Financial Times Guide Inheritance Tax, Probate and Estate Planning (The FT Guides)

353 Pages·2010·5.454 MB·English

by  Amanda Fisher

FT

ABOUT THE AUTHOR FT Guides
Nearly 9.5 million households in Britain will have to pay
Guides
inheritance tax. What’s the best way to avoid it?
Amanda Fisher began her career with HM FINANCIAL TIMES Guides INHERITANCE TAX,
Revenue and Customs, and later moved
over into practice and qualifi ed with a If you’re administering an estate because someone has AI PROBATE AND
N
national accountancy fi rm where she gained died, how do you obtain probate?
N
ESTATE PLANNING
considerable experience dealing with private H INHERITANCE
D
tax clients and their trusts and estates. Is it ever possible retrospectively to minimise an estate’s E

tax liabilities? ER TAX, PROBATE The Financial Times Guide to Inheritance Tax,
She now runs her own tax and accountancy
SI Probate and Estate Planning will help you face the
practice of private clients, and regularly deals
T
T diffi cult task of dealing with an estate when someone
with trust and estate work alongside her other A
A AND ESTATE has died. You’ll learn the best way to manage the
freelance work as a tutor, examiner and author
N process of acquiring probate and complete the
T
for tax publications.
The Financial Times Guide to Inheritance Tax, Probate and Estate EC administration of the estate, before distributing to
PLANNING
the benefi ciaries. You will also have an insight to
Planning will help you navigate the complicated maze of inheritance
E
tax, understand how probate works and protect your estate. Amanda P the advantages of making a will and organising your

estate effi ciently to minimise any future impact of
Fisher tells you what to do when someone dies, helps you deal with LT
administrative affairs and distributing the estate to benefi ciaries, and AA AMANDA FISHER inheritance tax, including the use of trusts.
offers long-term strategies on how to protect your estate and minimise NX The Financial Times Guide to Inheritance Tax,
any potential inheritance tax liability, including the use of trusts. Probate and Estate Planning covers:
N,

P • Registering a death
The Financial Times Guide to Inheritance Tax, Probate and I
Estate Planning: NR • The duties of executors and administrators
GO • Consideration of the validity of a will
• Explains what to do when someone has died, including how • Intestacy and partial intestacy
to register the death B • Obtaining details of assets and liabilities
• Advises on the duties of executors and administrators, and how to A • Applying for probate and letters of administration
consider the validity of a will T • Treatment of income before and after the death
E • How to value property for inheritance tax
• Helps you apply for the grant of probate or letters of administration
• Calculating inheritance tax liability on the
• Guides you through the completion of inheritance tax returns and
death estate
how to calculate and pay any tax due
• Tax planning after death and deeds of variation
• Provides advice on lifetime planning and illustrates ways to minimise • Paying inheritance tax
F
potential inheritance tax liabilities I • Distributing the estate
S
H • Lifetime planning to reduce an inheritance tax
liability
E
R • The benefi ts of making a will
• Trusts
FINANCE

Front cover image
© Getty Images Visit our website at
www.pearson-books.com
Visit our website at
www.pearson-books.com
CVR_FISH9969_04_SE_CVR.indd 1 12/7/10 09:21:21
The Financial Times Guide
to Inheritance Tax, Probate
and Estate Planning
In an increasingly competitive world, we believe it’s quality of
thinking that will give you the edge – an idea that opens new
doors, a technique that solves a problem, or an insight that
simply makes sense of it all. The more you know, the smarter
and faster you can go.
That’s why we work with the best minds in business and finance
to bring cutting-edge thinking and best learning practice to a
global market.
Under a range of leading imprints, including Financial Times
Prentice Hall, we create world-class print publications and
electronic products bringing our readers knowledge, skills and
understanding, which can be applied whether studying or at work.
To find out more about Pearson Education publications, or tell us
about the books you’d like to find, you can visit us at
www.pearsoned.co.uk
The Financial
Times Guide to
Inheritance Tax,
Probate and
Estate Planning
Amanda Fisher
PEARSON EDUCATION LIMITED
Edinburgh Gate
Harlow CM20 2JE
Tel: [phone]
Fax: [phone]
Website: www.pearsoned.co.uk
First published in Great Britain in 2010
© Pearson Education Limited 2010
The right of Amanda Fisher to be identified as author of this work has been asserted by her in
accordance with the Copyright, Designs and Patents Act 1988.
Pearson Education is not responsible for the content of third party internet sites.
ISBN: 978-0-273-72996-9
Crown Copyright material is reproduced with the permission of the Controller of HMSO and
the Queen’s Printer for Scotland under the terms of the Click-Use Licence.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Fisher, Amanda.
The financial times guide to inheritance tax, probate and estate planning / Amanda Fisher.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-273-72996-9 (pbk. : alk. paper)
1. Probate law and practice--Great Britain--Popular works. 2. Estate planning--Great Britain--
Popular works. I. Title.
KD1518.F57 2010
346.4105’6--dc22
2010025976
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,
or transmitted in any form or by any means, electronic, mechanical, photocopying, recording
or otherwise, without either the prior written permission of the publisher or a licence
permitting restricted copying in the United Kingdom issued by the Copyright Licensing
Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. This book may not be lent,
resold, hired out or otherwise disposed of by way of trade in any form of binding or cover
other than that in which it is published, without the prior consent of the publisher.
10 9 8 7 6 5 4 3 2 1
14 13 12 11 10
Typeset in 9pt Stone Serif by 3
Printed and bound in Great Britain by Ashford Colour Press Ltd, Gosport
Contents
Preface / xi
PART 1 THE APPLICATION FOR PROBATE / 1
1 Registering a death / 3
When and where to register a death / If the death is referred to a
coroner / Who can register a death? / Documents and information you
will need to register a death / Documents you will receive once the death
has been registered / Removing a body from England or Wales / When
someone dies abroad / Registering a death for Scottish residents /
Registering a death for residents of Northern Ireland
2 Other matters to address when someone has died / 13
Arranging to see the deceased’s solicitor or other professional adviser and
the reading of any will / Arranging a funeral / Making sure that everyone
who needs to know is informed / Checking whether all benefits are being
claimed / Starting to collect information and documents
3 The duties of executors and administrators / 21
If a will was left by the deceased / If no will was left by the deceased /
Duties of the personal representatives / Getting professional help / Duties
under Scottish law
4 Consideration of the validity of a will / 27
The conditions for a will to be valid / The testator / Witnesses to a
will / Revocation of a will / Codicils / Other matters / What to do if a will
is thought to be invalid / What to do if a will is thought to be unfair / Wills
under Scottish law
vi Contents
5 Intestacy and partial intestacy / 35
The rules of intestacy in England and Wales / Cohabitees / Other
dependants and the Inheritance (Provision for Family and Dependants)
Act 1975 / Assets held in joint names / The rules of intestacy in Northern
Ireland / The rules of intestacy under Scottish law
6 Obtaining details of assets and liabilities / 43
Beginning to deal with assets and liabilities / Valuing the property in the
estate / Types of assets in the estate / Types of liabilities in the
estate / Finding unknown creditors or beneficiaries / Information required to
administer the estate / Starting to value the estate / If the valuation of the
estate results in a loss
7 The need for a grant / 55
Probate / The grant of probate / Applying for a grant / When a grant may
not be needed / Once the grant of probate has been received / Different
terms associated with probate / Scottish variations
8 Applying for probate and letters of administration / 59
When a grant may not be required / Applying for the grant in England and
Wales / Where to apply for the grant / Required forms and returns for
excepted estates / Required forms and returns for non-excepted estates /
The interview with the probate registry / The cost of applying for the
grant / Obtaining the grant / Further information / The equivalent for
Northern Ireland: applying for probate / The Scottish variant: applying for
confirmation / Summary
PART 2 INCOME TAX AND CAPITAL GAINS TAX / 81
9 Treatment of income before and after the death / 83
Tax liabilities of the deceased to the date of death / Tax liabilities at the date
of death / Tax liabilities of the estate following death / Tax liabilities following
the administration period
10 Tax liabilities and obligations to the date of death / 89
Income tax / National insurance / Capital gains tax / Dates for submitting
tax returns
Contents vii
11 Tax liabilities during the estate administration period / 93
Income tax / Capital gains tax / Assets sold during the administration period
before distributions / Assets not sold but transferred to the
beneficiaries / Tax planning / Distributions of income during administration /
Dates for submitting tax returns
PART 3 INHERITANCE TAX / 103
12 Completing the inheritance tax return / 105
Inheritance tax return form IHT400 / Completing form IHT400 / Calculating
the inheritance tax payable / Delivering the return form to HMRC / Making
amendments or corrections to form IHT400 / Scotland and Northern Ireland
13 How to value property for inheritance tax / 131
Personal possessions and chattels / Land and property / Leases / Bank
and building society accounts / Quoted shares and securities / Unit trusts /
Unquoted shares and securities / Government securities / National Savings
certificates and premium bonds / Individual savings accounts / Foreign
assets / Trusts / Pensions / Life insurance / Business interests / Jointly-
owned assets / Related property owned jointly with a spouse or civil
partner / Jointly owned assets: Scottish law
14 Overseas property / 143
Chargeability to inheritance tax / Domicile / Location of assets / Valuation of
overseas property / Double taxation relief
15 Considering gifts made before death / 149
The occasions of charge / Three-step method for calculating IHT / Reliefs
available on lifetime gifts / Gifts with reservation of benefit / Pre-owned
asset transfer rules
16 Calculating inheritance tax liability on the death estate / 161
The chargeability of the deceased person / Charges to inheritance tax
on death / Valuation rules in an estate computation / The death estate
computation / Calculation of inheritance tax on the death estate / Nil rate
band for spouses / Exempt beneficiaries taking the residue of the
estate / Business property reliefs / Tax credit reliefs / Date for payment of
inheritance tax
viii Contents
17 Tax planning after death and deeds of variation / 175
Disclaimers / Deeds of variation / Considerations for making a deed of
variation
18 Excepted estates / 181
Low value estates / Exempt excepted estates / Foreign domiciliaries /
Procedure in England, Wales and Northern Ireland / The Scottish variant /
Summary
19 Paying inheritance tax / 199
Obtaining an inheritance tax reference number / Payment due date /
Methods of payment / Payments from the deceased’s bank account (direct
payment scheme) / Payments by instalment / Interest on overdue IHT /
How inheritance tax is attributable to beneficiaries
PART 4 WHEN PROBATE HAS BEEN GRANTED / 211
20 Distributing the estate / 213
Dealing with the assets once the grant has been obtained / Protecting the
personal representatives / Estate accounts / Distributing the legacies and
the residue / Form IHT30: clearance certificate / Insolvent estates
21 Estate accounts / 221
When estate accounts are beneficial / When estate accounts are
necessary / An estate where gifts have been made to charity / Format for
the accounts
22 Revisions and amendments to the estate / 225
Relief for a loss on sale / Land and property / Notes for completing
form IHT38 / Shares / Notes for completing form IHT35 / The effect on
inheritance tax / Tax planning
PART 5 LIFETIME PLANNING / 239
23 Lifetime planning to reduce an inheritance tax liability / 241
Making lifetime gifts / Lifetime gifts: be sure you consider all taxes / Using
the inheritance tax nil rate band / Making a tax-efficient will / Taking out
insurance to cover any IHT liability
Contents ix
24 The benefits of making a will / 255
Choosing how the estate is distributed / Choosing personal
representatives / Executors can act immediately / Guardians can be
appointed for minors / Tax planning advantages / Special wishes and the
funeral / How to draw up a will / Where to keep a will / Living wills / Law in
Northern Ireland and Scotland
25 Trusts / 263
What is a trust? / The settlor / The beneficiaries / The trustees / The main
types of trust / Other types of trust / Using trusts for tax and practical
reasons / Seeking professional advice / Trusts and Scottish law
Appendix A Tax return SA900 relating to the estate
administration period and form R185 / 281
Form R185 – income payments to beneficiaries
Appendix B Inheritance tax return forms / 296
FormIHT 400: inheritance tax return form / Form IHT 400: calculation /
Form IHT 402: claim to transfer unused nil rate band
Appendix C Estate accounts / 311
Appendix D Further help / 319
Glossary / 323
Index / 327