Administration Flashcards
How do you identify a PR?
Executor: Via appointment in the will.
Administrator - with will: NCPR 20
Administrator - no will: NCPR 22
What’s the required number of PRs?
Executors: 1 - even with a minor beneficiary;
Administrators: 1 - 2 if there’s a minor beneficiary
What is the liability of a PR?
A PR is personally liable for any breach they commit as a PR that results in a loss to the estate.
The courts may relieve the PR from liability if the PR was reasonable and honest in their actions.
What assets can a PR control?
Anything that passes through the will or under intestacy rules.
PR has no power over property that passes outside of the estate.
What assets don’t need a grant?
- Assets under the value of £5,000;
- Chattels;
- Cash
What types of assets pass without interference from a PR?
- Joint property;
- Insurance policies assigned or written in trust;
- Discretionary lump sum pension benefits
What if an executor is unwilling to act at the time of administration?
(i) They can renounce their right to take the grant, provided they haven’t intermeddled in the estate;
(ii) they can appoint an attorney to act for them, e.g. if they lack capacity at the time of administration;
(iii) they can reserve their power to act later, e.g., if one of the executors can’t continue.
What is the order of priority for NCPR 20? (PA1P)
- Executor
- Trustee of the residuary estate
- Any residuary beneficiary
- PRs of any residuary beneficiary other than a trustees or life tenant of the residue
- Any other beneficiary or a creditor
PRs of any one in (5)
Those in lower categories must ‘clear off’ those higher than them. Also, beneficiaries with vested interests are preferred to those with contingent interests.
What is the order of priority for NCPR 22? (PA1A)
(i) Spouse;
(ii) Issue;
(iii) Parents;
(iv) siblings;
(v) half-siblings;
(vi) grandparents;
(vii) uncles/aunts/issue;
(viii) half-uncles/aunts/issue
Akin to NCPR 20, if there is someone in a lower category applying when there’s someone in a higher category, they must clear them off.
What forms, fees and documents does a PR need to apply for the grant?
Form: PA1P (if there is a will); PA1A (if there is no will)
(PA1P will annexed if there is a will but no appointment)
Documents: Need to send deceased’s will and codicil (if any) and a certified copy of the death certificate
Payments: Application fees and IHT payment (IHT 400 should be submitted to HMRC unless the estate is excepted).
What powers does a PR have?
- Power to invest estate assets (must consider investment criteria);
- Professional PR can charge a reasonable amount for their time (Agreed by others), Lay PR cannot (unless will states otherwise);
- Power to sell, charge and lease assets to pay debts and liabilities;
- Power to reimburse reasonable expenses.
What are the (4) possible claims against a PR?
- Maladministration = incorrectly administering the estate;
- Misuse of assets - e.g. making a financial gain from the estate assets;
- Negligence - i.e. unreasonable delay, poor investment;
- Breach of fiduciary duty - e.g. putting themselves in a conflict of interest
What duties are owed by a PR?
- Duty to dispose of body;
- Pay IHT and inform HMRC;
- Collect in and administer the estate;
- Provide inventory and account of estate assets during administration;
- due diligence;
- duty of care when making investments;
- avoid conflicts of interest;
- not to profit from role unless authorised by the court and beneficiaries.
What is the order of priority regarding property sold for the payment of unsecured debt?
(i) Property undisposed by the will;
(ii) Property included in a residuary gift;
(iii) Property given for the payment of debts;
(iv) Property charged with the payment of debts;
(v) fund retained to meet pecuniary legacies;
(vi) property specifically gifted.
When is an estate insolvent?
When the estate can’t pay its debt nor can it pay its administration fees.
What are the methods of funding IHT?
(a) Direct Payment scheme from the deceased’s bank accounts;
(b) Life insurance;
(c) Assets whereby a grant isn’t needed;
(d) Loans from the bank and/or beneficiaries.
When do you pay IHT? What properties are the exception?
At the end of 6 months in which the deceased died.
Exception, instalment properties: property; shares (others)
What are the three categories of an ‘excepted’ estate? (No IHT 400 form)
(1) Small estate - The gross value of the estate is below the NRB;
(2) Exempt estates - Bulk of the estate attracts the spouse or charity exemption;
(3) Non-Domiciled - Deceased wasn’t domiciled in the UK
How do you transfer:
(i) Land;
(ii) shares; and
(iii) chattels?
(i) assent;
(ii) stock transfer form; and
(iii) delivery.
How long does a PR have to distribute the estate?
They have ‘an executors year’, but are not legally bound to do so.
Claim of maladministration may be brought if there was an undue delay in distribution.
What is the income tax rate for a PR?
No personal allowance; flat rate of 8.75% for dividends; flat rate of 20% for all other income.
That is only for income earned during the estate administration; income earned before the deceased’s death is taxed at the normal rates + with the allowances.
How is CGT calculated on death?
Death isn’t a disposal, so the value is uplifted to what it is at the date of death.
CGT is paid if there is a sale of the gift and can benefit from the annual exemption. Further, tax will be payable if the deceased had outstanding CGT liability on death.
The rate payable is 20%; 28% on residential property.
How can a PR protect themselves (not beneficiaries) from liability?
Known
- Benjamin order - Known but missing beneficiary;
- Keep assets back;
- Take out insurance;
- Obtain indemnity from beneficiaries
Unknown
- S27 Trustee Act - Advertisement in local gazette and newspaper, wait two months, unknown beneficiary/creditor cannot bring action against PR;
