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Wills & Administration of Estates > Administration: Introduction and Personal representatives > Flashcards

Administration: Introduction and Personal representatives Flashcards

1
Q

What legal process does administration refer to?

A

Managing the distribution of deceased’s estate, paying their debts, taxes and other expenses, and making payments to Bs

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2
Q

What is the difference between PRs, executors and administrators?

A
  • PR = people permitted by law to administer deceased’s estate
  • Executor = PR appointed by person’s will
  • Administrator = PR appointed by operation of statute
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3
Q

What is the grant of representation and what 2 things does it establish?

A

An order of the High Court confirming authority of PRs to act (right to collect in deceased’s assets and distribute estate) - establishes

  • Authority of PRs to act
  • Validity of deceased’s will/intestacy
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4
Q

Will the grant be needed if everything passes to the spouse by survivorship?

A

No!

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5
Q

Can PR collect/realise assets in estate without producing appropriate grant?

A

No (usually)

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6
Q

What is the power conferred by grant limited to?

A

Assets passing under the succession estate

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7
Q

Where do executors and administrators derive authority from?

A
  • Executor’s authority derives from the will (can act from death but grant confirms authority)
  • Administator’s authority dervies from grant (no authority until grant issued)
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8
Q

Can an executor administer estate without a grant?

A

Legally yes but usually not practical - most asset holders require sight of grant before paying funds to executors

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9
Q

When should grant of representation be obtained?

A

ASAP

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10
Q

Can a PR be a B of the estate?

A

Yes

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11
Q

What is the role of a PR? What is the role in nature?

A
  • Collect in deceased’s assets
  • Ensuring deceased’s debts paid
  • Meeting tax liabilities and other estate expenses
  • Distributing assets to entitled Bs

Role is fiduciary in nature - owe duty of care

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12
Q

Does an executor’s authority derive from the grant?

A

No - grant is confirmation of authority, which comes from the will

Administrator’s authority comes from grant

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13
Q

Does legal title lie with PRs?

A

Yes by virtue of their appointment (but can transfer to their own name before distributing)

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14
Q

Can assets be administered without a grant?

A

Some can - but some institutions unwilling to release funds to PRs without seeing grant

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15
Q

When will a PR be a T of some/all of estate property?

A
  • Will expressly appoints executors to act in capacity of T or any arising trusts
  • There is an intestacy; PRs hold estate on trust with a power to sell
  • A statutory trust arises under intestacy (PRs wil be Ts of trust for minor B)
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16
Q

Must a PR be a T for the duties of a T to apply to them?

A

No - will apply equally to PRs

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17
Q

What are the 3 broad ways a solicitor may be involved in administration of estate?

A
  1. Instructed by PRs for advice - act for PRs (not Bs) if PRs unable to carry out administration
  2. Appointed as executor under deceased’s will - as professional PR (will charge for services); duties owed to estate creditors and Bs
  3. Instructed to act on contentious probate matter - for PRs or Bs
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18
Q

Are duties of the PR found in statute or common law? What liability will arise from a breach?

A
  • Obligations are found in both
  • PR is personally liable for loss caused by breach
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19
Q

What are the duties of a PR before the issue of a grant?

A
  • Dispose of deceased’s body
  • Provide information about estate to HMRC and pay any IHT due
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20
Q

What cannot happen until information delivered to HMRC and any IHT due has been paid?

A

The issue of grant

I.e. PRs cannot obtain grant before complying with HMRC duties

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21
Q

What do PRs complete a IHT400 for? What will it not be completed for?

A
  • To inform HMRC about assets and liabilities of estate
  • Will not be completed for an excepted estate
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22
Q

How do PRs pay IHT due?

A

With estate funds - not required to use personal assets

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23
Q

What 3 duties comprise the PR’s duty to administer and who are these duties owed to?

A
  1. Duty to collect in
  2. Duty to administer estate
  3. Duty to provide inventory and account

Owed to estate Bs and creditors

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24
Q

What is involved in the PR’s duty to collect in?

A
  • Identify and locate deceased’s asstets (inc sums owed to them), liabilities and creditors [already done from IHT 400]
  • Obtain possession/legal ownership of assets
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25
Q

What is involved in the PR’s duty to administer estate?

A

Keep assets secure, pay debts and liabilities, legacies and residue to those legally entitled

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26
Q

What is involved in the PR’s duty to provide inventory and account?

A

Keep

  • Inventory (list of assets and values)
  • Account (record of steps taken in administration)

Recorded in ‘Estate Account’

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27
Q

What happens if PRs refuse to let B see accounts/have not maintained adequate records?

A

Bs can make application to court in accordance with NCPR for PRs to produce

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28
Q

What are the two general duties re carrying out administration?

Aside from acting within scope of their powers conferred by statute/will

A

Carry out administration…
1. With due diligence (depends on facts of case)
2. Within a reasonable time

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29
Q

What is a ‘reasonable time’ to complete administration? Is it a breach if they fail to do this?

A
  • 12 months of death (executor’s[/administrator’s] year)
  • Fail to do so: no breach, but must justify delay
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30
Q

What does it mean that a PR is ‘appointed for life’?

Even though reasonable time obligation + role ends upon finalisation of administration

A
  • If additional assets discovered after administration is complete = PRs have duty to administer
  • If creditors/Bs who were unknown at the time come to light after estate is fully administered = PRs may be personally liable
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31
Q

What statutory duty of care are PRs subject to?

A

The same as Ts when they exercise their powers…

  • Higher standard for professional PRs/those (who hold themselves out as) possessing special knowledge or experience

Applies when PRs invest, delegate, insure and purchase land

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32
Q

What fiduciary duties is a PR subject to?

A

PRs must not (unless authorised by court/fully informed Bs):

  • Place themselves in position of conflict e.g. purchase asset from estate even if for fair value
  • Profit from position (unless professional capacity, authorised under will)
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33
Q

Where does a PR’s powers derive from?

A

Statute and will (codicil)

Must act within scope

34
Q

How do statutory powers apply to those who died intestate and those who died with a will?

A
  • Intestate = only statutory powers apply
  • Will = statutory powers apply to extent they do not conflict with express provisions (i.e. will apply in default of any alternative contained in will)
35
Q

What can express clauses in a will do and what is their relationship with statutory powers?

A
  • Confe additional powers that go beyond/modify/exclude statutory powers
  • Take priority over statutory powers
36
Q

What statutory powers do the PRs have?

A
  • Sell, charge or lease (wide powers - may need to do this soon after grant issued to repay debts)
  • Appropriate
  • Insure
  • Invest
  • Charge for PR services
  • Delegate powers
  • Appoint Ts
37
Q

What can PRs do with their power to appropriate?

A

Appropriate an asset in satisfaction of a B’s entitlement

Can decide what assets used to meet his

E.g. testator leaves £20,000 to B, but B wants specific item

38
Q

What rules is the power to appropriate subject to?

A
  • Specific B cannot be prejudiced (i.e. if item was meant to go to them, it cannot be appropriated)
  • Consent of recipient B is required (although can request the appropriation)

Normal to include express clause removing need to obtain required consen

39
Q

For appropriation, on what date is the value of the asset considered?

A

The date of transfer (not date of death!)

E.g. X entitled to £25,000. Wants the antique desk instead. The desk was worth £20,000 at death but is now worth £18,000 (on date of appropriation). X can receive desk, and must be given £7,000, not £5,000/

40
Q

What happens if B requests a specific item, but this either exceeds B’s entitlement or is less than B’s entitlement?

A
  • Exceeds = PRs cannot appropriate
  • Is less than entitlement = PRs may appropriate and make balancing cash transfer
41
Q
  • A testator (T) left a will which gave £25,000 to his friend (F) and the rest of his estate to his sister (S).
  • F wants the PRs to give her T’s antique desk instead of giving her £25,000 in cash. The desk was worth £20,000 at T’s death but is now worth £18,000

Can the PRs do this?

Summary of appropriation

A

Yes:

  • Desk was not specifically given to someone else
  • Provided F consents (but has requested) and receives a further £7,000 so total value received is equal to gift
42
Q

What does the PR’s power to insure cover and where will the premium come from?

A
  • Insurance to insure estate assets comprehensively and for full value
  • Can pay insurance premiums out of estate income or capital
43
Q

When will PRs have the duty/power to invest? What must they do?

A

If they retain assets for a period of time - will be subject to same investment duties as Ts:

  • Carry out regular reviews of investments
  • Have regard to standard investment criteria
  • Must obtain advice (unless concludes reasonably that it is unecessary/inappropriate in circumstances)

Can also acquire freehold/leasehold land!

44
Q

What are the 2 conditions for professional PRs to claim reasonable remuneration for their services?

I.e. time spent carrying out administration

A
  • Not acting alone; and
  • Co-PRs give written consent

If they are acting alone, will need express charging clause

45
Q

Can a lay PR or professional PR who is acting alone charge for their services?

A

If they are given express power in the will to charge for their services

46
Q

What is payment for remuneration not to be treated as?

A

A gift

47
Q

What PRs can reimburse themselves for expenses properly incurred when acting on behalf of an estate? What does this not extend to?

A
  • All PRs (whether or not they are acting in a professional capacity) may reimburse e.g. travel costs
  • Does not extend to charging for time spent on administration (even if PR must turn down work)
48
Q

What powers can a PR not delegate?

A
  • How and whether assets should be distributed (dispositive powers)
  • Whether fees or costs are payable from income or capital
  • The appointment of Ts/nominees/custodians
49
Q

Who can PR appoint as an agent and who can they not appoint?

A
  • May appoint one of the PRs if sufficiently qualified
  • Cannot appoint B as agent
50
Q

What are the 3 conditions for delegating?

A
  • PR does so in writing to the agent
  • PR provides agent with written policy statement which agent must agree to comply with
  • Use of agent is kept under review
51
Q

What power will commonly be delegated?

A

Investment powers - firms often have links to financial advisers to whom they refer work

52
Q

How does a T pay a legacy absolutely to a minor?

A

They cannot - minor cannot give valid receipt

53
Q

What are the T’s options as a minor cannot give good receipt?

Where legacy given to absolute minor

A
  1. Hold relevant assets on trust for minor (invest, use stat powers of maintenance and advancement) until minor turns 18 in capacity as T; or
  2. Appoint Ts (usually minor’s parent/guardian) of legacy and give (pay) legacy to them rather than retaining it
54
Q

Can a parent give good receipt to PRs on behalf of minor?

A

Yes - but if testator does not want them to receive legacy on behalf of minor = will can be drafted expressly to give legacy to Ts to hold until child reaches majority

Note that an express clause within a will which permits PRs to accept receipt from a minor beneficiary aged 16 or older is effective.

55
Q

Under their power to run a business, what can a PR do when the testator was:

  • A shareholder in company
  • A partner in a business partnership
  • A sole trader
A
  • For shareholder and partner - Articles and partnership agreement should contain terms
  • For sole trader - PRs can sell business as a going concern within year of death (common to include express power so PRs can run/manage sole trader business in accordance with testator’s wishes)
56
Q

As PRs are personally liable to business creditors on running a business, how can they protect themselves?

A

May indemnify themselves from estate for liabilities incurred when running business for realisation only

57
Q

What provisions contain the most useful powers for the greatest number of estates?

A

The STEP provisions

58
Q

Can a co-PR ever act alone?

A

Like Ts are required to make decisions together and exercise discretionary powers unanimously, but will appointing them may state otherwise

59
Q

When will a PR usually have the authority to act alone?

A

When exercising a lawful power to sell or transfer an estate asset during administration

e.g. a PR acting alone has authority to pass title to the deceased’s personal possessions to a third party and so bind the other PRs.

60
Q

What is the exception to dealing with estate assets alone?

A

Stocks and shares registered in joint names of PRs

61
Q

Will a PR only be personally liable for losses resulting from their breach of duty?

A

No, personally liable for…

  • Any loss resulting from a breach of duty which they commit
  • (Potentially) breaches committed by other PRs if they did not monitor their conduct

Recall obligations:
* PRs have statutory and common law duties to carry out the administration of the estate.
* PRs may only exercise the powers conferred on them by statute and/or will.
* The role of PR is fiduciary in nature and PRs are subject to fiduciary duties.

62
Q

Who do PRs owe duties to?

A

Estate Bs and creditors

63
Q

What is a claim of action against a PR for breach of their duties called and in what circumstances may it be brought?

A
  • Devastavit (wasting of assets)
  • Brought where there is a loss of estate because of PR wrongdoing

C seeks court order that PR makes good loss using personal assets

Devastavit because it is devastating when PR wrongdoing causes a loss

64
Q

Can a C only make a claim if there is a loss?

A

No - can seek account of authorised profit/transaction set aside if breach of fiduciary duty occurs

65
Q

What 4 things might a claim against a PR be based on?

A
  1. Maladministration (incorrectly administering estate, using residuary estate to meet liabilities wrongly)
  2. Misuse of assets (making personal use of estate assets)
  3. Negligence (unreasonable delay in administration)
  4. Breach of fiduciary duty (breach of no conflict/profit rule, self-dealing)
66
Q

How can a PR be removed as PR?

A
  • Court order appointing a replacement PR
  • Administration action where court takes over administration itself
67
Q

What are the protections available for PRs?

Many equally applicable to PRs and Ts

A
  1. Seeking court guidance
  2. S48 AJA
  3. S27 notice
  4. Benjamin Order
  5. Presumption of Death Act
  6. Insurance
  7. Payments into court
  8. Indemnity from B
  9. S61 Trustee Act
68
Q

When can PRs seek court guidance and what might the outcome be?

A

When they foresee difficulties in administration which could lead to incurring personal liabilities…

  • Administration action application to have estate administered by court
  • Specific relief; application for guidance on particular matter
69
Q

What is the alternative to seeking out (time consuming and expensive) court guidance? When will this be used?

A
  • An application under s48 to distribute in accordance with a written legal opinion
  • Used where there is no dispute

Given usually by solicitor/barrister with 10 years+ experience

70
Q

What does a s27 notice protect against? What does it not protect against?

Gazette

A
  • Protects against claims by unknown Bs and creditors
  • Does not protect against known but missing B/creditor and will not protect Bs who receive more than entitlement to their estate (and may be vulnerable to claims from other Bs)

I.e. PR who are also Bs may be liable to other Bs as a B

71
Q

Where should a s27 notice be published and what should it specify?

A
  • Should be published in London Gazette, local newspaper to land held on trust, and any other appropriate newspaper
  • Will specify their intention to distribute to known Bs two months after date of advertisement
72
Q

What is a Benjamin Order used for and what will it allow PRs to do?

A
  • Used for missing Bs
  • BO enables PRs to distribute estate on basis that the missing Bs have died

Or on different assumption e.g. missing B has no kids

73
Q

What liability will a BO relieve and what will it not relive?

A
  • Will relieve PRs from liability if they administer estate in accordance with court order and assumption turns out to be incorrect
  • Will not relieve a B (to whom property was distributed) from claims from a disappointed B/creditor
74
Q

What must PRs have done to obtain a Benjamin Order?

A

Made full enquries to establish true position and demonstrate no reasonable prospect of knowing true position without disproportionate expense

75
Q

When can an application under the Presumption of Death Act 2013 be made and what will an order under the act do?

A
  • Where a person not known to be alive for 7 years or more
  • Order confirms presumed date of death
76
Q

Why apply under the Presumption of Death Act instead of using a Benjamin Order?

A

Quicker than using Benjamin Order

77
Q

What risk can insurance purchased by the PRs cover? When is it unlikely to be obtainable?

A
  • Covers risk that B/creditor returns after administration complete and makes claim against PRs for share they should have received
  • May not be possible to obtain if risk too high and premium too expensive

Still may be less than seeking a BO

78
Q

What can a PR use an indemnity for? What is the drawback of using one?

A
  • PRs can seek indemnity from Bs who promise to reimburse PRs for any loss PRs suffer from being sued by disappointed B/creditor
  • Drawback: indemnity only as good as person giving it and may prove difficult in future to trace those providing indemnity
79
Q

What will a payment into court do, who would not favour this option, when is it suitable and when should it be used?

A
  • PRs pay legacy amount into court and distribute balance of estate
  • Bs who would otherwise receive share would not be fans
  • May be more suitable than insurance where B can be located but refusing to accept inheritance
  • Last resort
80
Q

What will exoneration by the court under s61 do and when will court make order?

A

Exoneration will exonerate a PR in whole or part from personal liability for breach

Order will not be made unless PR:

  1. Acted honestly; and
  2. Reasonably; and
  3. Ought fairly to be excused for breach of trust and for omitting to obtain directions of court in matter
81
Q

What can exemption clauses in a will do? What can they not do?

A
  • Will exempt lay executors from liability and excludes statutory duty of care for all executors
  • Cannot prevent claims against professional executors

Wills & Administration of Estates (13 decks)

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