BPP University College Of Professional Studies Limited (BPP)
These are the notes I used during my LPC Private Client exam:
- Financial and Estate Planning, Distribution of the Estate, Intestacy Rules, Inheritance Provisions for Family and Dependants Act 1975, Wills Formalities + Drafting and Reading it, Administrative Powers of Trustees and Personal Repr...
BPP University College Of Professional Studies Limited (BPP)
BPP University College Of Professional Studies Limited
Private Client
All documents for this subject (1)
2
reviews
By: loveulikecrazy22 • 10 months ago
By: helenstephens • 1 year ago
Seller
Follow
rosiesnotes
Reviews received
Content preview
Private Client (Wills, Probate & Estate Planning) Revision Notes for LPC Exam in 2021
Financial and Estate Planning
1. First Interview
a. Gather the client personal and financial details
i. Name and address, D.O.B, Occupation, Marital status
ii. Current income and expenditure, Assets and liabilities, Pension arrangements, Insurance
policies, Gifts made and received, are significant changes expected financially
b. Establish the Client’s Objectives:
i. Usually estate planning (transmitting wealth) and because intestacy there is no
guarantee that promises will be kept.
ii. Good to have a will to avoid intestacy, executors / guardians and trustees all appointed,
give client control, express burial wishes, tax planning, give powers to the administrators
of the estate.
c. Always keep in mind Professional Conduct Steps:
i. SRA Code of Conduct:
1. Make a client care letter at the start of the retainer informing the client of right
to complain and how to do so (CCS 8.3), the likely costs (which must also be
updated regularly after sending the letter CCS 8.7)
2. Make sure firm has a way to identify conflicts of interests (CCF 2.1) and that there
are none (CCS 6.2)
3. Make sure you take instructions from your client and you act in their benefit CCS
3.1 and 3.4)
a. Another requirements they must comply with are the SRA Principles 4,5
and 7 of acting with honesty, integrity and in the best interests of the
client.
4. Cary out Customer Due Diligence Checks in accordance with the MLR 2017 CCS
8.1 and be war of the offences under the Proceeds of Crime Act 2002.
2. Tax Planning Considerations (For more look at Chapter 2 + print specific tax planning in main class
lecture) Who, When and How (which exemption to best make use of)
a. Who should the property be given to?
i. Gifts to spouse: Is the client married or looking to get married?
1. Dividing wealth between spouses gives greater scope for tax planning and
especially financial security for the less wealth spouse (equalisation of the estates
s.18 IHTA 1984) as any transfer is 100% exempt for IHT and for CGT it is a no loss
no gain transfer. If looked at as a unit both spouses’ annual exemptions can be
used and by transferring income producing assets such as shares to the spouse
in a lower band for income tax, it reduces the couple’s overall tax bill.
a. Remember however when you transfer but ownership it is split between
the two spouses, related property rules apply and regardless of whose
share is more valuable each party share will be deemed to be 50% of the
total value.
ii. Gifts to anyone else:
1. These gifts are made with the aim to use exemptions and the reliefs available
and also help in reducing the value of the donor’s estate. IHT and CGT are
potential consequences. Key to use those gifts that attract relief such as BPR or
APR to them. If client has shares in a public company, consider investing in a
private company to benefit from the Business Property Relief.
b. How should the property be given away?
i. Outright gifts - straightforward, not expensive
1
,Private Client (Wills, Probate & Estate Planning) Revision Notes for LPC Exam in 2021
ii. Trusts – flexible, can achieve more complex objectives, require professional advice, time
and ongoing administration and are therefore more expensive. Especially life interest
trusts (but remember to allow the trustees to advance the capital and make loans to the
life tenant).
iii. Transfer into joint names – rules of survivorship apply and give survivor automatic
access. If this is for the main residence if the client has issue than RNRB will not apply.
c. Using Exemptions – during lifetime or through will?
i. Lifetime planning
1. By making lifetime transfers (PET – these are transfers of values; especially if the
client is the life tenant of a trust) and LCTs – transfer of value into a trust) and
using the reliefs available the assets are removed from the taxable estate and
the IHT payable on death will be reduced. In fact if the testator can keep his
estate under 2 Million this ensures that the full amount of RNRB can be used.
However, lifetime giving could create a CGT liability for some assets (except cash
or gilt edged securities).
2. If client has shares in a public company, consider investing in a private company
to benefit from the Business Property Relief.
3. Remember all the exemptions: annual exemptions for the tax year and the one
before, charity exemption (100%), small gift exemption, if the client has spare
income from example rent normal expenditure out of income could be used,
family maintenance.
ii. Planning through the will
1. When drafting the will, consideration must be given as to what proportion of the
death estate will the NRB cover. Remember to use of NRBs and RNRBs:
a. The proportion of unused nil rate band of the first spouse can be
transferred to the second spouse and used at the distribution of their
estate with their own NRB.
b. The proposition of unused residence nil rate band that is used when the
main residence is passed to direct descendants of the deceased is also
transferable. RNRB does not apply if net estate is valued at more than 2
Millions.
2. If the IHT payable will be significant, consider creating discretionary trusts and
making other policies to be in trust.
3. Consider leaving at 10% of your estate if possible, to decrease the IHT from 40%
to 36%
4. No CGT is payable on death.
Succession / Distribution Estate Taxation Estate
Inside Outside Inside Outside
Property /gift subject to a
reservation, if a person
gives away an asset but
reserves a benefit in Property outside of the
DMC: Gifts given on condition of death.
All the relation to it. A way to UK where the
Donor may take back the assets if they
rest avoid gift with reservation beneficiary is domiciled
change their mind before death.
benefit rules is to not outside of the UK.
benefit or by paying
market value for that
benefit
2
,Private Client (Wills, Probate & Estate Planning) Revision Notes for LPC Exam in 2021
All jointly owned property
Trusts/ Settlements: Property passes in (house, bank account)
Reversionary or
accordance with the rules of the whether as tenants in
remainder interests in
trust/settlement deed after the life common or joint tenants,
settlement/ assets in a
tenant dies (it passes to the your half is included.
trust
remaindermen) Discounted by 10% if it is
not owned with spouse.
Donatio mortis causa
Statutory Nominations: Low value Policies written in trusts
(lifetime gift on the
bank accounts (limited to 5k) for another
condition of death
Property held as joint tenants: Life interest trusts created
automatically passes to the remaining by will, the life tenant is in Discretionary pension
joint tenant following the law of possession of the asset schemes / trusts
survivorship therefore it is taxable
Insurance policies written in trust:
Instead those nominated to be the
beneficiaries get the money paid Statutory nominations
directly to them when presenting death
certificate.
Discretionary Pension schemes/ Lump
All not specifically
sum pension benefits: If the deceased
excluded property is
elected/nominated a third party that
included
sum is paid directly to them
Distribution of the Estate
1. Explain how the estate will be distributed: through intestacy rules or following a valid will made by the
deceased.
2. Important to state first which items pass outside of the distribution estate (any property held as joint
tenants? Discretionary pension schemes, policies written in trust?). See table above to see what goes
in or out the succession estate.
3. List all the assets inside the distribution estate and add up their value to reach a total gross figure
(deduct debts and relevant expenses to reach a net figure).
4. If the deceased died testate the wishes expressed in the will are to be followed if the deceased was
intestate intestacy rules apply.
a. Remember to identify all the beneficiaries by name and indicate how much they would
showing the calculations, your statutory refences and stating if interests are vested or
contingent!!!.
i. Vested = effective immediately, the beneficiary have no conditions to satisfy.
ii. Contingent = the interest of the beneficiary is dependent on them satisfy the
condition imposed by the transfer ( these are those of s 47 AEA 1925). Apply for all
beneficiaries other than spouses, parents and grand parents.
b. Residue’ means the rest of the estate which is left after, debts, funeral expenses and
inheritance tax (note where the deceased dies testate you would also need to take the value
of any specific gifts passing under the will into account, prior to arriving at a figure for the
residue).
5. Remember that it is possible to make a claim for greater provision that those following the distribution
of the estate under the IPFDA 1975
3
, Private Client (Wills, Probate & Estate Planning) Revision Notes for LPC Exam in 2021
Intestacy Rules
• When there is no will, the death is intestacy (or partly intestate when not all the assets are disposed of
by the will) and intestacy rules from Administration of Estates Act 1925 as amended by the Inheritance
and Trustees Powers Act 2014 apply to determine succession of estate and what each beneficiary
receives.
• The first beneficiary considered under the intestacy rules is the spouse/civil partner. To inherit they
must survive the deceased by at least 28 days in accordance with s 46(2A) AEA. Because of the statutory
legacy being set at 270k, if the estate excluding the chattels (general bits and pieces other than business
assets, shares, cash and items held purely as an investment – so paintings are not chattels if held solely
for investment purposes but precious jewelry if worn only occasionally even if held at bank for security
reason is a chattel) as defined by s 55(1)(x) of Administration of Estates Act 1925) is worth less than it,
then the whole estate passes to the surviving spouse.
o The surviving spouse under intestacy laws has the right to have the family home
(appropriation of the family/ matrimonial home) when the deceased was the sole owner of
it or they owned it as tenants in common and survivorship did not apply (Schedule 2 Intestate
Estates Act 1952.
o This right must be exercised within 12 months of the grant of representation. In situations
where the spouse entitlement is worth less than the house, they will need to pay the PR the
difference as the price is valued at the market price on the day of the appropriation.
Consent of the court for appropriation is required where the home is only part of a
building owned by the deceased or when the home is part of a farm or other business
premises
• The second-class beneficiaries will be the issues of the deceased (children - incl. adoptees - and linear
descendants eg grand kids, great grand kids...).
• When the deceased does not leave behind a spouse/partner or issue: s 46 AEA 1925 gives a statutory
order of entitlement which goes as follow: parents, whole blood siblings, half blood siblings,
grandparents, whole blood uncles and aunts, half blood uncles and aunts, the crown.
o Within the class what is received is divided equally between all the members of that class.
• Beneficiaries other than spouses, parents and grand parents take their inheritance on the statutory
trusts following s 47 AEA 1925. This means that to inherit, following the terms of the statutory trust:
o 1 - The beneficiary must be 18 or already married (in this case they have a vested interest) or
if they do not satisfy that they get a contingent interest until the requirement is satisfied. +
o 2 - If the beneficiary dies before the intestate, the beneficiary's children can inherit in their
place (substitution limb of the trust) once they satisfy age requirement in '1'.
o 3 – The estate is to be divided equally among all the class members who are living or conceived
at the time of the deceased death.
4
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller rosiesnotes. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $15.58. You're not tied to anything after your purchase.
