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(FLK2) Wills and Estates > Administration > Flashcards

Administration Flashcards

1
Q

What is Administration?

A

The process of:

  • Collecting the Deceased’s Succession Assets;
  • Paying the Estate’s taxes, debts, and expenses; and
  • Managing its distribution.
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2
Q

What is a Personal Representative (“PR”)?

A

Someone permitted by law to Administer the Deceased’s Estate, with whom legal title therein vests.

This is a lifetme appointment.

PRs are Fiduciaries, but not necessarily Trustees.

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3
Q

What is the Grant of Representation (the “Grant”)?

A

A High Court Order establishing:

  • The PR’s authority to act; and
  • The Deceased’s status as Testate or Intestate.

The power granted is limited to the Succession Estate.

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4
Q

What will the Grant of Representation contain?

A
  • The Estate’s value.
  • Identity of Executors appointed.
  • Deceased’s Identity and Death Date.
  • Deceased’s status as Testate or Intestate.
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5
Q

What are the Three Types of Grants of Representation?

A
  • Grant of Probate: For Testate Estates that appoint an Executor willing to assume the role, issued in their name.
  • Grant of Letters of Administration: For Intestate Estates.
  • Grant of Letters of Administration (with Will): For Testate Estates that appoint an Executor unwilling to assume the role.

If a Will fails to dispose of the whole Estate, a Grant of Letters of Administration (with Will) is the correct option.

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6
Q

Which Assets can be dealt with without a Grant of Representation?

A
  • Cash.
  • Solely-owned Chattels.
  • Assets outside the Succession Estate.
  • Assets distributable under the Administration of Estates (Small Payments) Act 1965 (“AE(SP)A”), including:
    * National Savings.

* Building Society Accounts.

* Arrears of salary and wages.

* Friendly Society & Industrial and Provident Society Deposit Accounts.

* Pensions where the Deceased was a member of the Army, Police, Air Force, or Fire Authority.

There is an upper limit of £5,000 per AE(SP)A Asset, which if exceeded, triggers the need for a Grant.

Title of Chattels passed by delivery, except for cars, where proof of ownership is required. If Chattels are jointly-owned, consent is required for sale.

‘National Savings’ includes Bank Accounts, Savings Certificates and Premium Bonds.

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7
Q

What is the Difference between an Executor and an Administrator?

A
  • An Executor derives power from the Will (or Codicil), and therefore, may act from Death.
  • An Administrator derives power from the Grant, and therfore, may only act after Issuance.

Administrators are appointed by the Non-Contentious Probate Rules 1987.

The Grant merely confirms the Executor’s authority, which is useful for facilitating Administration vis-à-vis Third Parties, e.g. the Land Registry.

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8
Q

Who alone is Entitled to a Grant of Probate?

A

The Named Executor.

If more than one Executor is Name, but not all of them apply, the Applicants may proceed, but will have to explain to the Probate Registry why the others are missing from the Application.

Once Granted, a Named Executor may formally appoint another to act on their behalf under a Power of Attorney.

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9
Q

When will an Executor be unable to Act?

A
  • They are a Minor.
  • They lack Capacity.
  • They Predecease the Testator or die before receiving the Grant.
  • They are a Former S/CP, unless the Will expressly states otherwise.
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10
Q

What happens if an Executor dies?

A

At Least One Remains:

  • The Remainder can continue, but if their number falls below the Minimum Threshold, they must appoint another.

None Remain:

  • Chain of Representation: The Final Executor’s Executor automatically assumes responsibility.
  • Grant of Letters of Administration de Bonis Non.
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11
Q

Who is Entitled to a Grant of Letters of Administration (With Will)?

A

In Descending Order of Priority:

  • Executors.
  • Trustees of the Residuary Estate.
  • Residuary Beneficiaries / Beneficiaries under Intestacy.
  • PRs of Residuary Beneficiaries / Beneficiaries under Intestacy, excluding Trustees or Life Tenants of the Residue.
  • Creditors or other Beneficiaries.
  • PRs of Creditors or other Beneficiaries.

Parties cannot apply if outranked, and must explain why higher-ranked persons are not applying.

Those within the same Class have equal standing, but Vested Beneficiaries outrank Contingent Beneficiaries.

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12
Q

Who is Entitled to a Grant of Letters of Administration?

A

In Descending Order of Priority:

  • S/CP.
  • Children.
  • Parents.
  • Whole-Blood Siblings.
  • Half-Blood Siblings.
  • Grandparents.
  • Whole-Blood Uncles and Aunts.
  • Half-Blood Uncles and Aunts.

Applicants must prove their familial relationship to the Deceased and show a beneficial entitlement under the Estate.

Parties cannot apply if outranked, and must explain why higher-ranked persons are not applying.

The Children of a Predeceased Relative may apply in their stead. Their PRs can too, but they are a second preference.

A Minor may have an adult apply on their behalf, but an adult with equal entitlement to apply will be given priority.

If no one can apply, the Crown may do so, and if not, a Creditor or a person who would have benefited from a larger estate may apply.

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13
Q

What is the Minimum Threshold of PRs?

A

Executors:

  • In most cases, one.
  • In cases involving a Trust of Land, two, unless a Trust Corporation is acting, in which case, one.

Administrators:

  • In most cases, one.
  • In cases involving a Minor or a Life Interest Trust, two.
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14
Q

What are an Executor’s options if they are Unwilling to Act?

A

Renunciation:

  • This is a signed, permanent surrender of the right to apply for Probate, unless they have Intermeddled.
  • Intermeddling includes any action indicating the Executor accepted their appointment and fulfilled their duties.

Reservation of Power:

  • This only applies if there is another person who can become Executor, who must give notice upon Application.

Appointment of Attorney:
* If the Grant has already been obtained, delegation is for a maximum of 12 months.

  • If it has not, the Attorney must apply for a Grant of Letters of Administration (With Will).

Administrators can only Renounce or Appointment of Attorney.

Examples of Intermeddling include:
* Forgiving debts or liabilities due to the Estate.
* Obtaining, receiving or holding the Deceased’s assets.
* Paying debts, selling assets, or disposing of personal property.

Acts of common humanity, like arranging a funeral or securing the Estate Assets, do not amount to Intermeddling.

If no one is able or willing to act, an Administrator will be appointed under a Grant of Letters of Administration (With Will).

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15
Q

What is the Procedure for a Grant Application?

A

Determine Entitlement:

  • The Applicant must ensure they are entitled to apply and have the highest priority. Any higher-priority persons must be cleared-off.

Collate Estate Information:

  • The Applicant must provide enough detail about the Estate to enable the Probate Registry to issue the correct Grant.

Select Application Medium:

  • Online Applications are mandatory for most Probate Applications.
  • Paper Applications are only required for complex, non-standard cases, particularly Second Grants, Missing Wills, and Chains of Representation.

Submit Supporting Documents:

  • This includes the Original Will / Codicils, the Original Death Certificate, relevant tax documentation, Powers of Attorneys, Affidavits, etc.
  • Legal Professionals applying need to submit a Death Certificate.

Pay Inheritance Tax:

  • If partly or wholly paid in installments, only the due amount must be paid at Application.

Submission and Issuance.

  • An Application Fee is payable for all Estates worth more than £5,000.
  • The Probate Registry will provide a requested number of sealed copies, fees payable.

An Applicant must explicitly state whether the Deceased had an interest in Settled Land, since a separate Grant would be required to deal with it.

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16
Q

What are the Duties of a PR?

A

In Statute:

  1. Report information on the Estate to HMRC (Form IHT400).
  2. Pay Inheritence Tax.
  3. Collect in the Deceased’s Succession Assets to create an inventory and account of the Estate.
  4. Administer the Estate.

In Common Law:

  • General Fiduciary Duties.
  • Dispose of the Deceased’s body.

The Reporting and Tax Duties must be completed in order for a Grant to be Issued.

The Duties to Collect In and Administer arise only once the Grant is Issued, are owed to both Beneficaries and Creditors.

The Duty to Account is ongoing throughout the whole Administration.

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17
Q

What does the Duty to Collect In entail?

A
  • Identify, locate, and obtain control, possession, or legal ownership of the Deceased’s Succession Assets.
  • Identify the Deceased’s Liabilities and Creditors.
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18
Q

What does the Duty to Administer entail?

A
  1. Keep the Succession Assets secure.
  2. Pay the Deceased’s Debts and Liabilities.
  3. Meet the Estate’s Administration expenses.
  4. Pay any Legacies.
  5. Distribute the Residue to those legally entitled.

Expenses include such things as legal and financial services, Probate fees, valuations, etc.

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19
Q

What are the Methods for Collecting Assets?

A
  • Land: Registering a Transfer to either a Beneficiary or the PR.
  • Chattels: Physically corralled and quarantined.
  • Investments: Instructing the relevant Financial Advisor.
  • Bank Accounts: Submitting a Withdrawal Form.

Funds collected should be deposited into either an Administration Account or a Law Firm’s client account.

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20
Q

What is the Order in which Estate Assets can be used to satisfy Debts, Liabilities, and Expenses?

A

Secured Debts:

  • Highest payment priority by default.
  • The Will can liberate the Secured Asset from necessarily satisfying the Secured Debt, but only using specific language.

Unsecured Debts and Administrative Expenses:

  • Lowest payment priorty by default.
  • Must be paid out of Assets in the following order, unless the Will expressly states otherwise:
    • Property passing by Intestacy, subject to Pecuniary Legacies.
    • Residuary Estate, subject to Pecuniary Legacies.
    • Property specified for debt repayment by the Will.
    • The Pecuniary Legacy Fund.
    • Specific Property given to Beneficiaries.

If a Secured Debt obligation exceeds the Collateral’s value, the difference is Unsecured.

If the Will liberates a Secured Asset, the Secured Debt is merely satisfied from elsewhere.

Legacies abate proportionally if the Estate’s debts bite into the Legacy Fund.

If there is a choice about which Assets to sell, PRs must consider CGT, the Asset’s liquidity, and the Beneficiaries’ wishes.

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21
Q

When is an Estate Solvent?

A

When it can satisfy its Debts and Expenses.

If an Estate is Insolvent, Court Orders can be made to determine Creditor Payment Priority.

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22
Q

What is the Consequence of Satisfying Debts using Out-of-Order Assets?

A
  • The aggrieved Beneficiary may seek compensation through Marshalling; which allows them to
  • Claim against Assets inherited by another Beneficiary that should have been used instead.
  • Creditors are under no obligation to return money.
23
Q

Aside from Inheritance Tax, what are an Estate’s main Tax Obligations?

A
  • Capital Gains Tax (“CGT”).
  • Income Tax (“IT”), both before and after Death.

Others include VAT, NIC, Council Tax, and Business Rates.

24
Q

What is the position regarding Estate Income?

A

PRs are liable to pay IT on Estate Income.

  • Estate Income:
    • Minimum threshold of £500 p/ta.
    • Payable at the Basic Rate (20% / 8.75% for Dividends).
    • No Tax-Free Allowance.
    • PRs must submit Form R185 when distributing Estate Income to Beneficiaries.
    • Beneficiaries can use Form R185 to claim a refund or top up their obligations.
    • Tax ceases upon transfer to a Beneficiary.
25
Q

What is the position regarding Estate Gains?

A

PRs are liable to pay CGT on Estate Gains.

  • Estate Gains:
    • Tax-Free Allowance of £6,000 (now £3,000).
    • Chargeable on any Sale or Disposal.
    • Death and Asset Transfers do not trigger CGT.
    • Only chargeable on Post-Death Gains.
    • Asset values are reset to the Probate Value for future CGT purposes.
    • Capital Gains can be used to offset losses from Asset Sales.
    • Losses cannot be carried forward after the Administration.
26
Q

What are the Methods for Distributing Assets?

A
  • Land: Asset for a Legal Estate in Land (Form AS1)
  • Chattels: Physical delivery.
  • Investments: Transfer Form.
  • Cash Legacies: Cheque or bank transfer.

The Beneficiary bears the cost of transfer unless the Will states otherwise.

PRs should always obtain confirmation of receipt.

27
Q

When should a PR delay Distribution?

A
  • If there is a possibility of an IPFDA Claim, in which case, ten months from the Grant’s Issuance.
  • If they have Served a §27 Notice, in which case, two months from Service.
28
Q

What is the Order of Payment of Legacies?

A
  • Specific Legacies.
  • General Legacies.
  • Residual Legacies.

If it is impossible to completely pay them all, they abate in reverse order, but within each category, they abate proportionately.

29
Q

By when should a PR complete an Administration?

A

One year of Death, after which, they must provide justification for delays.

Since PRs are appointed for life, if any Estate business arises after the Administration ends, they must see to it.

30
Q
A
31
Q

From where do a PR’s Powers derive?

A
  • Statute.
  • Testementary Instruments.

Should the two conflict, Testemntary Instruments will prevail. They can modify or exclude existing powers and confer new ones.

32
Q

What are the Powers of a PR?

A

Unders Statute:

  • Sell.
  • Lease.
  • Invest.
  • Insure.
  • Charge.
  • Appropriate.
  • Delegate Powers.
  • Appoint Trustees.
  • Charge for Service.
  • Reimbursement for Expenses properly incurred in their duties.

The Power to Invest is closer to a Duty, since PRs must preserve the Estate’s value by achieving returns higher than the current interest rate. All investment activity must be under regular review.

33
Q

What is Asset Appropriation?

A

The allocation of certian Assets to Beneficiaris in lieu of a sale to distribute cash.

34
Q

What must PRs consider when Investing Estate Assets?

A
  • The Standard Investment Criteria is §4, TA 2000.
  • Requesting professional advice where necessary or appropriate.
35
Q

Under what conditions can Asset Appropriation be exercised?

A
  • The recipient Beneficiary must consent.
  • A specific Beneficiary must not be prejudiced.
  • The Asset must be valued at the time of Transfer.
  • The Asset’s value does not exceed the recipient Beneficiary’s entitlement.

The difference between the Asset’s value and the recipient Beneficiary’s entitlement can be settled in cash.

36
Q

Which Powers cannot be Delegated?

A
  • How and whether Assets should be distributed.
  • Whether fees or costs are payable from the Estate.
  • The appointment of Trustees, Nominees, or Custodians.

PRs may delegate between themselves. Beneficiaries cannot be appointed as an Agent of a PR.

37
Q

What are the Procedural Requirements for Delegation of PR Powers?

A

The Delegation must be:

  • In writing to the Agent; and
  • Accompanied by written Policy Statement that the Agent must agree to and comply with.

The terms of the Policy Statement and the Delegation itself must be under regular review.

38
Q

What is to be done with Legacies to Minors?

A

Because Minors cannot give Good Receipt, the Legacy must be held on Trust until they come of age.

A Minor’s Parent or Guardian can give Good Receipt on their behalf, and the Will can expressly allow a 16-year-old to accept Legacies.

Otherwise, a Trustee appointed to hold it on their behalf in the meanwhile can give Good Receipt.

39
Q

What is to be done with a Deceased’s Sole Tradership?

A

It may be sold as a going concern within one year of Death.

This is a common law power, and usually, the Will would expressly permit the PR to manage the business in the Deceased’s stead.

40
Q

Can Joint PRs act alone?

A
  • If multiple PRs are appointed, they must exercise their discretion unanimously; unless
  • It concerns the lawful power to sell or transfer an Estate Asset during Administration; except for
  • Stocks and Shares registered in the PRs’ joint names.
41
Q

When will the PR be a Trustee of the Estate?

A
  • A Statutory Trust arises in an Intestate Estate.
  • The Will expressly appoints them as Trustees of any Trusts arising from the Estate.
  • They are an Administrator, in which case, they hold the Estate generally on trust with a power to sell.
42
Q

What is the Role of a Solicitor in an Administration?

A
  • Advising PRs on the Administration.
  • Administering the Estate as Executor.
  • Representing a Party in a contentious Probate matter.
43
Q

What is the Timeline of an Administration?

A

The Death Certificate and Funeral.

  • PRs obtain the Death Certificiate, and usually, the Family performs the Funeral.
  • PRs should notify relevant public bodies of the Death.

The Original Will / Codicil:

  • Only the Originals, if valid, will suffice to obtain a Grant.

Scheduling Assets, Liabilities, and Lifetime Transfers:

  • The Schedule must valuate the whole Estate by identifying all its Assets and Liabilities.
  • Once completed, the PR should contact any relevant bodies to request a transfer of ownership.

Securing the Estate Assets:

  • PRs are personally liable for preservation of the Estate’s value, and thus must take immediate steps to collect and secure its Assets.
  • This transpires simultaneously with Scheduling.

Establishing Distribution:

  • The PR should establish who is owed what and tell them as much.

Chattels worth more than £500 should be independently valued.

Quoted Shares are valued by taking the difference between the highest and lowest price on Death Day and adding 25% of that to the lowest price.

44
Q

What is an Affidavit?

A

A formal written statement of fact, signed under Oath, and capable of admission as eivdence in Proceedings.

45
Q

What are the Requirements for making an Affidavit?

A

The Authenticating Statement:

  • Is signed and dated by all Parties;
  • Is completed and signed by a Witness, who must be an Independent Solicitor or Commissioner for Oaths that has their name, address, and qualification stated; and
  • Must follow immediately on from the text and not on a separate page.
46
Q

When is an Affidavit necessary?

A
  • When there is a valid Will whose validity or interpretation is uncertain.
  • In this case, the Affidavit affirms to the Probate Registry the Will’s validity.

The PR would give the Affidavit.

47
Q

What are the Different Types of Affidavits and when would they be needed?

A
  • Affidavit of Due Execution: For concerns regarding the Will’s execution.
  • Affidavit for Knowledge & Approval: For concerns regarding the Testator knowledge and approval of the Will’s contents.
  • Affidavit of Alterations: For concerns regarding which iteration of the Will is valid.
  • Affidavit of Plight and Condition: For concerns regarding the Will’s physical condition.
  • Affidavit of Search / Missing Will: For concerns regarding the whereabouts and details of lost or missing Testementary documents.

An Affidavit is not necessary for uncommonly used names. The Grant can simply be issued in all the names the Deceased was known by.

48
Q

What Claims can be brought against a PR?

A
  • Negligence.
  • Maladministration.
  • Misuse of Estate Assets.
  • Breach of Fiduciary Duty.

This may result in removal and personal liability to the Estate.

49
Q

How can a PR Protect itself from the Possibility that a Missing Beneficiary one day Returns?

A
  • Insurance.
  • §27 Notice.
  • Fund Retention.
  • Benjamin Order.
  • Payment in Court.
  • Presumption of Death Order.
  • Indemnity from Beneficaries.

The Will itself may also contain exemption clauses.

§27 Notice must be in the Gazette and Newspaper local to the Deceased’s address.

50
Q

What is a Payment into Court?

A

Prerequisites:

  • The Trustee demonstartes genuine doubt as to the whereabouts of a Missing Beneficiary.
  • The Trustee pays the Beneficiary’s Unclaimed Share into Court.

Consequences:

  • The Trustee is no longer responsible for the Share.
  • If the Beneficiary later appears, it can claim its Share from the Court, but cannot Sue the Trustee.

This is a last resort.

51
Q

What is a §27 Notice?

A

Prerequisites:

  • The Trustee must post a Public Notice of its intention to Distribute the Trust;
  • In the Gazette, a Newspaper local to the Beneficiary’s last known address, and any other relevant publications;
  • At least two months prior to Distribution.

Consequences:

  • The Trustee can distribute the Trust as things stand.
  • If the Beneficiary later appears, it can claim its Share from other Beneficiaries, but cannot Sue the Trustee.

§27 Notice must be in the Gazette and Newspaper local to the Deceased’s address.

52
Q

What is a Benjamin Order?

A

Prerequisites:

  • The Trustee must perform a full inquiry into a Beneficiary’s whereabouts, at proportionate costs, finding no reasonable prospects of discovery.

Consequences:

  • The Trustee can distribute the Trust as things stand.
  • If the Beneficiary later appears, it can claim its Share from other Beneficiaries, but cannot Sue the Trustee.
53
Q

What is Fund Retention?

A

The Trustee sets aside and manages a portion of Trust Assets to in consideration of Claims from Missing Beneficiaries.

This is risky, as it can give rise to Claims of Improper Distribution.

54
Q

What is a Presumption of Death Order?

A

Prerequisites:

  • The Beneficiary has been missing for at least 7 years, during which there has been evidence suggesting life.

Consequences:

  • The Beneficiary is legally deemed to have Died on the Date specified in the Order.

(FLK2) Wills and Estates (6 decks)

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