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Wills, Intestacy & Probate - Coggle Diagram
Wills, Intestacy & Probate
After Death
Property Passing Outside the Will or Intestacy
DIRT DJ
Discretionary Pensions
Insurance
Reservation of Benefit- Gift
Interest(s) in Trusts
Donationes Mortis Causa (Deathbed Gifts)
Joint Tenants
"Some Really Valuable Ideas Get Noticed Very Properly."
Secure Assets
Register the death
Valid Will
Identify personal representative (executor or administrator)
Gather information about lifetime gifts, assets and liabilities
Notify relevant parties of the death (banks, HMRC,etc)
Valuation of taxable estate
Pay inheritance tax
Calculating Inheritance Tax
Step 1- Determine Tax Band
0% tax-free allowance chargeable at 0% (no IHT to pay)
1) NRB £325,000 (everyone is entitled)
2) RNRB Residence Nil Rate Band (RNRB) - Extra nil rate band that applies if a property has been a residence of D, passed on to lineal descendants on death as a result of death. and any spouse/CP of a lineal descendant.
What is the meaning of 'Residence'?
Property lived in by D at some point (doesn't have to be the residence at the time of death).
RNRB may apply if D owns a property that is no longer his residence when he dies.
RNRB may apply even if D has given away his home to his children; if he still benefits from the property somehow without paying for it
Step 2- Work out value of the estate in 2 imaginary buckets -
Add all the assets up to get the ‘gross value’, then take off any debts or liabilities (e.g., mortgage).
This gives you the ‘net value’ of the estate.
Lifetime gifts within 7 years prior to the death
Step 3
Deduct any applicable exemptions by 'reducing the asset value'
Step 4
Deduct any applicable relief by 'reducing the asset'
Deduct any reliefs by 'reducing the asset value'
Business Property Relief (BPR) (on death and lifetime transfers)
100% Relief on Business of an interest in business (e.g sole trader or partnership share)
1) Business or an interest in business (e.g sole trader or partnership share
2) Unquoted company shares (e.g. shares in a private company)
50% Relief
Quoted company shares/securities which give control of the company
Land or buildings, machinery or plant used wholly or mainly for the purposes of a business (e.g. property lent to or used by partnership held outside of it)
How to Qualify...?
1) Be owned for at least 2 years prior to the gift or death (subject to certain exceptions e.g. where the property was replaced by a new one)
2) Be used wholly or mainly for 'trading' business (trade or profession for gain) subject to certain exceptions, where a part is used exclusively for business (e.g. if a property is used as a home and shop, the room used as a shop will qualify, the rest won't
Not be caught by exclusion: Some types of businesses do not attract BPR (such as companies dealing with securities, stocks or shares, land or buildings, or in the making or holding of investments. and not-for profit organisations.
Step 5
Calculate the IHT at the appropriate rate
Step 6
Payment of IHT
Other potential tax implications
Income Tax
Some assets can continue to generate income after the death until the date everything has been distributed, For example, income may arise from dividends payments, bank interest on savings, rental income...
Estates do not get allowances on savings, income or dividends, so all income is taxable (unless specifically exempt). Estates pay tax at basic rates of 8.75% on dividends and 20% on any other income.
Capital Gains Tax
During the period of administration until everything has been passed on to beneficiaries, CGT applies to gains on any assets disposed of by the estate (except for assets transferred to the beneficiaries). The PR will be responsible for paying any CGT due (paid from D's estate)
Issues Related to Validity of Wills and Codicils
s.9 Wills Act - No Will is Valid...
Issues related to Revocation and Alteration of Wills
Issues related to ascertaining gifts and beneficaires
Grants of Representation
Administration of the Estate
Distribution of the Estate :
Liability and Protection of Personal Representatives
PR can be held personally liable for beneficiaries or creditors for loss resulting from their own breach of duty....
s.27 of Trustee Act provides an advertising mechanism that if followed, can give protection against personal liability for unknown debts, If someone makes a claim after the estate is distributed, they cannot pursue the PR for any sums they claim. They can follow the assets in the hands of the persoms