specific object/ property

What is a demonstrative legacy?

A gift of money or an object that comes from a specific source

What is a specific legacy?

The gift of a specific object or property

What must you always remember when dealing with abatement?

Are the legacies abating because of inability to pay debts or because there isn’t enough to go around?

Who is responsible for paying the balance of an outstanding contract for a gift to a beneficiary?

The beneficiary, not the estate or executors

What happens to a demonstrative legacy if it no longer exists ie the source is empty?

It becomes a general legacy

What happens if an executor dies after obtaining the grant of probate but before carrying out the administration of the will?

The chain of representation applies and their appointed executor would become the executor of the initial will

What happens to the chain of representation if the deceased executor has not appointed another executor?

The chain ends and either the existing executors carry out the administration or, if none, the estate falls to intestacy rules with a new grant of probate

Can an executor who renounces their position revoke their renunciation?

Only if they obtain approval from the Court which will only be given in exceptional circumstances

What is the order of people who may become administrators of an intestate estate (WITH WILL)?

1. A trustee of the residuary estate

2. Any other residuary beneficiary

3. The personal representatives of any residuary beneficiary

4. Any other beneficiary or creditor

5. The personal representatives of any other beneficiary or creditor

What does knowledge and approval mean for drafting a will?

The testator must know and understand the contents of the document and this must reflect their actual intentions

What is the presumption where a will is partly written in ink and pencil?

The parts written in pencil will be presumed to not be intended as final unless proven otherwise

What are the requirements for a witness witnessing a will?

1. Must be physically and mentally present

2. Do not need to sign in the presence of the other witness

3. Testator does not need to see the witnesses sign

4. Witness does not need to know the document is a will

5. Must not be beneficiary (or beneficiary’s spouse) or they lose their entitlement (unless there are at least two other non-beneficiary witnesses)

6. A minor can witness provide they have capacity but this is inadvisable

7. An executor can be a witness

8. A creditor can be a witness

Who are the only people who may make a will without the relevant formalities?

1. Soldiers in actual military service

2. Any mariner or seaman at sea

3. Members of the navy in actual military service

When is a foreign will recognised under English law?

Conforms with law of jurisdiction in which:

• It was executed; or

• Testator was domiciled or habitually resident; or

• Testator was a national

What is a mutual will?

A will between two people which cannot be changed after the death of the first person

What are the requirements for a valid mutual will?

1. Two or more persons execute will pursuant to oral or written agreement (must be written if land involved); and

2. Parties agree the survivor will be bound by the agreement; and

3. First party dies

Is a mutual will void by remarriage?

By operation of law yes however the trust remains unaffected and so the survivor is still bound

When is an alteration valid?

1. When signed and attested; or

2. Entire will is later reexecuted; or

3. Later codicil refers to the alteration

What is the effect of unattested alterations?

1. Where wording is apparent - Original wording remains

2. Where wording is not apparent - Change implemented or term voided (subject to dependent relative proving otherwise)

What is the effect of a codicil?

It republishes the will and can correct an imperfect will

How can a will be revoked?

1. Later Will or Codicil (expressly or impliedly)

2. Written Intention to Provoke

3. Destruction

4. Divorce

5. Marriage/ Civil Partnership

How may a later will or codicil revoke a will?

1. Expressly - the entire will is revoked by an express revocation clause

2. Impliedly - to the extent the most recent will or codicil is inconsistent

How may a testator expressly revoke their will in writing?

By declaring intention to revoke and with the same formalities as executing a will

How does destruction revoke a will?

The testator must (with capacity) intend to destroy the will and completely destroy the will otherwise any surviving provisions will still be in effect

How does marriage revoke a will?

Marriage automatically revokes a will unless made before and explicitly in contemplation of the marriage

How does divorce revoke a will?

The former spouse will be treated as dead under the will - separation has no effect on a will

Can a revoked will be revivied?

Yes, provided the document is still in existence and revival complies with formalities under s9 Wills Act

Where may extrinsic evidence be used to help interpret a will?

1. Where any part of the will is meaningless;

2. The language used in any part of the will is ambiguous on the fact of it; and

3. Evidence shows that the language used in any part of the will is ambiguous

May the Court correct an error in a will?

The Court may ‘rectify’ an error in the will where the error does not accurately reflect the parties’ true intentions including drafting errors

What are the three certainties that must be met for a valid gift?

1. Certainty of Intention

2. Certainty of Subject Matter

3. Certainty of Objects (beneficiaries)

What is ademption?

Where a gift fails as it is no longer in the testator’s possession at death

When will ademption not occur on a gift?

1. Gift is general or demonstrative rather than specific

2. Subject of gift was disposed of without authority

3. Property has not changed in substance

4. Testator has drafted the gift so as to avoid ademption

When does the will speak from?

From the date of death

What is the position where the testador’s death and destruction of property is simultaneous?

The property is presumed to have been destroyed before and therefore any specific gift will adeem

What occurs where a direct descendant beneficiary dies but has surviving issue?

The issue will inherit the gift in equal shares

What is the rule in Lassence v Tierney?

If a gift appears to be absolute but states it is to be held on trust, the gift will be held on trust as long as it is effective

What is the position on gifts made to an executor?

There is a rebuttable presumption that they will be conditional on the executor acting as such (does not apply to gifts of residue)

What is the Cy-Pres Doctrine and how does it apply?

Gifts for charitable purposes which fail for uncertainty or objects may be instead paid to other charities in line with the charitable intention

What should a solicitor do when drafting a will that purports to grant them a gift?

1. Refuse to draft the will and recommend another firm drafts it; or

2. Ensure the client receives independent legal advice

What is the order of entitlement to be a beneficiary where a intestate deceased has no spouse or children?

1. Parents

2. Brothers and sisters of whole blood

3. Half brothers and sisters

4. Grandparents

5. Uncles and aunts of whole blood

6. Uncles and aunts of half blood

7. Crown

Can a surviving spouse claim the marital home as their entitlement?

They may elect to purchase the home from the estate before the execution/ administration

What property will pass outside of the estate?

1. Jointly Owned Property

2. Nominated Property (Statutory Nomination)

3. Donatios Mortis Causa

4. Proceeds of Life Policies Written in Trust

5. Discretionary Occupational Pension Scheme Benefits

What is the position where an intestate’s estate is not worth more than £322,000?

If applicable, their spouse inherits the entirety

What are the two types of grants of representation for the execution of a will/ administration?

1. Grant of Probate

2. Grant of Letters of Administration (with or without will attached)

What is the purpose of the grant if representation?

1. Establishes authority of PRs

2. Establishes validity of will or that the deceased died intestate

What assets may the executors/ administrators deal with without a grant of representation?

1. Small sums due to the estate up to £5000

2. Cash

3. Personal chattels

What is IHT Form 400?

1. Must be submitted to HMRC within 12 months of date of death

2. Contains details of deceased’s assets, liabilities and financial interests

3. Must be submitted in order to obtain grant of representation

When is an estate excepted from Inheritance Tax?

1. Assets held in the UK valued at less than £150,000

2. Estate comprises only of property passing under the deceased’s will or intestacy

3. Value of non-UK assets must not exceed £100,000

4. Deceased made no lifetime chargeable transfers in the 7 years before death with a total value exceeding £250,000

5. Total value of the gross estate does not exceed the tax-free allowance or £3million

What IHT tax form is used for an excepted estate?

IHT Form 407

When will the right to take out the grant of probate cease?

1. When the executor dies before taking out the grant; or

2. When the executor renounces probate

3. When the executor lacks capacity

When will the Grant of Letters of Administration with Will Annexed be granted?

1. When the will is valid bit does not appoint executors

2. Where the executor is incapable of administering the will ie they have died

3. Where the will is partially intestate

How many executors is necessary where there is a minor interest?

At least two (or one and a trust corporation)