Administration Flashcards
1
Q
What is the difference between an administrator and an executor?
A
Administrator is appointed by statute, executor is appointed by will.
2
Q
What is the name of the court order allowing PRs to act?
A
The grant of representation.
3
Q
Where do the administrator and executor derive their authority from?
A
Administrator derives authority from the grant - they have no authority to act until the grant is issued≥
Executor derives authority from the will and they may act from the date of death. The grant confirms this authority.
4
Q
What is the role of a PR?
A
Collect and get in the real and personal estate of the deceased and administer it according to law.
5
Q
Can a PR also be a beneficiary of the estate?
A
Yes
6
Q
Who does legal title estate lie with?
A
The PRs.
7
Q
When would a PR also be a trustee?
A
The will expressly appoints the executors to act as trustees of any trust arising, there is intestacy, or a statutory trust arises under an intestacy, where the PRs will be the trustees of that trust on behalf of the minor beneficiary.
8
Q
What are the three main ways that a solicitor would be involved in the administration of the estate?
A
- Instructed by the PRs for advice on the administration.
- Been appointed as executor under the deceased’s will.
- Instructed to act on behalf of a party to a contentious probate matter.
9
Q
If a firm is instructed by PRs, who is the client
A
The PRs (not the beneficiaries).
10
Q
Is a PR personally liable for loss caused by a breach of duty?
A
Yes.
10
Q
What are the PR’s duties before the issue of a grant?
A
Common law duty to dispose of the deceased’s body.
Statutory duty to provide information about the estate to HMRC and pay IHT due.
A grant will not be issued unless info required to be reported to HMRC has been delivered and any IHT due has been paid.
11
Q
What are the duties of the PR under the grant?
A
Collect and get in the real and personal estate of the deceased and administer it according to law.
Provide ani inventory and account of the estate assets.
12
Q
When is an IHT 400 needed?
A
Completed to notify HMRC about the assets and liabilities of the estate. Needed for any estate that is not excepted.
13
Q
By when should PR’s complete the administration?
A
Within 12 months of the date of death. Longer than this is not necessarily a breach, but PRs are required to justify any delay.
14
Q
Which PRs have a higher statutory duty of care?
A
Professional PRs and those with special knowledge or experience, or who hold themselves out as having special knowledge or experience.
14
Q
How long does the PR’s appointment last?
A
Even though their role ends once the adminstration is finalised, their appointment is for life, meaning that if additional assets are discovered, they have a duty to administer them and there is an ongoing risk of personal liability if creditors or beneficiaries who were not known at the time come to light after the estate is fully administered and demand their entitlement.
15
Q
What are the wider fiduciary duties of a PR?
A
Not to put themselves in a position of conflict, or profit from their position.
16
Q
What are the statutory powers that the AEA 1925 confers for PRs?
A
Sell, charge or lease; Appropriate; Insure; Invest; Charge for PR services; Delegate powers; Appoint Trustees
17
Q
What statutory does the power to sell, charge or lease entail?
A
Wide powers to sell assets - may need to do this soon after the grant is issued so they can repay deceased’s debts and any loan taken out to meet the inheritance tax liability.
18
Q
What does the PR’s statutory power to insure entail?
A
Prs have power to take out insurance to insure estate assets comprehensively and for full value - authorised to pay insurance premiums out of estate income or capital .
18
Q
PR’s statutory power to delegate
A
PRs can employ agents and delegate e their powers, except for:
- How and whether assets should be distributed; whether fees or costs are payable from income or capital; the appointment of trustees.
PRs may not appoint beneficiaries as their agent but can appoint one of the PRs if they are sufficiently qualified.
Delegation should be in writing, and PR should provide agent with a written policy statement which they must agree to comply to.
19
Q
Power of reimbursement of PR expenses
A
All PRs may reimburse themselves for expenses incurred properly when acting on behalf of an estate -e.g. travel costs incurred in course of carrying out estate admin.
19
Q
What does the PR’s statutory power to appropriate entail?
A
Can appropariate an asset in satisfaction of a beneficiary’s entitlement, can decide which assets are used to meet this.
Subject to the rules:
-Specific beneficiary must not be prejudiced.
-Consent of the recipient beneficiary is required.
-Value of the asset must be considered at the date of transfer/appropriation rather than the date of death. If asset exceeds B’s entitlement, the PRs may not appropriate.
If it is less than entitlement, PRs can appropriate and then make a balancing cash transfer.
Wills commonly have. clause removing need to obtain consents.
19
Q
What does the PRs statutory power of investment entail?
A
IF Mrs retain assets for a period of time, they have a duty to preserve the estate and actively invest.
General power of investment under TA200 applies to PRs like trustees - can acquire freehold or leasehold land in the UK. Must carry out regular reviews of investment and have regard to standard investment criteria and obtain advice.
19
What does the statutory power to charge for services entail?
Professional PRs can claim reasonable remuneration provided they are not acting alone and their co-PRs provide their written consent.
Lay PR or Pro acting alone needs to be given express power in the will to charge for services.
20
PR's statutory power to appoint trustees (gifts to minors)
Minors cannot give valid receipt. PRs to hold relevant assets on trust investing accordance with statutory powers and utilising powers of maintenance and advancement where possible until minor attains 18.
20
PR's statutory power to accept receipt from parent.
Parent or guardian has power to obtain good receipt for minor. This is in the Children's act but also is commonly included expressly for clarity.
21
Statutory power to run a business
If testator was a shareholder the company as an entity will survive their death.
If they ran business as sole trader, limited common law power to enable PRs to sell the business as a going concern within a year of death.
21
What is maladministration?
Could include incorrectly administering estate by distributing to the wrong beneficiaries, using residuary estate to meet liabilities which should have been paid from other parts of the estate, paying legacies before debts without retaining sufficient funds for creditors.
22
A claim against a PR can be based on...
maladministration, misuse of assets, negligence, breach of fiduciary duty.
23
What is misuse of assets?
Making person use of estate assets.
23
What is negligence?
e.g. unreasonable delay in carrying out administration, failing to invest or making poor investment decisions in breach of the duty of care.
24
How can a PR be removed from their role?
Court order under s 50 AJA appointing a replacement PR, or an administration action, where court could take over administration itself.
25
What could breach of fiduciary duty include?
Breach of no conflict rule, breach of no profit rule, self-dealing.
26
How can court directions be used to protect PRs?
If they foresee difficulties in the administration and are concerned this may lead to them incurring personal liability, they may seek court guidance. Could be an administration action application to have the estate administered by the court or specific relief - an application for guidance on a particular matter.
26
How can PRs seek protection with s48 AJA 1985?
Court = expensive and time consuming. s 48 allows PRs to distribute in accordance with a written legal opinion.
26
How can PRs be protected by s27 TA 1925?
TO prevent liability to unidentified beneficiaries and creditors, trustees can publish a notice of their intention to distribute to known beneficiaries two months after the date of the advertisement. Notice must be placed in London Gazette, a newspaper circulating in the area in which any land held on trust is situated, and any other newspaper that is appropriate.
Only protects against claims by UNKNOWN BENEFICIARIES AND CREDITORS. Not protection if they distribute assets ignoring the claim of a known but missing creditor/beneficiary. Also doesn't protect other beneficiaries who receive more than their entitlement.
26
How can PRs use a Benjamin order to protect themselves?
If there is a known but missing beneficiary, PRs will not be able to rely on s 27 TA but may seek a Benjamin order permitting them to distribute the estate on the basis that the missing beneficiaries have died.
Relieves PRs from personal liability if they administer estate in accordance with court order and assumption turns out to be incorrect.
Before an order is awarded, PRs must make full enquiries to attempt to establish the true position and demonstrate there is no reasonable prospect of knowing the true position without disproportionate expense.
27
How can the presumption of death act 2013 be used to protect PRs?
Court order declaring that a person thought to have died, or not known to be alive, for seven years or more has died. Order will confirm presumed date of death and relates generally to deceased's property and affairs.
28
How can PRs use insurance to protect themselves?
Can purchase insurance to cover risk that beneficiaries or creditor returns after admin is complete and makes a claim against PRs for the share they should have received.
29
What is the effect of PR payment into court?
IF they can locate a beneficiary who is refusing to accept their inheritance, for example, can pay to court.
30
How can PRs apply for exoneration by the court?
s 61 TA, can apply for a whole or partial exonerating order from personal liability for breach. Order will not be made unless court considers that the PR acted honestly and reasonably, ought fairly to be excused for the breach of trust and omitting to obtain directions of the court in the matter.
31
What is the effect of exemption clauses in a will?
Can exclude or restrict liability for a PR's wrongdoing.
32
What is a grant of probate?
Required for estates where deceased left a valid will, will appoints executors, at least one of the executors appointed is going to act.
Only those names may take out the grant. Named executor can formally appoint someone to act on their behalf under a power of attorney
33
What is a grant of letters of administration?
Appropriate where deceased died without having made valid will. Administrators are appointed under NCPR 22 - lists in order of priority those entitled to apply for the grant.
34
When is a grant of letters of administration (with will) wanted?
Deceased left a valid will, but it does not appoint executors who are willing/able to act.
Administrators are appointed under the NCPR Rule 20.
35
Which assets included in succession estate do not require grant for PRs to deal with them?
1. Assets which can be distributed under the Administration of Estates (small payments) Act 1965.
2. Personal Household possessions
3. Cash
36
Which assets can be distributed without a grant under the Administration of Estates (Small Payments) Act?
National savings, friendly society and insdustrial and provident society deposit accounts, arrears of salary and wages,, pensions where deceased was member of police fire, air or army, building society accounts.
Upper limit £5k per asset.
37
What property does not devolve on PRs?
Assets which pass outside succession estate (not by a will or intestacy) do not devolve on PRS and do not require a grant to be released.
-Property owned as JTs
-Life policies written in trust, discretionary pension lump sums nominated for a third party
-DMCs
-Assets held in trust in which deceased had an interest.
For them, assets will need to produce death certificate, any other docs the asset holder requires.
38
Pre-Grant Steps
1. Death Certificate/Funeral
2. Secure estate assets
3. Locate will/codicil.
4. Provide Beneficiaries with realistic timescale for distribution.
5. Schedule of assets and liabilities.
6. Contact appropriate organisations to notify of death, provide death certificate, request confirmation of value of asset at time of death, and instructions how to close account/transfer ownership.
39
How should PRs deal with joint accounts?
Establish what proportion of the account was owned by the deceased.
39
Will a copy of the will suffice for the purposes of obtaining a grant?
No - original will is needed unless special permission has been obtained from the Probate Registry.
39
How should PRs deal with low value chattels?
Usually can estimate their value. Probate value will normally be lower than value for insurance purposes.
39
How should PRs establish value of bank accounts?
Request from bank summary of account balance on date of death plus any interest accrued.
40
How should PRs deal with Quoted Shares?
Special rules for establishing the date of death call linked to stock exchange prices on that date.
Valued by taking the lower of the two prices on the Stock Exchange Daily List and adding one-quarter of the difference between the higher and lower value.
40
How should PRs deal with single items worth more than £500 or unusual items?
Formal probate valuation should be obtained. Many commercial organisations specialise in this - costs are payable from estate funds.
41
How should PRs deal with private co shares/partnership interests' sole trader business?
Specialist valuer usually instructed. If Deceased held shares or other financial investments through financial services company, broker will provide a list of shareholdings/investments and date of death values.
42
How should PRs deal with Land?
Instruct estate agents to prepare a valuation. Often more than one, and then average value is used.
43
When would an executor named in a will be able to act as a PR?
If they predeceased, are a minor, lack capacity, or are testators former spouse and the divorce took place after the will was made. They will be treated as having pre-deceased and cannot be appointed unless will expressly overrides this.
44
How many executors are required?
Only one, but common for at least two to be appointed.
If several are named but not all apply for grant. remaining will need to explain to probate registry why not all those named are applying.
Max 4 can be named on grant. Powers can be reserved to others, and if a vacancy arises, they can apply for a grant of double probate.
45
What are the requirements for grant of letters of administration de bonis non?
Admin is incomplete, there are no remaining PRs, there has been a previous grant of representation.
Then a second grant will be issued.
45
What happens if a grant has been taken out and one of the appointed PRs dies before administration is complete?
If at least one PR remains, they may continue.
No PR remains, either a chain of representation or a grant of letters of administration de bonus non is issued.
Chain will only apply if last surviving executor dies having appointed an executor of their own estate and this person takes out the grant for the last surviving executors estate. No additional grant is needed and the second executor will automatically become executor of original testators estate.
If chain cannot operate, grant of letters de bonds non.
46
What happens when deceased left a valid will but there are no executors willing/able to act?
Letters of administration (with will) is appropriate grant. Administrators are appointed, their entitlement to apply derives from Rule 20 NCPR 1987, which lists in order or priority those entitled to make an application.
47
What is the order of priority in NCPR Rule 20?
1. Executor.
2. Trustee of residuary estate.
3. Any residuary beneficiary or where there is a partial intestacy, the beneficiary of the estate under intestacy.
4. The PRs of anyone in (3) other than a trustee or life tenant of the residue.
5. Any other beneficiary or a creditor.
6. PRs of anyone in (5).
A PERSON IN ONE CATEGORY CANNOT APPLY IF ANYONE IN A HIGHER CATEGORY IS WILLING AND ABLE TO ACT AS ADMINISTRATOR. Need to explain why anyone with a better right to apply is not doing so.
48
What grant is appropriate for someone who died intestate?
Grant of letters of administration. Rule 22 NCPR.
49
What's the order of priority in Rule 22 NCPR?
a) Surviving spouse (28 days)
b) Children of deceased
c) Father and mother of deceased.
d) Whole blood siblings
e) Half-blood siblings
f) Grandparents
g) Uncles and aunts of whole blood
h) Uncles and aunts of half blood.
i) The crown/creditor/ person who doesn't receive benefit.
Issue of b,d,e,g,h included were their parent pre-deceased.
Can't apply if someone in higher category.
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 should demonstrate the nature of their familial relationship with the deceased and must have a beneficial entitlement under the estate.
50
How many administrators are needed in both letters of admin (with will) and letters of admin?
One required, unless there are a minor or life interest in the estate, in which case TWO are required.
51
What happens if an executor is a minor?
Probate can be issued to the other executors with power reserved to the miner who can make an application upon reaching 18.
52
What are the formal options for an executor who is not willing to act?
Renunciation.
Reserving power.
Appointing an attorney.
53
How can an executor renounce their right to apply for probate?
Sign a form of renunciation. Those who are applying should submit this as evidence why they are not making application.
Renunciation will be noted on the grant when issued, and it is final - court approval needed to change mind.
Cannot renounce if they have intermeddle with the estate and court will not accept an attempt to renounce.
54
What is intermeddling?
A person intermeddle when they take steps indicating they have accepted their appointment and are fulfilling the duty to administer estate even if they do not in fact wish to act as an executor.
Arranging funeral/taking steps to secure estate assets are acts of common humanity and do not count as intermeddling.
55
How can an executor reserve power?
There must be at least one other executor who does take out the grant.
An executor who has intermeddled can reserve power.
Apply for a grant of double probate to act later.
Executors who are applying for probate must give notice of their intention to apply to the executor to whom power is reserved.
56
How can an attorney be appointed?
Power can be given by executor (donor) to attorney (donee)...
After executor has obtained grant by s 25 TA- PR may delegate their functions to an attorney for max 12 months. Can be renewed if needed.
Before grant has been obtained - executor apply for grant of probate and attorney make a parallel application for grant of letters of administration (with will).
57
What if all executors are unwilling to act?
Grant of letters of administration (with will) and administrator appointed under NCPR 20.
58
What are the options for an administrator unwilling to act (i.e. someone with the right to apply and able to act but doesn't want to)?
Renunciation - form of renunciation signed and submitted to probate registry. EVEN CAN RENOUNCE IF THEY HAVE INTERMEDDLE. May need to renounce both NCPR 20 and 22 rights.
Apointing an attorney - after appointment under grant s25 TA rules (12 months). Before grant obtained - rule 33 NCPR - power of attorney must be provided to the probate registry as part of the application.
59
What is the deadline for paying the IHT due?
Six months from the end of the month in which the death occurred, after which interest becomes payable on the unpaid tax.
60
What should the PRs account to HMRC specify?
All of the property comprising the deceased taxable estate immediately before death and the value of each item at the date of death, the exemptions and reliefs that apply.
60
What is the deadline for submitting the account to HMRC?
12 months from the end of the month in which the death occurred.
61
How does payments to HMRC in instalments work?
IHT due can be paid by ten equal annual instalments. First due six months after end of the month in which deceased died. Remaining due on each subsequent anniversary date, with interest charged on the IHT that remains.
62
To what assets is the instalment option in respect of IHT available?
Land and buildings;
company shares/securities giving deceased control;
Some unquoted company shares/securities that did not give control where payment cannot be made without undue hardship, or tax attributable to shares represented 20% or more of total tax for which PRs are liable, or value of shares is greater than £20k and shareholding represents at least 10% of nominal value of all company shares.
Farms/interest in farming business
Business/ interest in a business
Timber.
63
What are the excepted estates for IHT 400?
Low value excepted estates> no IHT payable because gross value is below NRB. The gross value is the total taxable estate figure plus the value of certain ‘specified transfers’ plus the value of ‘specified exempt transfer’.
Specified transfers include chargeable transfers made in the 7 years before death comprising cash, chattels, shares or land.
Exempt excepted estates> gross value of the estate is no more than £3 million, but no IHT is payable because after debts are deducted and spouse/charity exemption applies, net value of estate is below NRB. Debts alone cannot bring the estate into exempt excepted status. BPR/ OTHER EXEMPTIONS CANNOT BE CONSIDERED FOR THESE CIRCUMSTANCES.
64
Once the PRs have established that the estate may either be a low value or exempt excepted estate, they need to check no additional factors prevent estate from being excepted. These will include:
* 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).
64
What are corrective accounts, when are they used.
Form C4 - used if PRs discover later that the date of death information provided to HMRC in the IHT 400 was inaccurate.
-additional assets, correction to value of assets, changes to exemptions and reliefs, variation or original beneficiary entitlements which affect IHT liability.
65
What are the options for raining funds to pay IHT?
Direct payment scheme : Banks or building societies may not be able to release funds to the PRs prior to the issue of the grant but they can be asked to make a direct payment from the deceased’s account(s) to HMRC by telegraphic transfer under the Direct Payment Scheme.
PRs must complete schedule IHT 423.
Borrowing : Can borrow from a beneficiary who uses funds outside of succession estate, like joint bank account, or from a bank, where commercial rates of interest will apply.
66
How do you make an application for the grant of representation?
Need to show entitlement by submitting an online application via HMCTs service or completing and then posting a paper application form to Probate Registry.
Submit supporting documentation.
66
How do professionals apply for the grant of representation?
Either mandatory online applications, online applications possible but not mandatory (includes some simple applications under NCPR 20 and 22) and mandatory paper applications (includes non-standard grants, and more complicated NCPR 20 and 22 applications).
67
What must be done If the solicitor completes a paper application?
Complete form PA1A or PA1P and post it to Probate Registry.
PA1A - NCPR 22, deceased didn't leave a will.
PA1P - deceased left a valid will.
1. Confirm the identity of deceased and applicants.
2. Justify type of grant requested and their entitlement to act as PR.
3. Provide info about value of estate and IHT status of estate.
4. Complete legal statement on probate form confirming info provided is correct and that they will administer estate properly.
68
What are the rules regarding the Probate Registry fee and Death Certificate?
Must pay unless estate is worth less than £5,000. Amount depends on whether or not pro is applying.
There is no “original” grant. The Probate Registry will provide the number of sealed copies as requested by the PRs when making the application.
The number required depends on the estate assets e.g. one per asset holder and a couple of spare copies. There is a small fee for each sealed copy requested.
Sealed copies are used when contacting assets holders. For example, if the deceased had an account with three different banks, the PRs would provide each bank with a sealed copy as evidence of their entitlement.
The PRs state how many sealed copies they want when completing the application.
A certified copy (not photocopy) of the death certificate should be provided on personal applications. It is not required for legal professional application.
68
When are affidavits required?
Maybe if there is a valid will but there is something about the document that renders its validity or interpretation uncertain. Original will submitted with affidavit. Often related to compliance with s9 WA, knowledge and approval, date, physical condition of will.
68
xxx 5 post grant practice xxxx
69
69
What additional items need to be provided to complete the application?
Probate Registry fees, death certificate, testamentary documents, forms or renunciation, IHT forms, power of attorney, affidavits.
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