Trusts

We have created this audiovisual presentation to help you understand this topic:

Making a will allows a person to leave specific instructions as to how their estate should be distributed on their death. A valid will must be in writing and must be signed by the testator (the person making the will). The testator’s signature must be witnessed by ...

Shortened demo course. See details at foot of page.

...d the surviving partner ending up with nothing

A will enables a person to pass on their estate to the people they really wanted to benefit instead of the individuals and proportions dictated by legislation under the laws of intestacy

The estate should be wound up quicker, and specific provision for minors can be made if there is a will in place

When a person dies leaving a valid will, the executors nominated within the will are required to administer the estate.

The execut...

Shortened demo course. See details at foot of page.

...in the preceding seven years) exceeds the IHT nil rate band, tax will be due and this must be paid before grant of probate is issued.

A mutual will is where two or more people agree to execute a separate will disposing of their property in the same way. In other words, each will is identical (or si...

Shortened demo course. See details at foot of page.

...tipulation that the last survivor’s will remains unchanged after the death of the first to die. For this reason, they are generally favoured over mutual wills.

A deed of variation is used to change or vary the arrangements of a will - or even intestacy - post-death. It does not change the will itself, but simply changes who benefits...

Shortened demo course. See details at foot of page.

...ty increases due to the variation

Have appropriate tax statements written into the deed to make it IHT and CGT efficient

Not be done for money or money’s worth

Disclaimers and the rules governing them are similar to deeds of var...

Shortened demo course. See details at foot of page.

...entitled to benefit under the terms of the will, trust or intestacy.

The following situations can result in a will being revoked:

Marriage or civil partnership - in this event, any previous will is revoked unless it is made with a marriage or civil pa...

Shortened demo course. See details at foot of page.

...nce, a person can apply for financial provision out of the deceased’s estate on the grounds that the deceased’s will does not make a reasonable financial provision for them.

If a person dies without leaving a valid will, they are said to have died intestate. The rules of intestacy which are governed by the Administration of Estates Act 1925, as amended by the Inheritance and Trustees’ Powers Act 2014, are very specific in respect of how the estate is to be distributed. The rules differ in Scotland, Northern Ireland and England & Wales.  The Inheritance and Trustees’ Powers Act 2014 came into force for deaths occurring after 1 October 2014.

England & Wales

If the deceased was married or in a civil partnership, with no children, their spouse or civil partner will receive the entire estate of the deceased

In addition, the spouse or civil partner is entitled to the ‘moveable estate’ (or chattels), which is all the deceased’s personal effects

If there are children, the amount that the spouse is entitled to reduces to £270,000, plus they are entitled to half of the remainder of the estate. The children will receive an equal share in the remainder of the estate

If there are no children, it passes to the grandchildren

If none of these parties exist, the legacy moves back up the succession line and any surviving parents will take the share

If there are no surviving parents, any brothers or sisters will get a share ...

Shortened demo course. See details at foot of page.

...rother or sister has died before the deceased, their children inherit their share. If there are no surviving parents, siblings, nephews or nieces, the spouse (or civil partner) gets everything.

If the deceased leaves no surviving spouse (or civil partner) or children

If the deceased’s parents are still alive, they will share the estate. If the deceased’s parents are dead, any brothers or sisters will have equal shares in the estate. If a sibling died before the deceased, their share will be divided equally between their children. If there are no living parents or siblings, any grandparents will share the deceased’s estate. If all parents, grandparents, siblings, nephews and nieces are all dead, any living uncles or aunts will inherit the estate in equal shares. If there are no living relatives as listed above, the whole estate goes to the Crown.

Deed of variation for an intestate estate

Sometimes, where the deceased has not left a will, the distribution of the estate under the law of intestacy may not be tax efficient. Furthermore, the distribution may not be how the family members believe the deceased person would have wanted their assets and belongings to be shared. A deed of variation is possible, just as it is where a will exists, to alter the distribution accordingly.

Since 9 October 2007, it has been possible for any unused percentage of a spouse’s or civil partner’s IHT nil rate band to be transferred to the...

Shortened demo course. See details at foot of page.

...d is 100% of the nil rate band available in the year of the surviving spouse’s death. In other words, their nil rate band cannot be more than doubled.

Since 6 April 2017, each individual has an additional Residence Nil Rate Band (RNRB) to add to the regular nil rate band where they leave residential property to lineal descendants. This includes the d...

Shortened demo course. See details at foot of page.

...is withdrawn at a rate of £1 for every £2 over the £2m threshold. That means that estates over £2.35m in 2022/23 do not benefit from the RNRB [£2m + (2 x £175,000)].

When a person dies, their personal representatives are responsible for paying any debts of the deceased, including any liabilities to income tax and capital gains tax, and for settling any inheritance tax due on the estate.

In respect of income tax, the personal representatives are responsible for paying tax due on any income received by the deceased up to the date of death, after applying the normal allowances and reliefs. The tax ...

Shortened demo course. See details at foot of page.

... gift is reduced on a sliding scale after the first three years from the date of the transfer. Some other types of gifts are not classified as PETs; instead, they are known as ‘chargeable lifetime transfers’. Some tax may have been paid at the time this type of transfer was made and, if the individual does not survive a full seven years since the date of the transfer, further tax may be payable on death, with no reductions.