Administration - Obtaining the grant

Question 1

What is a grant of representation

Answer 1

Confirms the PRs authority to act and their title to the deceased’s assets which pass under the will or intestacy. PRs need to obtain the assets, the asset holders will not usually release the assets until they’ve seen the grant. Additionally in order to sell assets the PRs will usually have to show proof of their title to the assets.

Question 2

Different grants of representation

Answer 2

1) Grant of probate
2) Grant of letters of administration with the will annexed
3) Grant of (simple) letters of administration

Question 3

Grant of probate

Answer 3

The deceased left a valid will which appoints executors one or more of whom is able and willing to act. The executors will obtain a grant of probate using form PA1P

Question 4

Grant of letters of administration with the will annexed

Answer 4

The deceased left a valid will but there are no persons able or willing to act as executors or a partial intestacy. Administrators will obtain a grant of letters of administration with the will annexed using form PA1P. NCPR 20 determines who the administrators will be - usually the residuary beneficiary

Question 5

Grant of (simple) letters of administration

Answer 5

The deceased left no will. Administrators will obtain a grant of (simple) letters of administration using for PA1A. NCPR 22 determines who the administrators will be - usually the main beneficiaries on intestacy.

Question 6

How many PRs do you need

Answer 6

One PR may obtain the grant and act alone. However, if they are selling land then the purchaser will insist on a receipt from all the trustees being at least two in number to overreach

Question 7

Assets which may pass to the PRs without a grant

Answer 7

This is useful when the deceased’s family needs funds immediately or for paying IHT
1) Assets which do not exceed £5,000
2) Chattels (all moveable property)
3) Cash
4) Joint property - passes through survivorship to surviving joint tenant
5) Insurance policies if assigned or written in trust for others
6) Pension benefits

Question 8

Form IHT400

Answer 8

Only need this if it is not an excepted estate. No grant of representation can be issued until this is submitted. It is an inventory of the assets to which the deceased was beneficially entitled and of their liabilities. It is the form for claiming reliefs and exemptions and calculating the IHT payable

Question 9

Excepted estates

Answer 9

3 types:
1) Low value estates - below £325,000 but can be increased if their spouse hasn’t used all their nil rate band
2) Exempt estates - gross value does not exceed £3 mill and there can be no liability to inheritance tax because of a spouse or a civil partner exemption or a charity exemption which brings the estate below the IHT nil rate band
3) Deceased was never domiciled in the UK

Question 10

When is IHT payable

Answer 10

6 months after the end of the month in which the deceased died

Question 11

Options for raising IHT payable before the grant

Answer 11

1) Direct payment scheme - British Banker’s Association and building Societies’ Association will allow PRs to pay IHT directly from deceased’s accounts
2) Life assurance - asking the life assurance company to release funds
3) Assets realisable without production of the grant e.g assets no more than £5000
4) Loans from beneficiaries
5) Bank borrowing
6) National savings and government stock
7) Heritage property in lieu of tax

Question 12

Burden and Incidence of IHT

Answer 12

PRs are liable for the inheritance tax due on the chargeable transfer made on death

Question 13

Executors applying for a grant of probate - Who can apply for the grant

Answer 13

One executor may obtain a grant and act alone. A person appointed as an executor but who at the testator’s death lacks capacity to make decisions cannot apply. Where one of several executors is a minor the other(s) being adults probate can be granted to the adult executor with power reserved to the minor to take a grant at a later date

Question 14

Executors applying for a grant of probate - Renouncing the right to take the grant

Answer 14

Persons appointed as executors may renounce their rights to take the grant. Rights as executor cease and the administration of the estate proceeds as if the executor had never been appointed. Executors can renounce only if they have not intermeddled in the estate. Intermeddling = notifying deceased’s bank of the death.

Question 15

Administrators applying for a grant of letters of administration with the will annexed - Order of priority

Answer 15

NCPR 20:
1) The executor
2) Any residuary legatee or devisee holding in trust for any other person
3) Any other residuary legatee or devisee
4) PRs of these residuary beneficiary
5) Any other beneficiary - prefer vested interest over contingency
6) PRs of these beneficiaries

Question 16

Administrators applying for a grant of letters of administration with the will annexed - What they need to state in the form

Answer 16

They will explain why nobody in higher ranked categories are taking the grant, why there is an intestacy and why they are entitled

Question 17

Administrators applying for a grant of (simple) letters of administration - People who are entitled to a grant of administration

Answer 17

Where the deceased died wholly intestate the person(s) having a BENEFICIAL interest in the estate shall be entitled to a grant of administration in the following classes in order of priority:
1) Surviving spouse
2) Children of the deceased and the issue of any deceased child who died before the deceased
3) The father and mother of the deceased
4) Brothers and sisters and the issue of any
5) Half brothers and sisters and the issue of any
6) Grandparents
7) Uncles and aunts of whole blood
8) Uncles and aunts of half blood

Question 18

Administrators applying for a grant of (simple) letters of administration - What they need to state on the form

Answer 18

Explain why no-one in the higher categories is taking the grant and their relationship to the deceased

Question 19

What are the main duties of PRs

Answer 19

1) To obtain the grant of representation
2) To collect and manage the assets of the estate
3) To ascertain and pay the deceased’s debts and liabilities
4) To distribute the remaining cash and assets in accordance with the will or intestacy rules

Question 20

Preventing the issue of a grant - Caveats

Answer 20

If there is a dispute over the validity of the will or some other reason why family members wish to prevent the issue of a grant. They can lodge a caveat and once it has been entered no grant can be issued until the caveat is removed or ceases to be effective (they last for 6 months but can be extended)

Question 21

Compelling the issue of a grant - Citation

Answer 21

Potential beneficiaries will want the administration of the estate to proceed in a timely manner and may become frustrated if the PRs delay their application for the grant. The beneficiaries can apply for a citation which is a method of forcing a party with a right to the grant to act. Once cited the executor must proceed with an application for a grant of probate. If the executor does not do so the citor can apply to the court for an order allowing the executor to be passed over and a grant of letter of administration with will annexed.

Question 22

Which assets need IHT paying before the grant?

Answer 22

Anything which is not an installment property. An installment property is:
- Land
- A business or interest in a business
- Shares where the deceased had control of the Company immediately prior to death
- Unquoted shares which do not give control if it is sufficiently large

Question 23

what happens on divorce?

Answer 23

Divorce will not invalidate a will but the appointment of the ex-spouse as executor will fail. Additionally, any gifts to the divorced partner will also fail.

Question 24

What if one of the executors dies?

Answer 24

This will change the grant from a grant of probate to a grant of letters of administration with the will annexed.

Question 25

What if a gift of residue fails

Answer 25

The will is still valid so if there is still an executor willing to act then there will still be a grant of probate