UK Financial Regulations - Essay Example

(a) Mrs Muriel Mould died suddenly aged 71 without leaving a will. She had been a widow for 20 years. She left two sisters Isabel and Clara who were both older than her and two sons - Henry aged 45 and Len aged 42. Her only daughter Susan died last year aged 39 after a long illness. For the last 10 years Muriel lived with her daughter and granddaughter Fiona. Muriel's estate is very straightforward as she did not own any property but had two Insurance Policies paying 56,000 and 62,000 respectively, and approximately 120,000 in a High Interest Account at the bank. Henry and Len call in to see you and ask the following questions:- (a) When someone dies without leaving a will, who is entitled to the estate List the order of priority on intestacy and explain who is entitled to Muriel's estate and in what proportions: Having died without leaving a will or without having made a valid will, Mrs Mould will be considered to have died intestate and therefore the rules of intestacy governed by the Administration of Estates Act 1925 (as amended) and the Intestates Act, 1952 (and various other amendments contained in the Family Provision Act, 1966, The Family Law Reform Act, 1969 and The Family Provision (Intestate Succession) Order, 1972) apply to her estate, which is worth approximately 238,000. By not leaving a will any wishes Mrs Mould had for the allocation of her estate to friends, relatives and other beneficiaries will be ignored. How the estate will be allocated depends on the value of the estate and the deceased's family circumstances. The law in this area is concerned with bloodlines, rather than merit, or the verbally expressed will of the intestate. Not only does it recognise human improvidence, but also that calamities and unfairness occurs within human affairs. It sets out to ensure that there is no discrimination on personal whim. It is not concerned with blame. Due to the increasing complexity of family trees, this area can become ripe for litigation. However, Mrs Mould could be described as being from a 'once-normal nuclear family' where the bloodlines are easily ascertained. Assuming the above facts are ascertainable to be correct, then the main rules will be applied to five main groups of relatives, as follows: 1. The surviving spouse. 2. Surviving children (referred to as 'issue'). 3. Surviving parents. 4. Surviving brothers and sisters of whole blood ie having the same biological parents. 5. Surviving relations of a lesser degree. In the event that the surviving spouse is the only living relative of the deceased (ie no parents or siblings of whole blood), then the estate passes absolutely to that spouse. If there is both a spouse and children then all personal possessions (except business property) and the first 125,000 goes to the remaining spouse free of death duty (inheritance tax) and costs absolutely, with (if possible) interest. The remaining spouse is also entitled to a life interest in half of the residue which is to be invested in a trust from which the spouse will receive income during his/her lifetime. The remaining property then goes to the children via 'statutory trusts'. The definition of 'Statutory trusts' can be found in s.47 Administration of Estates Act 1925. The deceased's property will be held in equal shares for all 'living' (including unborn) children of the estate. On the death of the remaining spouse the children automatically inherit the remaining capital once they reach their majority, ie under current UK law, the child either attains the age of eighteen and/or marries before that age. If there are children but no spouse the estate is shared equally among the children via a statutory trust. Importantly, the child or children of any deceased child (ie grandchildren) will get the share of their deceased parent and if more than one, in equal shares. Where the only remaining relatives are the spouse and whole blood relatives as described above, then the spouse inherits all personal chattels, the first 200,000 plus a life-interest in half of the remainder. The balance goes to the deceased's parents or if the parents pre-deceased the testator, then to the deceased's brothers and sisters of the whole blood (or their descendants under a statutory trust). Failing that, then the law will try to pass the property on to brothers and sisters (or their issue) of the half blood; then on to grandparents absolutely. If this does not apply, then the property passes to uncles and aunts (or issue of theirs) of the whole blood; then finally onto uncles and aunts (or issue of theirs) of the half blood. Based upon the above reasoning, we need only consider the positions of Mrs Mould's sons, sisters and grand-daughter as Mrs Mould's other relatives pre-deceased her. Given that children and grandchildren take precedence over whole blood siblings we conclude that the estate must logically be left to Mrs Mould's children (issue) and accept that her sisters would not be entitled to any of her estate under current UK intestacy rules. A question arises as to whether Mrs Mould has any duty toward her grand-daughter, Fiona. What is Fiona's position given that her mother is deceased According to the intestacy rules, Fiona is entitled to the share of her deceased mother. Therefore, Henry and Len are entitled to inherit one-third shares of the remainder of Mrs Mould's estate immediately (as they are over eighteen). Fiona is also entitled to a one-third share. It is not clear on the facts whether she is married and/or over eighteen - so this may impact on when she actually inherits that share. If she is both unmarried and under eighteen, then her share will be held to her benefit under a statutory trust until either event occurs. Before the value of the estate is finalized there are certain debts which must be paid as taking priority such as funeral and testamentary expenses, along with any outstanding obligations to the state such as rates, taxes and legitimate creditors (though this is unlikely to apply to Mrs Mould). It is always prudent to prevent late claims from any unknown creditors by advertising for them to be made promptly by placing advertisements in the London Gazette as well as local newspapers with a good circulation. Applying the above to Mrs Mould's case it would appear that her remaining sons and grand-daughter will inherit all of her estate in the first instance. As her estate is below the current nil-rate band of 300,000 for the purposes of Inheritance Tax (assuming that we have all details regarding any assets held in trust and gifts made within seven years of her death) her children and their issue will benefit from most of what their mother/grandmother has left behind. (b) What documents must be completed to apply for a Grant and who may apply If Henry applies as the elder son can his application be challenged As Mrs Mould has died intestate, a Grant of Letter of Administration will be required. Prior to obtaining a Grant of Letter of Administration, I would advise my client(s) to ensure that they have ascertained that they make explicit that for probate purposes they need to ascertain: all the debts and liabilities; all the assets of the deceased; and advised all the debtors and creditors of the estate of the death. The above may require the putative Administrator(s) to collect all documents, such as title-deeds of property; insurance policies; pension plans; stocks and share certificates; building society passbooks, National Savings Certificates; Premium Bonds; details of Bank Accounts; details of any debts, unpaid invoices, etc. They will then need to write to each asset holder enclosing a copy of the death certificate and requesting details of the current balance on the account. To apply for the Grant of Letter of Administration the family will need to send an Oath for Administrators, a receipted Inland Revenue account and the appropriate fee. The most appropriate persons to apply would be Henry, - given that he is the oldest child, he will be presumed to have the closest connection with his mother, above Len or Fiona (if she is of age). Although Henry is the oldest surviving child Len has the same blood-line connection. Fiona would have a lesser right to challenge him due to the fact that Henry could be argued to have a closer standing under the Rules. (c) Write a letter containing instructions to Henry on how to take out the Grant alone, sending him the appropriate papers for signature. Dear Mr H. Mould Re: Grant of Letters of Administration I refer to previous correspondence in this matter. I refer you to our previous telephone conversation of the fourth of this month, in which I explained that due to the fact that your mother's estate is currently valued at more than 5,000, you will require a Grant of Letters of Administration in order to dispose of her estate lawfully. To this end, I have prepared and enclosed both the Oath for Administrators and a Receipted Inland Revenue Account, both based upon your oral representation. The Oath of Administrators, as you will perceive, states the status of your mother, clears-off those with a prior right to apply for a Grant; states the relationship of any applicant(s) to the deceased; as well as explaining your capacity to apply for the Grant. In order to proceed could you arrange for all Administrators to either swear or affirm the Oath as indicated on that document You may do this at this office, or at any other office which has authority. The completed Oath, Receipt and appropriate fee should then be filed at (ie delivered in person, or posted to) the Probate Registry. I also attach instructions on how to post or get to your local Probate Registry. Kindly note that until the Grant of Letter of Administration is officially received, your rights (powers) to execute your mother's estate are restricted, as your mother's assets - strictly speaking - vest in the President of the Family Division of the High Court until the Grant is issued. For example, you cannot lawfully make any arrangements to dispose of any assets pertaining to your mother's estate. If you have any questions or concerns regarding this, please call me and I will be happy to assist in advising you further. Yours sincerely _______________ A. N. Other Encs: (3) (d) What powers does the Administrator have before the Grant of Letters of Administration is issued The Administrator derives all powers from the Grant, and therefore has very limited powers prior to its receipt. The Administrator might for example begin investigating any tax liability and any Inheritance Tax, but is unable to advertise to give Notice to creditors and debtors prior to receipt of the Grant, and must take care not to end up personally liable for acts and/or omissions s/he is not authorised to undertake. (e) List the specific information that you will need to know about Muriel in order to complete the papers and apply for the Grant Initially I would have to put myself in the shoes of an Administrator (with limited powers) prior to taking any responsibility to commence the valuing of Mrs Mould's estate. In order to achieve this I would need to obtain information about her past financial assets, obtain valuations of any owned property (though we are told she left no 'property'), identify and arrange the re-payment of her known debts, calculate her tax liability and pay any Inheritance Tax. In order to acquire the grant I would need to lodge the complete and lodge the following documents: Oath for Administrators; Inland Revenue Account (receipted, if required); I will not require a Will as Mrs Mould has died intestate; I will not require any affidavit evidence as Mrs Mould has left no Will. Once the Registrar is contented that the documentation is in order, s/he will issue the Grant along with additional copies, requested. References HMRC Inheritance Tax (IHT). Available at: http://www.hmrc.gov.uk/cto/iht.htm Bruce, R. (2001) Success in Law. 5th Edition. London: John Murray Publishers Ltd Chartered Institute of Bankers: UK Financial Regulation - Module 1 Read More