Wills and Administration of the Estates
Learning Outcomes:
→ Ascertain whether or not a will is valid.
→ Identify those entitled to inherit and those entitled to act in the administration of an estate.
→ Calculate the inheritance tax consequences of a “death”.
→ Undertake key steps in the administration of an estate.
→ Assess the tax implications arising from the sale and distribution of assets during the administration period.
→ Identify those transactions on which IHT is chargeable.
→ Identify the circumstances in which exemptions and reliefs will apply.
→ Identify the steps necessary to complete the administration of an estate.
Contents
Wills and Administration of Estate 1
1) Property that does not pass by will or intestacy
2) Requirements for a valid will
3) Revocation and alteration
4) Failed gifts
5) The intestacy rules
6) Inheritance (Provision for Family Dependents) Act 1975
7) Missing beneficiaries and PR liability
8) Who administers the estate?
9) Administering estate
10) Order of distribution of assets
11) Conduct Issues
12) Inheritance Tax
13) Income Tax
14) Capital Gains Tax
Inheritance Tax
1) Inheritance tax generally
2) Transfers on death
3) Lifetime transfers – PETs
4) Effect of death on PETs
5) Lifetime Chargeable Transfers
6) Effects of death on LCTs
7) Paying IHT
Exam tip:
When trying to decide who is entitled to take assets following a death, always deal with assets in the following
order:
(a) Property passing independently of the will and intestacy rules;
(b) Property passing by will; and
(c) Property undisposed of by will and therefore passing under the intestacy rules.
1
, Property which does not pass by will or intestacy
Legal Foundations, 29.3 p370
Jointly → Land held as a joint tenancy
owned → (NB: not tenancy in common, in which case the share of each tenant in common
property passed on his death under his will (or under the intestacy rules).
(29.3.1) ✓ Rule of survivorship
✓ May include jointly owned chattels etc.
Nominated → Investments where the institution can pay the money to a chosen third party in the event of
property the death of the investor.
(29.3.2) o E.g., trustee savings banks, friendly or industrial or provident societies.
✓ Applies to deposits not exceeding £5,000.
→ If an individual has an account to which these provisions apply and has made a nomination,
on his death the property passes to the chosen nominee regardless of the terms of the will (if
any) or intestacy rules.
→ If no nomination has been made, the money in the account will pass under the will or
intestacy in the usual way.
Insurance → Where the benefit of such life assurance policy is expressed to be for another specified individual
Policies or is written into trust for another specified individual, and not the estate.
(29.3.3.) → This is effectively a gift on trust for those individuals:
1) s. 11 Married Woman’s Property Act 1882: A person taking out life assurance policy
on his own life may express the policy to be for the benefit of his spouse and/or
children. This creates trust in favour of your spouse and/or children.
2) A policy may be expressly written in trust for or assigned to named beneficiaries.
→ Once given away, the benefit of the policy does not belong to the policy holder.
→ On death, the policy matures, and the insurance company will pay the proceeds to the
beneficiaries (or to trustees for them) regardless of the deceased’s will.
→ The policy holder makes a transfer of value of the policy at the date of the gift.
→ If the gift is made shortly after the policy has been taken, its surrender value will be low.
Pension → Where a pension provides a ‘Death in Service Benefit.’
Benefits • If the deceased was still employed, trustees of the scheme in question have discretion as
(29.3.4) to whom they pay.
o Normally calculated with reference to the deceased’s salary.
o Paid independently of the will by the pension fund trustees to the dependents at
the trustee’s discretion under a ‘letter of wishes’.
o Although not legally binding on the pension fund trustees, they will normally
comply with its terms.
o Such pension benefits do not belong to the employee during his lifetime and pass
on death independently of the terms of any will and the intestacy rules.
Trust → This will pass according to the terms of the trust, not the will.
property → However, an interest in remainder under a trust can pass according to a will.
→ The value of the trust fund will not form part of his estate for probate purposes.
The remainder of the estate will pass by will or intestacy
2
Learning Outcomes:
→ Ascertain whether or not a will is valid.
→ Identify those entitled to inherit and those entitled to act in the administration of an estate.
→ Calculate the inheritance tax consequences of a “death”.
→ Undertake key steps in the administration of an estate.
→ Assess the tax implications arising from the sale and distribution of assets during the administration period.
→ Identify those transactions on which IHT is chargeable.
→ Identify the circumstances in which exemptions and reliefs will apply.
→ Identify the steps necessary to complete the administration of an estate.
Contents
Wills and Administration of Estate 1
1) Property that does not pass by will or intestacy
2) Requirements for a valid will
3) Revocation and alteration
4) Failed gifts
5) The intestacy rules
6) Inheritance (Provision for Family Dependents) Act 1975
7) Missing beneficiaries and PR liability
8) Who administers the estate?
9) Administering estate
10) Order of distribution of assets
11) Conduct Issues
12) Inheritance Tax
13) Income Tax
14) Capital Gains Tax
Inheritance Tax
1) Inheritance tax generally
2) Transfers on death
3) Lifetime transfers – PETs
4) Effect of death on PETs
5) Lifetime Chargeable Transfers
6) Effects of death on LCTs
7) Paying IHT
Exam tip:
When trying to decide who is entitled to take assets following a death, always deal with assets in the following
order:
(a) Property passing independently of the will and intestacy rules;
(b) Property passing by will; and
(c) Property undisposed of by will and therefore passing under the intestacy rules.
1
, Property which does not pass by will or intestacy
Legal Foundations, 29.3 p370
Jointly → Land held as a joint tenancy
owned → (NB: not tenancy in common, in which case the share of each tenant in common
property passed on his death under his will (or under the intestacy rules).
(29.3.1) ✓ Rule of survivorship
✓ May include jointly owned chattels etc.
Nominated → Investments where the institution can pay the money to a chosen third party in the event of
property the death of the investor.
(29.3.2) o E.g., trustee savings banks, friendly or industrial or provident societies.
✓ Applies to deposits not exceeding £5,000.
→ If an individual has an account to which these provisions apply and has made a nomination,
on his death the property passes to the chosen nominee regardless of the terms of the will (if
any) or intestacy rules.
→ If no nomination has been made, the money in the account will pass under the will or
intestacy in the usual way.
Insurance → Where the benefit of such life assurance policy is expressed to be for another specified individual
Policies or is written into trust for another specified individual, and not the estate.
(29.3.3.) → This is effectively a gift on trust for those individuals:
1) s. 11 Married Woman’s Property Act 1882: A person taking out life assurance policy
on his own life may express the policy to be for the benefit of his spouse and/or
children. This creates trust in favour of your spouse and/or children.
2) A policy may be expressly written in trust for or assigned to named beneficiaries.
→ Once given away, the benefit of the policy does not belong to the policy holder.
→ On death, the policy matures, and the insurance company will pay the proceeds to the
beneficiaries (or to trustees for them) regardless of the deceased’s will.
→ The policy holder makes a transfer of value of the policy at the date of the gift.
→ If the gift is made shortly after the policy has been taken, its surrender value will be low.
Pension → Where a pension provides a ‘Death in Service Benefit.’
Benefits • If the deceased was still employed, trustees of the scheme in question have discretion as
(29.3.4) to whom they pay.
o Normally calculated with reference to the deceased’s salary.
o Paid independently of the will by the pension fund trustees to the dependents at
the trustee’s discretion under a ‘letter of wishes’.
o Although not legally binding on the pension fund trustees, they will normally
comply with its terms.
o Such pension benefits do not belong to the employee during his lifetime and pass
on death independently of the terms of any will and the intestacy rules.
Trust → This will pass according to the terms of the trust, not the will.
property → However, an interest in remainder under a trust can pass according to a will.
→ The value of the trust fund will not form part of his estate for probate purposes.
The remainder of the estate will pass by will or intestacy
2
