Administration Flashcards
PR’s?
PR by will is an executor.
Where there is a will but no executor, a PR will be appointed and is called an administrator. – under non-contentious probate rules.
- Not automatically the trustees, will be where executor is stated as trustees.
Pre-grant
- Common law duty to dispose of body
- Statutory duty to pay any IHT, provide info to HMRC
Grant – gives the authority of the PRs to act. An order of the high court. It establishes authority of PR to act and the validity of the deceased’s will.
An executor – derived authority from will and may act from date of death
An administrator – derives authority from the grant
Role of a PR?
- S25 A PR must collect and get the estates and administer it
- Fiduciary in nature – duty of care
- Legal title lies with PRs virtue of their appointment
- NOT AUTOMATICALLY trustees – if any continuing trusts are created, they should be transferred to trustees as part of administration process – and record the date on which this occurred
- BECOMES A TRUSTEE
- If there is an intestacy
- Expressly appointed
- Statutory trust arises under an intestacy
Duties of a PR?
- Common law duty to dispose of the body
- Statutory duty to inform HMRC and pay IHT
- IHT 400 form for an estate that is not excepted
- Duties of a par under the grant – collect in assets and provide inventory and account of estate assets
- Duty of due-diligence – should not act ultra vires – should complete administration within an a=12 months of date of death
Power of a PR?
- Statute – IF deceased died intestate ONLY STATUTORY powers applies
- If left a will – statutory powers will apply to the extend they do not conflict
- Will – express clauses may confer additional powers or ones that exclude or modify
Role of solicitor?
- If instructed by prs – solicitor must act on Prs instructions
- Administrative expense and may be paid using estate assets rather than personal funds of PR
- Appointed as executor – they will be a professional PR and their duties are owed to creditors and beneficiaries – solicitor will charge estate for their services
- Contentious matters – if the terms of will are disputes or challenges, or a disappointed beneficiary wants to make a claim
Statutory powers?
- AEA
- Sell charge or lease – wide powers
- Appropriate – subject to following rules – a specific beneficiary must not be prejudices; consent of the recipient beneficiary is required.
- If value of asset exceeds beneficiaries’ entitlement the Prs may appropriate and then make a balancing cash transfer
- Insure – out of the estate income or capital
- Invest – duty to preserve the estate, standard investment criteria
- Charges for PR services – professional ones can claim reasonable remuneration provided they are not acting alone and the co-prs give their written consent. LAY prs need to be given express power in the wills. But ALL may reimburse themselves for expenses incurred when acting on behalf of the estate
PR’s can delegate EXCEPT FOR?
- How and whether assets should be distributed
- Whether fees or costs are payable from income or capital
- Appointment of trustees
- If delegation is required must do so in writing, and provide them with a written policy statement which the agent must agree to comply with. MUST KEEP THESE UNDER REVIEW.
Express powers?
Using a will precedent that contains express powers
Many firms incorporate Society of trust and estate practitioners’ provisions in STEP
CAN a joint pr act alone
- If more than one pr is appointed - exercise powers unanimously
- When selling or transferring usually have authority to act alone.
Under a grant?
- Collect in assets
- To administer it according to law
- Keep assets secure
- Paying debts and liabilities
- Paying any legacies
- And distributing any residuary estate
- Only the succession estate
General duty?
- Create within 12 months
- Subject to statutory duty of care as trustees.
- Role of pr is fiduciary in nature.
- Statutory powers of prs apply to the extent they dint conflict with what is said in the wills, express provision will take priorities on powers over PR’s.
- Personal liability
- May be removed by court – or an administration action where court will take over.
PR’s liabilites?
- Can claim of action against a PR is called a devsatavit
- Claimant will seek a court order that the PR makes good the loss during their personal assets
- A claim against a PR may be based on
Maladministration
- Incorrectly administering estate
- Using residuary estate to meet liabilities which should have been paid from other parts of the estate
Misue of assets
Negligence
- Unreasonable delay
- Poor investment
Breach of fiduciary duty
- Breach of no conflict rule, or no profit rule or self-dealing
Removal of a PR?
- Removed by a court order under the s50 AJA appointing a replacement PR
- AN administration actions where the court takes over the administration itself
Protection for PRS - If PRs also acts in trustee capacity – they will be subject to trustee duties and be personally liable for loss suffered as a result of a breach of trusts
Ways to protect from liability? COURT ORDERS?
Ask for court directions
- If they foresee difficulties then asks for direction from court – but its very expensive and time consuming
S48 AJA application – distribute with legal written opinion
- Could write under s48 AJA to distribute in accordance with written opinion S48 AJA
Protect against liability? S27?
protects PRs against claims against unknown beneficiaries
- Notice must be placed in – intention to distribute to known beneficiaries two months after the date of advertisement
- London gazette
- A newspaper circulating in the area in which any land held on trusts is situated
- Any other newspaper appropriate
- ONLY PROTECTS AGAINST UNKNOWN BENEFICAIRES AND CREDITORS
Benjamin order?
- KNOWN BUT MISSING BENEIFCAIRES
- May also be used to presume the missing beneficiary had no children or died.
- Relieves of personal liability
- Disappointed beneficiary can make a claim an against another beneficiary
- protects to distribute – that the missing beneficiary has died or
Presumption of death act?
if can’t be located and effected asking court to declare them as dead if more than 7 years. Confirm the presumed date of death – QUICKER THAN A BENEJAMIN RODER
Insurance? Indemnities? Payments to court?
Insurance
- May not be possible fi insurance if risk is too hight
Payments to court
- Where a beneficiary can be located but is refusing to accept their inheritance
Indemnities –
- beneficiaries reimburses if they get sued
- only as good as the person giving it
S61- exoneration in whole or part
- if they acted honestly and ought to be fairly excused for breach of trusts
Requirements for grant?
- need to provide evidence of their appointment and the grant provides the proof to act
- only extends to assets in succession estate
Grant of probate?
- Where left a valid will – where one of the executors is willing to act.
- Even if the will does not dispose of any or all of the property
- A named executor may formally appoint someone to act on their behalf – power of attorney
Grant of letters of administration WITH WILL?
- Needs to be a will – either appoints no executors who are willing or able to act
- Rue 20 applies for order of priority
Grant of letters of administration?
- Where died interstate
- Rule NCPR 22 which lists order of priority
ASSETS where no grant is needed?
- Small payments act –
- Upper financial limit of 5000 per asset – if holding exceeds this financial limit no payment can be made under the act and a grant will be necessary to establish title to the whole sum – not just the bit in in excess of the 500
- But banks will often release sums up to 15,000 without a grant
- National Savings (inc. Bank accounts, Savings Certificates and Premium Bonds) * Friendly Society and Industrial and Provident Society deposit accounts. * Arrears of salary and wages * Pensions where the deceased was a member of the police, fire authority, air force or army. * Building society account
Cash in house - Assets jointly owned would need permission before could be sold
Personal possessions
Property that does not devolve on PRS - Outside succession estate
- need to produce a death certificate and any other documentation the asset holder requires
- Property owned as joint tenants
- Life policies written in trust
- Donations mortice causes
- Assets held in a trust in which the deceased had an interest
Preliminary pre-grant steps?
- Register death – get death certificate – government organisations can be notified via centralises service when registering death
- Arrange funeral
- Locate wills and codicils – should satisfy themselves that the will is valid and correctly executed
- If died interstate should make enquiries to confirm this
- If a valid will has been lost – appropriate steps must be taken to re-construct it
- Enquiries to confirm if died interstate
- Compile a list of assets and liabilities – calculate IHT due and establish whether the estate is solvent or not
Establish value of assets?
- Bank act 0 summary of act balance and interests accrued
- Joint accounts – usually presumed 50/50
- Low value chattels – usually acceptable to estimate their value
- Single its wroth more than 500 – a formal probate valuation should be obtained
- Quotes shares – if deceased owned quotes shares s- there are special rules for establishing the date of death
- Private co-shares – valuaer will normally be instructed
- Land – estate agents prepare a valuation
Capacity to act?
- Unable to if they
- Predeceases the testator
- Are a minor
- Lack capacity
- Are the former spouse of civil partner
Only one executor is requiring even if there are minor or life interests that arise – practical reasons 2 are normally appointed
= power can be reserved to any remaining executors – which means they would be able to apply at a alter date if a vacancy arose and – need to apply for a grant of doubt probate
Death of a proving PR - IF ONE REMAINS?
- If a grant has been taken out and one of the appoints dies before complete
- If at least one remains – they may continue with administration and if falls below minimum needed then another one can be appointed
IF no PR remains after death of a PR?
- Chain or representations applies or
- Would apply if the last surviving executor dies having appointed an executor of their own estate and this person takes out the grant of probate for e’s estate- then that executors automatically become executor of original testators’ estate as well as being executor for the second estate – NO ADDITONAL GRANT IS REQUIRED
- S7NDOES NOT APPLY WHERE ADMINSISTARTIORS ARE ACTING
- Grant of letters of administration de bonis non is issued
- IF A chain of representation cannot be issues – a second grant will be issued – 3 requirements
- The administration is incomplete
- No remaining prs
- There has been a previous grant of representation
- 1 administrator is needed UNLESS life or minor interest where 2 will be needed
- Appointment of administrators by court
- Administrators’ authority to act
- Whereas PR is applying for letters of administration – order follows intestacy rules.
Where an executor does not want to act?
Renunciation
- Sign a form of renunciation
- Cannot later change mind without court approval
- CANNOT DO THIS IF THEY INTERMEDDLE – Funeral doesn’t count
Power reserved
- Grant of double probate runs con-currently – only appropriate if the administration has not completed
- Must give notice of intention to apply to executor who has the power reserved
- Must be at least one other that took out a grant of probate – if you have intermeddled you can still reserve power
- Where power is reserved to an executor, who are apply for probate must give notice of their intention to apply for the executor to whom power is reserved.
Use of an attorney
- After the executor ahs obtained a grant – maximum of 12 months can power be delegated – this can be renewed If needed
- Before a grant has been obtained – the executor is delegating the power to apply for a grant
When an ADMINISTRATOR Does not want to act?
Can renounce – a form of renunciation must be signed and submitted to private registry with the application for the grant – next best entitled person can apply
- Not prevented from renouncing even if they have intermeddled with the estate
- appoint an attorney CANNOT RESERVE POWER
But, what happens if those entitled to apply refuse to act but also refuse to renounce their right to apply? Or, what if an executor intermeddles in the estate (and is thus unable to renounce) but refuses to apply for the grant?
In these situations, it is possible to obtain a court direction (using the citation process) to:
* Require a person to take out a grant
* Remove their right to apply
* Authorise another person to take on the administration
Detailed - Grant of administrators will WILL?
- Administrators are appointed under this grant
- Entitlement to apply derives from rule 20
The order in Rule 20 broadly follows the entitlement to the estate assets.
(a) executor;
(b) trustee of the residuary estate;
(c) any residuary beneficiary (whether taking absolutely or for life), or, where there is a partial
intestacy, a beneficiary of the estate under intestacy;
(d) the PRs of anyone in (c) other than a trustee or life tenant of the residue;
(e) any other beneficiary or a creditor;
(f) PRs of anyone in (e).
DETAILED - Grant of letters of administration?
- Where the deceased died without a valid will
- Entitlement derives from rule 22 NCPR
- The order in Rule 22 broadly follows the entitlement to the estate under intestacy.
- (a) surviving spouse or civil partner
- (b) children of the deceased
- (c) father and mother of the deceased
- ) whole blood siblings (share both parents)
- (e) half-blood siblings (share one parent)
- (f) grandparents
- (g) uncles / aunts of whole blood
- (h) uncles / aunts of half blood
Under Rule 22(4), the PR of any applicant who survived the deceased but died before taking a grant may apply on their behalf, although an application by a living person within the same category is preferred. Applicants must demonstrate the nature of their familial relationship with the deceased (to evidence which category they fall within). In addition, they must also have a beneficial entitlement under the estate.
BEEFICIAL ENTITLEMNT CAN ALSO BE if you would have inherited if the estate had been bigger - SO FOR CHILDREN AND RESIDUARY
When applying - need to consider?
A person in one category cannot apply if anyone in a higher category is able and willing to act as administrator
The applicant(s) must explain why anyone with a better right to apply is not doing so (known as “clearing off”). Applicants do not need to explain why a person in the same category i.e. with an equal entitlement is not making the application. If one of two residuary beneficiaries (c) applies for the grant, the applicant must “clear off” (b) by e.g. confirming no trustee of residue is appointed, and (a) by e.g. confirming the sole appointed executor has pre-deceased. But the applicant is not required to “clear off” anyone in (c), i.e. explain why the other residuary beneficiary is not applying.
Number of administrators?
Only one administrators is requires unless there are minor or a life interest in the estate
If two are required but only one is willing to act someone form next best entitlement to apply
Reporting to HMRC?
- Duty to deliver an account to HMRC regarding the deceased’s estate
- Pay any IHT dude
Should – include all the property comprising deceased’s taxable estate and exemptions and reliefs that apply
Deadline for IHT?
- 12 months from the END of the month in which the death occurred
- Deadline for PAYING IHT IS
- 6 months from the end of the month in which the death occurred
But in practice - Grant will not be issued until info about estate has been rpvided to HMRC and any IHT has been paid
Instalment options?
- Paid by 10 equal annual instalments
- Remaining instalments are due on subsequent anniversary date with interests charged on any IHT that remains outstanding after the initial deadline starts
- To avoid interests – instalment option is only really used when needed – if insufficient liquid assets and PRs wish to avoid sale of family home to raise funds to pay tax.
- Operates on, land, company shares giving decades control, some unquoted shares. Dorms or interest in farming, business interest, timber.
- If anything is sold – then IHT is due immediately on that estate
Raising funds?
- Direct payment scheme to HMRC directly from BANKS.
- Or get a bank loan
- Or get a loan from beneficiary
- Revised information sent to HMRC in form C4
- Prs can then apply for the grant
Must decide if the estate is excepted?
If state is not accepted – form IHT 400 must be submitted to revenue within 12 months of due, interest on IHT is due from end of 6 months from death.
Two categories of excepted state
Low value –
- no IHT payable and the reasons for this is because the gross value of the estate is below the NRB
Exempt - An exempt excepted estate is one where: * the gross value of the estate is no more than £3 million, but * no IHT is payable, and the reason for this is because * after debts are deducted and spouse and/or charity exemption are applied the net value of the estate is below the NRB. (N.B. Debts alone cannot bring the estate into exempt excepted status).
- The meaning of gross value and NRB are the same as for the low value excepted estate. Only spouse/civil partner or charity exemption can be considered for these purposes – no other reliefs can be taken into account
ADDITIONAL FACTORS FOR EXCEPTED ESTATES?
- If
- any of the following apply, the estate cannot be excepted:
- The deceased made a GROB that subsists at death (or the reservation ended in the 7 years
- prior to death and the transfer was not exempt)
- The estate includes either more than one trust interest, or, a single trust interest worth more
- than £250,000 (and is not passing to spouse)
- Foreign assets are worth more than £100,000
- The value of specified transfers exceeds £250,000
- A claim for the RNRB is being made (the claim for RNRB - IHT 435/6 - would accompany the
- IHT 400).
An IHT 421 (the probate summary) should also be completed. It contains details about the deceased and a summary of the gross/ net succession estate (assets passing under the grant rather than the IHT estate).
Procedure for applying for a grant of representation?
Professional applications
- Made by a solicitor or probate practitioner –
- Mandatory online applications – includes most grants of probate
- Online applications – simple applications under NCPR 20 AND 22
- Mandator paper application – non standard grants
PA1A is sued when deceased did NOT leave a will
PA1P is sued where deceased left a valid will
Both applications require
- Confirm identity of deceased
- Justify type of grant
- Provide info about value of the estate
- Complete the legal statement on the probate form confirming the info provided is correct
- If an IHT 400 was completed – HMRC will provide confirmation to probate registry using form IHT 421
- Attach a legal statement
Completing the application
- Registry fee – no fee for estates worth less than 5000
- Original grant – will provide the sealed copies as requested
- A certified copy of death certificate
- Testamentary documents –
- Excepted estates
8. Power of attorney – is completed by the donor and also submitted with application for grant
Affidavits?
Affidavit
- A formal written statement of fact which a person signs under oath –
- Signed by all parties and dates, JURAT
Affidavit of due execution
- Where will is valid but not complied with s9
- One of the witnesses can sign it
If wills have marks
- Affidavit of plight and condition
- To confirm whether it was tried to be revoked, or if something was meant to be attached
Assuming there is a clear sign to revoke gift to Kelly this alteration would be efefctie if it was made before the will was executed
If original will I smissing – a copy of will can be admitted ot probate if there is a court order approving this
If a will existed but cannot be found
- A copy of will can be submitted if there is a court order and an affidavit is needed for the court order.
Once all this is sent – and they are granted the grant of representation – they will be sent a few sealed copies to each asset holder so all the assets are sent to the PRs.
Post grant steps?
Collecting in assets
An estate is solvent if the assets are sufficient to pay all the funeral, testamentary and administration expenses, debts and liabilities, and will be insolvent if the assets are insufficient to do so. It is immaterial whether legacies can be paid in full or not.
Money collected should be paid into
A prs bank acc ‘
A law firms client account
Pay off any debts – if we have a solvent estate –
If we have an insolvent estate
Secured debts?
a debt is secured if it has been charged on deceased property during their lifetime – will bear primary liability for payment of debt secured against it unless a contrary intention is shown in the will
Charged property will bear the main cost unless otherwise stated.
- So, someone would inherit subject to mortgage and is not entitled to have mortgage debt discharged from other assets in the estate – therefore may have to sell the house
Unsecured creditors
- For solvent estates – order is not a primary concern
Marshalling?
- If PR’s do take asset out of order the beneficiaries whose assets have been wrongly taken can use doctrine of marshalling – creditors are not bound by this and have no obligation to return the money – disappointed beneficiary could claim against the assets inherited by another beneficiary fi those assets should have been sued to repay the debts
