Administration: Introduction and PRs Flashcards
What does the grant of representation establish?
- authority of the PRs to act
- validity of the deceased’s will, or, that the deceased died intestate.
What is a PR’s power limited to?
The succession estate
Who holds the legal title of a deceased’s estate?
PR
What type of role is a PR and what do they owe?
Fiduciary, duty of care
What should a PR do when assets are transferred to trustees?
Record the date
When will a personal representative be a trustee?
- Will expressly appoints the executors to act as trustees of any trust arising.
- Intestacy - PRs hold the estate generally “on trust with a power to sell” (s 33 AEA)
- Statutory trust (intestacy) - PRs = trustees on behalf of minor beneficiary (s.46 AEA)
What are potential contentious matters?
- terms of will disputed / validity challenged
- disappointed beneficiary wants to make a claim under IPFDA 1975
Who does a professional PR owe duties to?
estate, creditors and beneficiaries
When is best to appoint a professional PR?
Complex estates/family disputes
What are the PR duties before a grant is obtained?
Common law - duty to dispose of the deceased’s body
S216 - notify HMRC about the assets and liabilities of the estate
S226 – Pay IHT on assets in their control (succession estate)
what does a PR do in order to Collect and get in the real and personal estate of the deceased?
- Identify and locate assets (inc sums owed to dec’d)
- Identify liabilities and creditors
- Obtain control, possession or legal ownership of the assets
what does a PR do in order to Administer the estate according to law?
- keeping the assets secure
- paying debts and liabilities
- meeting administration expenses
- paying legacies
- distributing the residue to those legally entitled
what does a PR do in order to Provide an inventory and account of the estate assets
list of assets + values and record of administration (Estate Accounts)
Who may ask to see estate accounts?
beneficiary or creditor
What happens if PRs refuse to show estate accounts?
application to court for order to produce an inventory and account may be made.
What are a PRs duties under the grant
- Collect and get in the real and personal estate of the deceased
- Administer it according to law (succession estate assets)
- Provide an inventory and account of the estate assets
What are the consequences of the PR appointment being for life?
o additional assets discovered after admin complete, duty to administer these assets.
o ongoing risk of personal liability if creditors/bens, not known of at the time, appear after fully administered and demand entitlement.
What are duties of PRs?
- Inform HMRC/pay IHT
- Duties under the grant
- due diligence
- reasonable time
- Statutory duty of care
- Fiduciary duty
What is reasonable time?
executor’s year - complete admin within 12 months from DOD. Longer = justify delay.
Who has a higher standard for duty of care?
- professional PRs
- special knowledge or experience/hold themselves out
What is the statutory duty of care?
same duty of care as trustees exercising powers under Trustee Act
What is the s1 Trustee Act duty of care?
such care and skill as is reasonable in the circumstances
What must a PR not do as part of their fiduciary duty?
- Place themselves in position of conflict eg purchase asset from estate
- Profit from their position
What are the statutory powers of PRs?
Sell, charge or lease
Appropriate
Insure
Invest
Charge for PR services
Reimburse PR expenses
Delegate powers
Appoint trustees
What is the pwoer to appropriate?
appropriate an asset in satisfaction of a beneficiary’s entitlement
What are the rules for appropriation?
- specific beneficiary must not be prejudiced
- Consent of the recipient beneficiary is required
- value of the asset at date of transfer/appropriation not DOD
Can a PR appropriate if the asset is not the same as the entitlement?
If value of asset exceeds entitlement = the PRs may not appropriate.
value less than the entitlement = may appropriate + balancing cash transfer.
What is the duty to invest?
retain assets for period of time = duty to preserve the estate and actively invest
What are the rules on the duty to invest?
- general power of investment (s3) applies.
- permitted to acquire freehold or leasehold land (s8)
- must carry out regular reviews of investments (commonly annually).
- must have regard to the standard investment criteria (s4)
- duty to obtain advice unless reasonably conclude unnecessary or inappropriate (s5)
When can a PR charge for services?
Professional PRs reasonable remuneration provided:
* not acting alone, and
* co-PRs give their written consent
When can a PR charge for services if acting alone?
express power in will to charge for their services
What expenses can be reimbursed from an estate?
may reimburse for expenses properly incurred when acting on behalf of an estate eg travel costs
What are the rules on delegating powers?
permitted to employ agents and delegate their powers, except:
* how and whether assets should be distributed
* whether fees or costs are payable from income or capital
* the appointment of trustees /nominees/custodians
What must a PR do in order to delegate powers?
- do so in writing to the agent and
- provide written policy statement which agent must agree to comply
When should a PR appoint trustees?
Where absolute legacy to minor as cannot give valid receipt.
Who has power to give valid receipt on behalf of a minor?
Parent/guardian
What happens if a testator is a sole trader?
limited common law power to sell the business as a going concern within a year of death
What is a devastavit?
claim of action against a PR for breach of their PR duties
What is the consequence of a devastavit?
claimant will seek a court order that the PR makes good the loss using their personal assets.
What is the consequence of a breach of fiduciary duty?
claimant may seek account of unauthorised profit and/or for a transaction to be set aside.
What may a claim for against a PR be based on?
Maladministration
Misuse of assets
Negligence
Breach of fiduciary duty
What are examples of maladministration?
- Incorrectly administering by making distributions to wrong benes
- Using residuary to meet liabilities which should have been paid from other parts of the estate
- Paying legacies before debts without retaining sufficient funds for creditors
What are examples of misuse of assets?
Making personal use of the estate assets
What are examples of negligence?
- Unreasonable delay in carrying out the administration
- Failing to invest or making poor investment decisions in breach of the duty of care
What are examples of breach of fiduciary duty?
- Breach of the no conflict rule
- Breach of the no profit rule
- Self-dealing
How may a PR be removed?
- A court order under s 50 Administration of Justice Act 1950 appointing replacement
- An administration action, where the court would take over the administration itself
What court directions can a PR seek to protect themselves?
- administration action application - administered by the court.
- specific relief, an application for guidance on a particular matter.
What is a s48 AJA application?
application to distribute in accordance with a written legal opinion
How is a s27 TA notice done?
Publish notice of intention to distribute 2 months after advert in-
a) The London Gazette,
b) A newspaper in the area of land held on trust, and
c) Any other apt newspaper e.g. owned a business, relevant trade paper
What does a s27 notice protect against?
Only protects against unknown beneficiaries, not missing ben/creditor
Protects claims in PR capacity, not beneficiary capacity.
What is a benjamin order for?
known but missing beneficiaries on the basis that they died
What are the requirements for a benjamin order?
Must make full enquiries to establish true position and demonstrate no reasonable prospect of knowing truth without disproportionate expense.
What is a presumption of death order?
Person thought to dead/not known to be alive for 7 years/more has died.
What is an indemnity from a beneficiary?
beneficiaries promise to reimburse the PRs for any loss the PRs suffer as a result of being sued by a disappointed beneficiary or creditor.
What are the requirements for an exoneration order?
- acted honestly and reasonably
- ought fairly to be excused for
o the breach of trust and
o omitting to obtain directions of the court in the matter
What liability cannot be exluded by express clause?
Fraud
