Taxation, Fees and Financial Aspects of Estates
Core concepts
Understand the taxes that touch an estate: estate duty or inheritance tax on the transfer of value at death, capital gains tax on disposals by the personal representative, income tax on estate income during administration, and stamp duty on instruments. Learn the nil-rate band, the residence nil-rate band, and the treatment of exempt and relieved property.
Fees
Court fees are payable on application for a grant, often scaled to estate value. Professional fees are charged on a time basis or as a percentage of the estate, and must be disclosed and agreed in advance.
Traps
Questions test the valuation date for estate assets (date of death, with an alternative for quoted shares), the treatment of jointly owned property, and the availability of business and agricultural relief. Watch the grossing up of legacies and the incidence of tax between beneficiaries.
Worked example
A legacy is left free of tax; the residue bears the tax. If the residue is insufficient, the legacy must be grossed up to determine the tax attributable to it.
Rule of thumb
Value at death, apply reliefs, allocate tax by the terms of the will, then charge fees.
Professional Ethics, Conduct and Client Care in Probate Practice
Core concepts
Ethics in probate practice rests on integrity, competence, confidentiality, and conflict management. The practitioner must act in the client's best interests, keep client information confidential, avoid conflicts of interest, and decline instructions where a conflict cannot be managed.
Client care
Obtain clear instructions, confirm them in writing, explain fees, and keep the client informed. Where the client lacks capacity, take instructions from an authorised representative or apply to the court. Where a will is challenged, explain the contentious route.
Traps
Questions test: acting for both sides in a dispute; acting for a personal representative who is also a beneficiary; the duty to report suspected fraud or undue influence; and the duty to account for client money. Also watch the duty to avoid drafting a will in which the drafter takes a benefit.
Worked example
A solicitor is asked to draft a will leaving a substantial gift to the solicitor. The solicitor should decline to act or ensure the client takes independent advice, and the gift may be presumed voidable.
Rule of thumb
Ask: whose interests am I serving, and would I be comfortable defending this in open court?