3a. Probate - Wills Flashcards
Execution of wills
What two things must a person have and what one thing must they do to make a will?
Have:
- Capacity at the time the will was made, and
- Intention to make a will
and
Execute the will in accordance with the required formalities.
Execution of wills
Who has the burden of proving a testator did not have mental capacity, and what is the statutory test for this?
The person alleging the testator lacked capacity must show at the material time, the person is unable to make a decision for themselves because of an impairment or disturbance in functioning of the mind
Execution of wills
What is the statutory test a reiteration of and what three things did this require the testator to understand at the time of execution?
The common law test, which required the testator to understand:
- The nature of the act of making a will
- The extent of their property, and
- The claims which they ought to give effect to even if they subsequently do not
Execution of wills
In most cases, when is the material time?
When the testator signs the will
Execution of wills
What is the exception to the rule that the material time is when the testator signs the will?
If the testator did not have mental capacity at execution, but did when giving instructions to the drafter, the testator will be deemed to have acted with capacity if:
- The will was prepared in accordance with the instructions, and
- At execution, the testator at least understood they were signing a will for which instructions had previously been given
Execution of wills
What two things are required to satisfy the intention to make a will?
Testator must have:
- General intent to make a will, and
- Specific intent to make that particular will, i.e. they knew and approved of the contents
Execution of wills
Who has the burden of showing the testator did not have intention, and how might they show this?
The person challenging their intention, and they may do so by showing the testator acted due to fear, fraud, undue influence, or mistake
Execution of wills
In what three circumstances does the presumption that if the testator acted with capacity, they had specific intent not apply?
- Testator is blind or illiterate
- Will is signed on testator’s behalf
- Suspicious circumstances where the will drafter substantially benefits from the will
Execution of wills
What is required for a gift in the third situation, suspicious circumstances where will drafter benefits, for the gift to not fail?
Evidence of testator’s specific intent must be put forward by the person claiming the gift
Execution of wills
What is required for a will that has been made under duress, i.e. as a result of force and fear, to be valid?
Court must pronounce that it is valid, and issue a grant in solemn form
Execution of wills
What can occur where an omission from a will is made under duress?
The disappointed beneficiary can be entitled to the gift on the basis of the earlier will.
Duress is deemed to invalidate the revocation and the new will is read in line with that earlier valid provision.
Execution of wills
What are the three formalities for a valid will?
- In writing
- Signed by the testator (or some person in T’s presence and at T’s direction such that it is clear T intended to give effect to the will)
- Signed by two witnesses each in the presence of the testator, but not necessarily in each other’s presence (or their previous signature is acknowledged in T’s presence)
Execution of wills
What is an attestation clause and what is required if one is missing?
A signed clause confirming the formalities have been met. If one is not provided, the proponent of the will (i.e. the person offering it into probate) must provide proof these formalities were followed
Execution of wills
In what situation is a special attestation clause required, and what must it show?
A special attestation clause is required where the testator is illiterate, and it must show that the will was read to T and he understood and approved the contents, i.e. he had the specific intent to make that particular will
Execution of wills
In a situation where someone signs the will on the testator’s behalf, is the will invalid if this person is also a witness?
No
Execution of wills
What are the two requirements where someone signs the will on the testator’s behalf?
- Testator must be present when signature is made
- Testator must indicate to the witness that the signature has been put there at his request
Execution of wills
Do the witnesses need to see the contents of the will or know that the testator is signing a will?
No
Execution of wills
For a document to be incorporated by reference into a will, what two requirements must be met?
- Document must exist at the date of the will
- Document must be referred to in the will
Documents expressed to be created after the fact, e.g. lists of items, or subsequent references in diaries, will not be included
Alteration, amendment, and revocation of wills
When will a general alteration be valid?
If it can be proved it was made before execution, provided that the will reads naturally
Alteration, amendment, and revocation of wills
What is the situation where a will has words crossed out and it can’t be proved that the alteration occurred before execution or that it was made with the same formalities as the will, i.e. writing signed and witnessed?
The original gift applies
Alteration, amendment, and revocation of wills
What is the presumption given to unattested alterations?
They are presumed to have been made after execution, unless merely filling in a blank space in a will form
Alteration, amendment, and revocation of wills
What is a codicil?
Brief document that adds to, amends, or partially revokes an executed will
Can be used to remedy a gift which was void because the beneficiary witnessed the will
Alteration, amendment, and revocation of wills
What are the three requirements of a codicil?
- Must make reference to the will
- Must satisfy the formalities of a will, i.e. writing signed and witnessed
- Clause should be included confirming the unamended part of the will
Alteration, amendment, and revocation of wills
What are the two ways a revocation of a will can occur?
- By law
- Deliberate act of the testator
Alteration, amendment, and revocation of wills
What are the two situations in which a will is revoked by law?
- Marriage/civil partnership
- Divorce, nullity, or dissolution
Alteration, amendment, and revocation of wills
What is the effect of a testator marrying after executing a will?
The will is revoked unless it appears, from the will, that the testator was expecting to marry a particular person and they intended that all or part of the will should not be revoked by that marriage
Alteration, amendment, and revocation of wills
What is the effect of divorce, nullity, or dissolution on a will?
Will is partly revoked as to the appointments/gifts to the former spouse/civil partner as they are treated as having died on the date of divorce/dissolution
The remainder of the will is valid
Alteration, amendment, and revocation of wills
What gift provisions in a will will be relevant upon divorce/dissolution, and why?
Substitutional gifts conditional upon the spouse/civil partner predeceasing the testator, because they are deemed to have done so
Alteration, amendment, and revocation of wills
What is required to exempt a will from these divorce/dissolution rules?
Contrary intention expressed in the will
Alteration, amendment, and revocation of wills
When can a will be revoked?
At any time before the testator’s death
Alteration, amendment, and revocation of wills
What are the two ways a testator can revoke a will through deliberate act?
- Executing a later will/codicil
- Destruction
Alteration, amendment, and revocation of wills
What is the extent to which a later will/codicil will revoke an earlier will?
Only to the extent that it is inconsistent with or merely repeats the terms of the earlier will
Alteration, amendment, and revocation of wills
How is a will revoked by destruction?
Burning, tearing, or otherwise destroying the will by the testator (or someone at T’s direction and in their presence) with the intention of revoking the will
Alteration, amendment, and revocation of wills
What is the situation if only part of a will is destroyed?
Whether or not the will is fully revoked, or only revoked to the extent of the part that was destroyed will depend on the importance of the part which was destroyed, e.g. the signature page being destroyed will revoke the entire will if intent to revoke is evident
Alteration, amendment, and revocation of wills
Regarding intention to revoke, what is the presumption if a will is found mutilated at the date of death?
It is rebuttably presumed to have been revoked with the testator’s intent
Alteration, amendment, and revocation of wills
What is the other situation where a will is rebuttably presumed to have been revoked?
Where a will was last known to be in the testator’s possession, but cannot be found at the date of death
Alteration, amendment, and revocation of wills
How does the court-applied doctrine of dependent relative revocation save a will?
If the testator’s intention to revoke the will was conditional on a future event, and the event did not take place, the original will, even if destroyed, may be valid if it can be reconstructed
Alteration, amendment, and revocation of wills
What are mutual wills?
Where two or more people make wills with the same clauses conferring reciprocal benefits, further to an agreement between them to make such wills and not revoke them without the consent of the other
Alteration, amendment, and revocation of wills
What is the effect of a mutual will conferring a constructive trust in favour of the other party?
If one testator dies, and the other changes their will, a beneficiary harmed by this can apply to court for an order that the recipient of the changed gift transfers it to the original beneficiary
Interpretation of wills
Unless a contrary intention is shown in the will, when are gifts in wills treated as being given, and what is the general meaning of this?
The moment of death, which means that a gift is generally treated as being of the object the testator has on their death
Interpretation of wills
What wording will indicate that the gift is of the object the testator has when the will was made?
My before an individual object, e.g. my car, or my watch
If that specific item is not in the estate, the gift adeems. This is avoided by use of the words the car/watch I own on my death
Interpretation of wills
As of when are the beneficiaries in a will determined?
The date of execution, subject to class closing rules
Interpretation of wills
What is a specific legacy?
A gift of a specified part of the estate, e.g my BMW car with registration ABC1234
Interpretation of wills
What is a general legacy?
A gift of a generic item which does not identify a particular item, e.g. a BMW car
Interpretation of wills
What occurs if the item described in the general legacy is not in the estate?
The beneficiary can require the executors to purchase the item if there is sufficient funds
Interpretation of wills
What is a pecuniary legacy?
A gift of cash
Interpretation of wills
What are the two ways gifts can fail?
- Ademption
- Lapse
Interpretation of wills
Under the doctrine of ademption, in what three situations will a specific gift adeem?
- No longer part of the testator’s estate
- Subject to a binding contract for sale
- No longer meets the description in the will
Only applies to specific legacies. Does not apply to general legacies
Interpretation of wills
Whilst a change in the substance of the subject matter will cause a gift to adeem, what will not?
A mere change in name or form
Example:
- Shares in ABC plc which change in form due to a corporate restructuring but the shares are still in ABC plc: gift does not adeem
- Shares in ABC plc which goes into liquidation and is taken over by XYZ plc, and shareholders receive new shares in XYZ plc: gift adeems as the substance is different
Interpretation of wills
When will a gift fail by lapse?
If the beneficiary predeceases the testator
Interpretation of wills
What will prevent a gift from failing by lapse?
A substitutional gift in the will accounting for the situation where the beneficiary predeceased the testator
Interpretation of wills
What happens where there is no substitutional gift?
The gift falls into the residue
Interpretation of wills
What happens if a residual gift lapses?
It passes under the rules of intestacy
Interpretation of wills
Regarding objects, i.e. people, what is the exception to the general rule that the will is construed at the date of death?
Will is construed at date of execution, as to objects, e.g.:
A gift of “all my shares in ABC plc to the eldest son of John” is a gift of however many shares the testator had at the date of death to whoever the eldest son of John was at the date of execution
Interpretation of wills
Where a gift is to two or more people as joint tenants, i.e. jointly, what is required for the gift to lapse?
All joint tenants must predecease the testator. If not, the gift passes to the surviving tenants in proportionate shares.
This does not apply where a gift is simply split and given in equal shares. It has to be joint. Think right of survivorship
Interpretation of wills
What is the special rule where a gift is made to a testator’s child or other lineal descendant, e.g. grandchild, and the beneficiary child or descendant predeceases the testator?
The gift will pass to the issue of the beneficiary if they are living, and unless a contrary intention is shown, it will occur per stirpes.
Note this only applies where a testator gives a gift to their issue or lineal descendant who:
(1) Predeceases the testator and
(2) Leaves living issue of their own.
It does not apply to gifts to parties who aren’t issue or lineal descendants.
Interpretation of wills
A gift to a beneficiary will fail if the beneficiary or their spouse/civil partner witness the will. Does this invalidate the entire will?
No, just the gift to the beneficiary witness fails
Interpretation of wills
In what situation will a gift to a beneficiary not fail where that beneficiary witnesses the will, and why?
Where there are at least two other witnesses who are not beneficiaries or spouse/civil partner, because the formal requirement that a will have two witnesses will be satisfied irrespective of the beneficiary acting as a subsequent witness
Interpretation of wills
What two groups does a gift to children apply to, and what one does it not?
Applies to:
- Natural children
- Adopted children
But not stepchildren, unless adopted.
Interpretation of wills
When will a class normally close?
When at least one beneficiary has a vested interest, to the exclusion of any potential beneficiary not then living
Interpretation of wills
If a class closes, do beneficiaries who have not satisfied their contingency still qualify?
Yes, as long as they are living when the class closes
Interpretation of wills
Why does the inclusion of the word each of change the effect of the class closing rules?
The class closing rules operate to close a class off so that the pool of assets can be divided up among vested and contingent holders, and of course paid to vested beneficiaries immediately. E.g. “£5,000 to the children of John” requires those beneficiaries to be determined to know how many ways to divide the total pool of £5,000.
Whereas, “£5,000 to each of the children of John” does not require the class to close at all to determine how much each will receive. Each will receive the £5,000.
Interpretation of wills
However, in the absence of a provision to the contrary, where each of is used, when does the class close?
At the testator’s death, and if there are no class members eligible, the gift will fail and not continue until the at least one class member is eligible
Interpretation of wills
How can the class closing rules be excluded?
By an express provision in the will
Intestacy
In what two situations will the rules of intestacy apply?
- Deceased died without making a will, or at least a valid will
- Deceased’s will does not dispose of all of their property
Intestacy
For a spouse to receive their beneficial entitlement, for how long must they survive the deceased?
28 days
Intestacy
What is the spouse’s entitlement where there are no issue, i.e. children?
The entire estate
Intestacy
What are the spouse’s three entitlements where there are issue?
- Personal chattels
- £322,000
- Half the residue absolutely
The issue split the other half of the residue
Intestacy
What is a spouse with issue’s other option with regard to the matrimonial home?
They can opt to take the matrimonial home (or deceased’s interest in it if they were tenants in common) in satisfaction of their entitlement to the three things in the previous card (chattels, 322k, half the residue), and the children will take the residue (after IHT)
If the property is worth more than the entitlement, the spouse must pay this equality money to the estate
Intestacy
What is the list of eight beneficiaries who will take intestate property if there is no spouse, and how is this dealt with?
As soon as a beneficiary falling a category in the below list is identified, subsequent beneficiaries are ignored:
- Issue of the intestate
- Parents (equally if both alive)
- Full brothers or sisters
- Half brothers and sisters
- Grandparents (equally if both alive)
- Full uncles and aunts
- Half uncles and aunts
- The Crown as bona vacantia
Intestacy
How will members of a class of beneficiaries take their share, and what are the two conditions, one of which is required?
They will take their shares equally, as long as they:
- Reach 18, or
- Marry before 18
Intestacy
Except for parents and grandparent beneficiaries who take equally, what does it mean for the rest of the beneficiaries to take per stirpes?
It means that they beneficiaries assume the share through the root
Intestacy
What happens if a potential beneficiary (i.e. a beneficiary with a contingent interest) who was living at the intestate’s death, dies before their interest vests?
Their issue take the deceased parent’s share
Intestacy
What happens if a potential beneficiary (i.e. a beneficiary with a contingent interest) who was living at the intestate’s death, dies before their interest vests, but they have no issue?
The estate will be administered as if that beneficiary has never existed
Intestacy
For the purposes of intestacy, who are deemed to be an adopted child’s parents?
The adoptive parents. Not the natural parents.
Intestacy
Although the intestacy rules apply whether or not an individual’s parents were married, what does the law presume if a person dies intestate and their parents were never married?
The law presumes that the father has predeceased the intestate child, unless there is evidence to the contrary or the father is on the birth certificate
Property passing outside the will and/or intestacy
Can the following rules be varied by the terms of the will?
No
Property passing outside the will and/or intestacy
What are the six categories of property that do not form part of the deceased’s estate?
- Property owned as beneficial joint tenant (remember IHT still payable)
- Life assurance policies
- Pension scheme death benefits
- Nominated property in savings schemes (max £5k)
- Life interests in trust property (passes according to that trust)
- Gifts where donor has received a benefit
Property passing outside the will and/or intestacy
Why do life interests not pass under intestacy?
Because a life interest vests in the remainderman upon the death of the life interest holder
Property passing outside the will and/or intestacy
Even though property owned under a joint tenancy, life interests in trust property, and gifts with reservation of benefit do not form part of the estate for succession purposes, for what purposes are they considered part of the estate?
IHT
PRs
What two groups of people does the term personal representative include?
- Executors
- Administrators (intestate estates)
PRs
Although anyone can be named as an executor, what is it advisable to ensure?
That they are willing and able to take up the position
PRs
Whilst they can be named an executor, what two groups will not be granted probate?
- Minors
- Mental incapacity
PRs
Why does dissolution of a marriage render the appointment of a spouse ineffective?
Because the spouse is deemed to have died on the day of dissolution, unless a contrary intention is included in the will
PRs
Until when is a person free to renounce their right to a grant of probate?
Until they have accepted office or otherwise intermeddled in the estate
PRs
How does an executor accept office?
By either taking a grant of probate or intermeddling in the estate
PRs
What is intermeddling in the estate?
Anything which shows an intention to accept office, even notifying a deceased’s bank of the death
PRs
What are the four requirements to renounce?
- In writing
- Signed by executor
- Contain statement they have not intermeddled
- Signed by a disinterested witness
PRs
What does it mean that renunciation is all or nothing?
An executor cannot renounce part of the office, it must be all, or he must accept the appointment
PRs
Once renounced, what cannot be reclaimed without court permission?
The right to probate, i.e. can’t restart the appointment of executor
PRs
Does an executor renouncing their position as executor have any bearing on their position as trustee, if they also hold one?
No
PRs
Instead of renouncing, the executor can have power reserved. What does this mean?
They will not be involved for now, but if circumstances change, e.g. another executor dies or renounces themselves, the executor who reserved power can apply for a grant of probate at a later stage
PRs
Does the reserved power apply automatically, and what is the significance of this?
No, an application must be made to court.
Therefore, this is essentially a meaningless procedure, since an executor who renounces can always apply to the court after renouncing. The change of circumstances would merely be grounds to support the application.
Grants of representation
What is a grant of representation?
A conclusive court document, authorising the deceased’s personal representatives to deal with the estate and transfer assets to the beneficiaries
Grants of representation
In a non-contentious case, what is the monetary threshold which must not be exceeded for property in a savings scheme to be capable of being obtained (at the institution’s discretion) with just a death certificate, i.e. grant of administration not needed?
£5,000.
Note this is the same amount from the same source that will pass via intestacy to a chosen beneficiary in an intestate situation.
Grants of representation
What else can be sold with just the production of a death certificate, without requiring a grant of administration or providing the right to sell?
Chattels
Grants of representation
If the personal representatives of an estate hires a solicitor, who is the client?
The PRs
Grants of representation
What are the four types of grant?
- Probate
- Letters of administration with will annexed
- Letters of administration
- Grant de bonis non
Grants of representation
When is grant of probate obtained, and only to whom can it be made?
A grant of probate is obtained when the deceased left a valid will and it can only be made to the executors
Grants of representation
What are the minimum and maximum amount of executors that can obtain a grant of probate?
One, and four
Grants of representation
To whom is notice of a grant of probate generally given?
Any executors for whom power is being reserved
Grants of representation
When is an application for letters of administration with the will annexed made?
When there is a valid will, but some problem concerning the appointment of executors
Grants of representation
What are three of the reasons for which a letters of administration with the will annexed may be needed?
- Appointment of executor not correctly drafted
- Will is valid, but deceased did not appoint an executor
- Executor died before the deceased, renounced, or is unable (minor/incapable) or unwilling to act
Grants of representation
What is the order of entitlement to a grant of letters of administration with the will annexed?
- Trustee of residuary estate, if any
- Residuary beneficiary or their PRs, with vested having priority over contingent
- Any other beneficiary or creditor, or their PRs
Grants of representation
In what situation will a beneficiary not be entitled to apply for a grant of letters of administration with the will annexed?
If the gift fails due to the beneficiary or their spouse witnessing the will.
However, they can still apply in a different capacity, e.g. as a person entitled on partial intestacy.
Grants of representation
What is the minimum number of administrators required where there is a minor beneficiary, or life interest under the will?
Two
Grants of representation
In contrast to executors under probate, in a letters with will annexed situation, what will not cause the right to renounce to be lost, and why?
Intermeddling in the estate, because there are creases to be ironed out with regard to how the estate should be administered, so it is not possible for a role to crystallise by intermeddling
Grants of representation
What is meant by a person applying for letters of administration with the will annexed to clear off?
It means that in the application, the person applying has accounted for those having a superior right to the grant, e.g. by confirming their disinterest or renunciation
Grants of representation
When is an application for just letters of administration made?
If the deceased dies intestate or leaves a will but all the gifts have failed
Grants of representation
What is the order of entitlement for letters of administration?
Broadly the same order as for intestacy, but also including issue of parties if party has predeceased
Grants of representation
What is the right to letters of administration of a PR representing someone with an entitlement to a grant?
The same as the person they represent
Grants of representation
However, unless the spouse was beneficially entitled to the estate, who has priority over the PRs of a surviving spouse who died before obtaining a grant?
All relatives in the order of entitlement, i.e. issue down to half uncles/aunts
Grants of representation
For letters of administration, what is the minimum number of administrators required (1) generally, and (2) where there is a minor beneficiary or life interest under the will, and what is the maximum number of administrators?
- One
- Two
- Four
Grants of representation
What is a grant de bonis non and to whom is it granted?
A second grant made to allow the completion of the administration of the deceased’s estate following the death of the sole or last surviving PR, and is granted to the person who would have been entitled had the original PR never taken the grant
Grants of representation
What is the exception to this where a grant de bonis non will not be required, and logically when does this not apply, and why?
In a chain of representation situation, where the sole or last surviving executor dies and that executor’s executor takes a grant of probate, the executor of estate B will automatically take over the execution of estate A. They are not able to refuse this.
Logically this cannot apply where the deceased in estate A dies intestate, because there is no executor in this situation. There is an administrator and this exception will not apply, so a grant de bonis non will be needed.
Grants of representation
In relation to all grants, what occurs where one of the executors/administrators is a minor and there are other executors/administrators?
The grant is made to the adult PRs, with power reserved for the minor in the case of a grant of probate
Grants of representation
In relation to all grants, what occurs where the sole or last surviving PR is a minor?
A limited grant of letters of administration is made to the minor’s parent or guardian for the use and benefit of the minor until aged 18
Pre-grant procedure
What must be paid by the PRs before a grant can be obtained?
IHT
Pre-grant procedure
What is the voluntary scheme banks and institutions can agree to concerning release of estate funds?
In their discretion, the deceased’s bank can release the money owed to HMRC to satisfy the inheritance tax before a grant
Applying to the court
What must be included in an application for a grant of probate, or letters with will annexed?
- Two copies of the will
- Official copy of death certificate
- Tax form indicating either IHT was paid or it was not payable
- Probate court fees
Same for letters of administration, but obviously no will required
Applying to the court
What is required if the application includes the will, but the will does not have an attestation clause?
Affidavit of due execution from a witness to the will or other person present when the will was executed
Applying to the court
What is required if the application includes the will, but the will has obliterations, interlineations or other alterations?
Affidavit confirming whether these existed at the date of execution
Applying to the court
In order to apply for letters of administration, what must the applicant have?
I.e. letters of administration, where there is no will
A beneficial interest under the intestacy rules
Applying to the court
When is a caveat used and what is the effect?
When a beneficiary believes the will may be invalid.
It puts the administration on hold and is valid for up to six months.
Applying to the court
When is a citation to take probate used?
When an executor has lost their right to renounce due to intermeddling, but has not applied for a grant and does not intend to do so
Applying to the court
What must the executor in question do once cited, and what occurs if they refuse?
They must make an application for a grant of probate, and if they fail to do so, the citor can apply for a court order allowing the executor to be passed over
Applying to the court
What is a citation to accept or refuse a grant used for?
To clear off a person with a prior right to any type of grant who has not applied and shows no intention of applying
Applying to the court
What occurs if after a citation to accept or refuse a grant, the cited person still refuses?
A grant may be issued to the citor
Dealing with HMRC
Within how long after the end of the month of the deceased’s death must PRs deliver an account to HMRC?
12 months
However, interest accrues from six months on IHT owed
Dealing with HMRC
What is the discount in the market value for tax purposes offered by HMRC in the case of co-owned (1) residential property and (2) investment property, in recognition of the difficulty in selling a part interest in land?
- 15% for residential
- 10% for investment
Not available when the co-owner is the deceased’s spouse/civil partner
Dealing with HMRC
What is a small estate?
An estate which does not exceed the nil-rate band of £325k
Exempt from IHT and no formal account is necessary
Dealing with HMRC
What is an exempt estate?
An estate worth less than £3 million where the net chargeable estate does not exceed the nil-rate band of £325k
Does not apply if over £100k in foreign assets
Net chargeable estate is the value after deducting liabilities, and spouse and charity exemptions
Dealing with HMRC
To what extent only is the UK estate of a non-UK domiciliary excepted?
If their UK estate consists solely of cash or quoted shares not exceeding £150k
Dealing with HMRC
How much must the deceased have given away in the last 7 years before they died for their estate to not be excepted, where it otherwise would be?
Over £250k
PR duties
What must PRs do?
Take reasonable steps to preserve the deceased’s estate and reaslise on any investments
PR duties
What is the duty of care which applies to PRs in addition to trustees, and what is this in addition to?
PRs must act with reasonable care and skill taking into account any specialist knowledge, in addition to the fundamental duties to act in the best interest of beneficiaries
PR duties
The PRs’ liability for what will typically be excluded in a will?
Breach of duty of care
PR duties
Is a PR liable for loss from a fellow PR’s breach of duty?
Not unless PR was negligent in allowing the breaching PR to engage in the conduct which led to the breach
PR duties
What must the court be satisfied of before it can, at its discretion, relieve a PR from liability for breach of any duty?
That the PR acted honestly and reasonably and ought fairly to be excused
Same as with trustees
Administrative powers of PRs
On to Administrative powers of personal representatives:
What are the nine powers a PR has?
Power to:
- Sell, mortgage, or lease estate property
- Appropriate
- Accept receipt for a minor’s property
- Insure
- Delegate
- Reimburse themselves for expenses
- Invest (same as with trusts)
- Maintain a minor (same as with trusts)
- Advance capital (same as with trusts)
Administrative powers of PRs
What is appropriation?
The use of an asset to satisfy a legacy/interest in the estate, provided the beneficiary consents (unless consent expressly not required in will) and no specific beneficiary is affected
Administrative powers of PRs
Can PRs carry on a sole trade business of the deceased?
Not unless the will provides for it
Administrative powers of PRs
In what circumstance only is a PR liable for the act or omission of an agent to whom they have delegated?
If they fail to use reasonable care appointing the agent
Administrative powers of PRs
Whilst PRs can invest in most things, what two standard investment criteria must be met?
Investment is:
1. Suitable for the estate
2. Diversified
Administrative powers of PRs
As they apply automatically under the Trustee Act when a gift with the right to receive income is made to a minor, what is required to override the provisions regarding maintaining a minor?
Maintenance, education, benefit
An express provision in the will
Administrative powers of PRs
What discretionary power do PRs have if the estate includes a gift to a minor and the gift includes the right of the minor to receive income?
The trustees can decide to use this income for the minor’s maintenance, education, or benefit until the minor turns 18
Use means directly apply toward, not pay to the minor
If not used, PRs must accumulate for the minor until 18, where it is added to the capital. Even if contingent, entitled to income after 18
Administrative powers of PRs
What is the minor’s entitlement upon turning 18, if they still have a contingent interest?
They are entitled to income arising after their 18th birthday only, but income accumulated before and not used to maintain accrues to the capital of the trust
Administrative powers of PRs
To whom may PRs advance funds, what is the amount they may be advanced, and who must consent?
Anyone with a vested or contigent interest in the capital of the estate can be advanced up to their entire presumptive share, subject to the consent of anyone with a life interest in the estate
Entitlement is half of share if trust before October 2014
A life interest holder’s consent is needed because their income is based off the value of the estate which the PRs seek to reduce by advancing
Administrative powers of PRs
What interests give an interest in income, and which give an interest in capital?
- Interest in income comes from vested or contingent, but not remainder interest
- Interest in capital comes from vested, contingent, or remainder interest
Administrative powers of PRs
If an advance is made on a contingent interest which subsequently fails, does the beneficiary have to repay?
No
PRs may be liable for breach of duty if they acted unreasonably
Administrative powers of PRs
Whilst a sole PR can give valid receipt for the proceeds of sale of land, what is required for the actual transfer of land (and shares)?
All PRs must join together
Protection of PRs
What is the liability of PRs to any unpaid beneficiary or creditor, and how can this be avoided?
PRs are personally liable, even if the beneficiary or creditor was unknown at the time of distribution, unless they comply with section 27 of the Trustee Act
Protection of PRs
What are the steps that must be taken under section 27 of the Trustee Act for a PR to protect themselves from liability in the case of an unpaid beneficiary or creditor?
Place adverts in the London Gazette, a paper local to the trust or relevant property, and any other appropriate publication, and request any interested person contact the PRs’ solicitor.
PRs must wait at least two months before distributing.
Protection of PRs
What are the PRs’ four options when a known beneficiary or creditor cannot be found?
- Pay their entitlement into court and distribute the rest
- Distribute everything with an indemnity from the beneficiaries (risky because indemnity is worthless if beneficiary has no funds)
- Seek a Benjamin order
- Purchase insurance against the risk
Protection of PRs
What is a Benjamin order, and what is the extent of the protection it affords to PRs?
A court order which gives the PRs permission to distribute the estate based on an assumption set out in the order, e.g. that the missing beneficiary is presumed dead. This gives full protection to the PRs.
Protection of PRs
If there could be a possible claim under the Inheritance (Provision for Family and Dependants) Act 1975, how long should PRs wait to distribute, and why?
Six months, because a claim cannot be made without court permission after this time
Collecting and realising assets
What is a solvent estate?
An estate with enough funds to pay expenses related to funeral and execution of the estate, as well as debts/liabilities
Irrespective of whether there are enough funds to satisfy legacies
Collecting and realising assets
If the will provides they should not be paid from the residue, what are the three sources that debts owed to unsecured creditors are paid from?
- Property specifically charged with/given in payment for debts
- Pecuniary legacy funds
- Specific legacies
Collecting and realising assets
What is marshalling, and who can it be invoked by?
Marshalling is invoked by a disappointed beneficiary (whose specific legacy has been used to satisfy a debt), and it allows them to be compensated
Collecting and realising assets
What does it mean when property is given free of mortgage?
The mortgage must be paid out of the residue to the extent available
Collecting and realising assets
Where an estate is insolvent, what is the prescribed order of entitlement, which if followed, protects the PRs from liability?
- Secured debts
- Funeral and estate execution expenses
- Preferred debts, i.e. wages, salary, and holiday pay of deceased’s employees for prior four months, to a maximum of £800 each
- Ordinary debts, i.e. money owed to HMRC, and balance of preferred debts
- Interest on 3 and 4
- Deferred debts, i.e. loans from deceased’s spouse
Collecting and realising assets
What implied warranty do the PRs give when the pay a category of debt knowing that there are higher ranking debts?
They give an implied warranty that there are sufficient assets to meet all higher level debts
PRs personally liable if there aren’t sufficient assets
Not liable if they didn’t know of the superior debt
Collecting and realising assets
Although PRs must not prefer one creditor over another in an insolvency situation, when will a PR not be liable?
If they pay a creditor in one class in full, before the payment of others, and later discover the estate to be insolvent
Must have acted in good faith and had no reason to believe estate was insolvent
Post-death changes
How may a beneficiary disclaim their entitlement, and what precludes them from being able to do so?
Orally or in writing, unless they have already accepted benefit
Must be in writing for IHT and CGT purposes
Post-death changes
Where does a disclaimed gift go?
Into the residue, or into partial intestacy if the gift is the residue
Post-death changes
Does disclaiming a gift prevent the same person from receiving property under intestacy rules?
No, and it could potentially be the exact same property
Consider disclaimer to be rejecting the status as beneficiary under a will, not rejecting the property.
Post-death changes
What is the main disadvantage of a disclaimer, and what is a way to overcome this?
The disclaiming beneficiary has no control over the ultimate destination of the gift.
This can be overcome by use of a variation (allows B to change who receives the gift)
Disclaimer is all or nothing. Variation can be of part of a gift.
Post-death changes
What does it mean for a variation to be effective for tax purposes, and what are the three conditions for this?
The variation is read back to the date of death as if the deceased had left the property to the new beneficiary.
Variation must be:
- In writing
- Made within two years of death
- Not made for monetary consideration
If conditions not met, the failed variation will be deemed a disposal by the original beneficiary for CGT purposes
Post-death changes
Unlike disclaimer, in what situation can a variation still be made?
When the original beneficiary has accepted a benefit
Payment of legacies
What are the methods with increasing levels of formality which PRs must use to vest gifts in beneficiaries when the gift is of:
- Chattels
- Company shares
- Land
- Chattels: Items can be delivered, in exchange for receipt, and insurance then cancelled
- Company shares: Stock transfer form
- Land: Assent in writing, and insurance then cancelled (B needs to register their interest with HMLR)
Payment of legacies
Unless the will provides otherwise, who bears the costs of transferring assets?
The beneficiary
Payment of legacies
Beneficiaries are entitled to income from property gifted to them arising after what?
The deceased’s death
Payment of legacies
When does the doctrine of abatement arise, and what does it provide?
When assets of a deceased person are not sufficient to fully satisfy all creditors, their debts abate i.e. are reduced, proportionally, and the creditor has no choice but to accept this lower value
Abatement also applies to any specific legacy except where a priority is given
Ascertaining the residue
What is the tax presumption given to specific gifts of (1) UK property and (2) non-UK property?
Specific gifts of UK property are deemed free of tax, unless the will states otherwise.
The opposite presumption applies to non-UK property.
Ascertaining the residue
What does free of tax require in practice?
PRs must pay off any tax liabilities before distributing assets to beneficiaries
Ascertaining the residue
What are the four ways a PR can be authorised to receive remuneration for their services, in exception to the general rule that they are not entitled to do so?
- A legacy given to an executor
- Express clause in the will (usually for professional PRs)
- Beneficiaries (of the source of funds used to pay the PR) consent
- Court permission
Estate accounts
What are the three accounts which generally make up the estate accounts?
- Income account
- Capital account
- Distribution account
Estate accounts
Where does income that relates to the period before death but is received after death go?
Capital account
Estate accounts
At this stage, how are the PRs discharged from liability?
- PRs endorse the accounts and send to the residuary beneficiaries
- Residuary Bs endorse the accounts
- Residuary Bs formally discharge PRs with agreement to indemnify them against all claims and demands (again, can be worthless if Bs have no money)
If B refuses to endorse, PRs can ask the court to approve, or can pay the objecting B’s share into court
Assents
What is an assent and what are the three requirements for one?
Document which vests legal title in a beneficiary.
- In writing
- Signed by the PRs
- Expressly name the person in whose favour it is given
An assent relates back to the date of death, i.e. the property is treated as being the beneficiary’s since the deceased’s death
Assents
Is an assent still required if the PR is a beneficiary or trustee?
Yes, because the capacity in which they are holding the property is changing
Assents
What must HM Land Registry be notified of?
Any change of ownership of registered land, from the deceased to the PRs or the beneficiary
Assents
When buying land from a PR, what should a purchaser insist on which will protect the purchaser unless they have notice to the contrary?
A statement in the conveyance that no previous assent has been made
Assents
When buying land from a beneficiary, what is sufficient to prove the beneficiary has the right to sell?
An assent in the beneficiary’s favour
Beneficiary’s rights and remedies
Until administration is complete, what does a beneficiary not have?
B does not have any legal or equitable interest in the deceased’s assets
They merely have a right to have the estate properly administered
Beneficiary’s rights and remedies
What are the two ways a disappointed beneficiary can recover loss from the PRs?
- Personal action
- Tracing
Beneficiary’s rights and remedies
What are the two ways the PRs can be absolved in a personal action, even if they would otherwise be personally liable?
- If they acted honestly and reasonably, and ought fairly to be excused, or
- Beneficiaries consent
Beneficiary’s rights and remedies
What is tracing, and in what two situations is the right to it lost?
The right of the beneficiaries to trace and recover property from the estate from PRs or subsequent purchasers.
The right to trace is lost if the purchaser is a bona fide purchaser for value without notice, or it would otherwise be inequitable to allow tracing.
Inheritance (Provision for Family and Dependents) Act 1975
What are the grounds to make a claim to the court under the 1975 Act, and what is the effect?
The terms of a will can be set aside or an intestacy can be varied if the deceased was domiciled in England and Wales and did not make reasonable financial provision for the applicant
Inheritance (Provision for Family and Dependents) Act 1975
Within what time of what event must an application under the 1975 Act be made?
Within six months of the grant of representation to the PRs, or later with court permission
Inheritance (Provision for Family and Dependents) Act 1975
What are the five categories of people who will qualify to make a claim under the 1975 Act?
- Surviving spouse or civil partner at the date of death
- Former spouse or civil partner who has not remarried (unless clean break divorce)
- Child of the deceased or person treated as a child of the family (unless able-bodied adult in full employment)
- Person who was being maintained (via significant contribution toward reasonable needs)
- Person living with deceased as partner for entire two-year period before death
Inheritance (Provision for Family and Dependents) Act 1975
What is the standard for reasonable financial provision when it comes to a spouse?
Financial provision which is reasonable in all the circumstances, whether needed for maintenance or not
Inheritance (Provision for Family and Dependents) Act 1975
In their discretion, in what circumstance can the court apply the spouse standard to former spouses?
If the death occurs within 12 months of the divorce decree and no final order has yet been made in the divorce proceedings
Inheritance (Provision for Family and Dependents) Act 1975
For all other applicants who aren’t spouses or former spouses qualifying for the spousal standard, what is the standard?
Financial provision which is required for maintenance such that they can live decently and comfortably according to their situation
Inheritance (Provision for Family and Dependents) Act 1975
What occurs when the court approves an application under the 1975 Act?
The estate is administered according to the terms of the court order, and not the will or intestacy
Inheritance (Provision for Family and Dependents) Act 1975
In the event of a successful application under the 1975 Act, what are the court’s four options under their wide discretion?
- Transfer property
- Payment of a lump sum
- Payment of income
- Settlement of property on trust
Inheritance (Provision for Family and Dependents) Act 1975
Does the court have any powers under the 1975 Act regarding property disposed of by the deceased before death?
Yes, if that disposal was intended to avoid the provisions of the 1975 Act
