5. Administration: Dealing with the Assets Flashcards
What are some standard powers which would commonly be included in wills, in addition to statutory powers?
Power to charge (i.e. for time)
Extended power to appropriate assets without consent of legatee (i.e. removing consent from statutory power under s 41 AEA)
Power to insure assets
Power to accept receipts for or on behalf of minors
Self-dealing
What is self-dealing?
When a PR transfers from the estate they are administering to themselves - to avoid this, consent must be obtained by all beneficiaries (and those under 18 cannot provide consent)
What is excluded under trustee’s power to invest under s 3 TA?
Investment in land
What is excluded in a trustee’s statutory power to purchase land with trust assets?
Purchasing land abroad
What does s 31 TA permit the trustee do to?
To use income received under the trust for the minor’s maintenance, education or benefit
When a trustee turns 18, what do trustees have to do in relation to the income from a trust?
They have a duty to pay the beneficiary their share of the income
What does s 32 TA permit the trustee do to?
Allows trustees in certain circumstances to give a beneficiary payment of trust capital for their benefit sooner than they would receive it under the basic provisions of the trust
When does the administration period for a will begin?
At moment immediately following death
What is a devastavit claim?
When trustees are personally liable for any loss caused to the estate by maladministration ornegligence
What does s 61 TA give the courts the power to do in relation to trustees?
To relieve them from liability for a breach of duty if it is satisfies that the PR has “acted honestly and reasonably and ought fairly to be excused for the breach”
What are the three main issues a PR will face in the administration of an estate?
- Unknown beneficiaries and creditors
- Missing beneficiaries and creditors
- Inheritance (Provision for Family and Dependants) Act 1975
What is the risk if a trustee distributes and estate and then someone subsequently makes a successful claim?
They would be personally liable for resolving the mistake
How can a trustee protect themselves against unknown beneficiaries and creditors?
By advertising for claimants in compliance with s 27 requirements, and wait for 2 months before distributing the estate
What are the options for a PR if there are missing beneficiaries?
- Keeping back assets (advantage: protects from personal liability; disadvantage: beneficiaries may not agree)
- Taking indemnity from other beneficiaries (advantage: theoretically protects from personal liability; disadvantage: worthless is beneficiaries do not have means to satisfy claim)
- Taking out insurance (advantage: gives some protections; disadvantage: expensive and client liable for shortfall)
- Apply to the court for a Benjamin order -authorises the PRs to distribute the estate on the basis that the claimant is dead (advantage: offers full protection from personal liability; disadvantage: expensive and the beneficiaries are still liable)
How can a trustee protect themselves against an applicant under the Inheritance (Provision for Family and Dependants) Act 1975?
Wait 6 months from grant of representation before distributing the assets
Then applicant cannot apply
If the trustees have waited 6 months and therefore discharged their responsibilities under Inheritance (Provision for Family and Dependants) Act, can someone still bring a claim?
Yes - the PRs would not longer be personally liable but the claimant could recover from the beneficiaries if the court orders this
In a solvent estate, under ss 35 and 34(3), what is the order of payment?
Secured debts
Unsecured debts and expenses, paid in following order
1. Property undisposed of by will
2. Property included in a residuary gift
3. Property given for payment of debts
4. Property charged with payment of debts
5. Fund retained to meet pecuniary legacies
6. Property specifically devised / bequeathed, rateably according to value
7. Property appointed by will
If a pecuniary legacy has been left with no provision by will for payment, which assets will be used?
PRs will decide
What is the time frame for the payment of pecuniary legacies?
Payable at the end of the “executor’s year”, i.e. one year following testator’s death
In what four events, as an exception to the general rule, is interest payable on a pecuniary legacy from date of death?
- Payable in satisfaction of a debt owed by the testator to a creditor
- Charged on land owned by the testator
- Payable to the testator’s minor child
- Payable to any minor (not necessarily their child) when intention is to provide for maintenance of the minor
In what event would PRs become liable for tax?
If it remains unpaid by donees 12 months following end of month of donor’s death
How can a PR obtain confirmation from HMRC that there is no further claim to IHT on the estate?
Apply to HMRC using form IHT30 for a clearance certificate
When does liability occur for IHT and CGT following the death of the deceased, and what must be done?
Immediately following the death
PRs must make return to HMRC of income / capital gains - 6 April up until death
What rates of income tax are PRs subject to?
Dividends - 8.75%
Other income - 20%
