The Estate of Gavin Lewis - Assignment Example

Stephens and Co. 25 Friar’s Lane Chisington Ch4 9LQ 16 April, 2009 Richard Ayling The Barn Shallow Lane Chisington CH5 7RU Dear Mr. Ayling, Re: The Estate of Gavin Lewis Further to your instructions and our discussions in office and via telephone, I have reviewed the relevant issues with respect to your late grandfather’s estate. The following reflects the primary matters of concern: The Estate of Gavin Lewis First and foremost, your grandfather’s estate is currently comprised of the following assets and liabilities: Assets: Beneficial joint tenant of 6 Sterling Close with Tracy Estimated value of his share 180,000 Estimated value of his share of house contents and possessions 6,000 Portfolio of quoted investments Approximate value as at date of death 486,000 Barclay’s Bank account: Current a/c 6298456 7,000 Deposit a/c 2389564 17,000 Total 696,000 Liabilities: Funeral: 2,300 Outstanding debts: 15,700 Total: 18,000 The liabilities take into account any applicable inheritance taxes due to the estate of your grandfather. Per our conversation it was determined that there are two matters that will exempt the estate from inheritance tax liabilities. First, the home situated at 6 Sterling Close home was subject to a joint tenancy between your grandfather and his wife so that your grandmother inherits the title to the home absolutely under the inherent right of survivorship.1 Since the home devolves to the deceased’s wife, it will not attract inheritance tax because property inherited by a spouse is entitled to the nil-rate band.2 Secondly, a nil rate band in the sum of 312,000 applies to the estate generally.3 Moreover, there is no evidence of any gifts to which IHT is applicable. After controlling for the liabilities which are currently 18,000 pounds, administrative costs of 5,000 pounds, and the spouse’s share of the estate only 118, 500 pounds remains taxable. Since this sum falls below the current nil rate band of 312, 000 pounds, there are no applicable IHT. Entitlement: Having determined the assets as offset against the liabilities, the surviving spouse’s share of the estate, the remaining sum to be divided between the surviving entitled beneficiaries is 118, 500 pounds. This sum was arrived at by first deducting the liabilities and the administrative costs which leaves your grandfather’s intestacy at 493, 000 pounds. Once the surviving spouse’s statutory legacy of 250,000 pounds, together with chattels and a life interest in half of the remainder,4 the sum of 118,500 pounds remains. Your grandfather died without leaving a will. Therefore the estate will pass on intestacy under the Intestacy Rules which are set out in the Administration of Estates Act 1925 and further supplemented by Inheritance (Provisions for Family and Dependants) Act 1975. The rules of succession under the Intestacy Rules dictate that the property of a person dying intestate the surviving spouse will inherit property as described above with the remainder property divided among the children or more distant relatives. Since, your grandfather’s children predeceased him, the next-of-kin/remainder issue are the grandchildren. The residue of the estate, 118, 500 pounds will therefore be divided among the grandchildren, you, Joseph, Millie and Lee as the remainder issue which entitles each of you to the sum of 28, 625 pounds. Since Millie predeceased her father, her share will pass to Alan, her oldest child and the next-of-kin in the chain of succession.5 Obtaining a Grant: Since your grandfather died without having executed a will, there is no executor/executrix to distribute the remaining assets and to discharge the liabilities accrued to your grandfather’s estate. In order to overcome this shortcoming it will be necessary for the beneficiaries, who are the grandchildren to apply for letters of administration and to decide whom among you should act as administrator/administratrix or personal representatives of your grandfather’s estate.6 The house at Sterling Close is subject to survivorship as a joint tenancy and falls outside your grandfather’s estate.7 The application for a grant of letters of administration will be made to the Probate division of the High Court of Justice of the Local District Probate Registry who would typically appoint the surviving spouse.8 However, if the surviving spouse is unable or unwilling to serve as administrator/administratrix, the next-of-kin is the next logical choice.9 Since Tracy, (your grandfather’s surviving spouse) has decided that she is not up to the task and has instructed her solicitors accordingly, we propose to file her renunciation of grant of adminstratrix together with the application. In any event, there is a beneficiary, namely, Alan, under the age of 18. In such circumstances, the probate registry prefers to have at least two administrators.10 Since, you, Joseph and Lee have agreed to act as the personal representatives and are among the next-of-kin, the grant should be ordered in your favour. It is entirely unlikely that Alan as a minor will be able to have Jason, her father act as an administrator under the Non Contentious Probate Rule 27(5) since there are other applicants who are prepared to act as personal representatives of your grandfather’s estate.11 Role of the Administrators: The role of the administrators is similar to that of the executors of a will. While the executors distribute the assets in accordance with the testator’s wishes as expressed in the will, the administrators will distribute the property pursuant to the rules of intestacy as delineated above.12 The administrators will collect all the assets, hold them on trust and after discharging the liabilities delineated above, distribute the assets according to the Rules of Intestacy. The funds payable to Alan will be held by the administrators upon trust until such time as he attains the age of majority. Proposed Action: You have undertaken to inform Alan’s father that you, Joseph and Lee are applying for a grant of letters of administration. This will obviously be the first priority. Secondly, once we have been formally instructed by you, Joseph and Lee we will write to Barclays Bank and the financial institution holding your grandfather’s investment portfolio with a view to obtaining the exact balances and accrued interests at the time of your grandfather’s death. With respect to applying for a grant of letters of administration we will contact Tracy’s solicitors to obtain her renunciation of grant. We will then prepare the necessary probate papers for an application of the grant of letters of administration naming you, Joseph and Lee as the personal representatives. In the meantime we will need to know if there are any other assets and liabilities that we have not already been apprised of. So we will ask that you let us know if anything further comes to light. Assignment of Entitlement: You have indicated that you want your entitlement in the sum of 29,000 pounds assigned to a lending institution to facilitate a buy and let mortgage of rental property. Your instructions are that the property is an apartment in a complex where properties have been sold at 210,000 pounds and you believe that you can obtain the property at 150,000 pounds. The lending institution to which you have communicated this information has agreed to lend only 70 percent of the purchase price. To this end, you need to come up with a deposit of 45,000 pounds and you only have 16,000 pounds of disposable income at this time. This necessitates your assignment of your entitlement of 29,000 pounds to the lending institution. We can prepare the necessary assignment of your entitlement for your execution. However, you would be best advised to negotiate the desired purchase price of 150,000 pounds first and ensure that you will not be obtaining a loan for only part of the purchase price before making any commitments. Once you involve the lending institution and the funds are deposited in escrow for the vendor, you will have further legal difficulties having the funds reassigned to you in the event the purchase price is actually 210, 000 and your loan does not cover this amount. Sincerely Yours Stephens & Co. Julie Butler References Administration of Estates Act 1925. Family Provision (Intestate Succession) Order 2009 (S.I. 2009 No. 135) Flanagan, Mossman.(2004) Property Law: Cases and Commentary. Emond Montgomery Publication, 2nd Edition. HM Revenue and Customs. “2007 Pre-Budget Report and Comprehensive Spending Review: Inheritance Tax (IHT) Nil-Rate Band.’ October 2007, PBRN 16. HM Revenue and Customs. “Distribution Under Intestacy (E & W) Statutory Legacy.” 2009, IHTM12122. Inheritance (Provisions for Family and Dependants) Act 1975 Land Transfer Act 1897 Non Contentious Probate Rule 27(5) Read More