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WAE > Administration - Personal Representatives > Flashcards

Administration - Personal Representatives Flashcards

1
Q

What is administration?

A

When a person dies the legal process for managing the distribution of their estate, paying debts, taxes, estate expenses and the beneficiaries.

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2
Q

What is a PR appointed by will called?

A

An executor

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3
Q

What is a PR appointed by statute called?

A

Administrator

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4
Q

What is a Grant of Representation?

A

A court order confirming the authority of the PRs to act.

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5
Q

Where does a executor derive their authority from?

A

They derive their authority from the will and they may act on the date of death. The grant confirms their authority.

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6
Q

Where does an administrator derive there authority from?

A

Derive their authority from the grant. They have no authority to act until the grant is issued.

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7
Q

Why is a Grant of Representation necessary?

A

It gives authority of the PRs to act; and

confirms the validity of the will, or that the deceased died intestate.

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8
Q

What is the role of a PR?

A

To administer the estate of the deceased.

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9
Q

What statutory duty do PRs have?

A

They have a statutory duty to collect in the deceased’s assets, ensure the deceased’s debts are paid and outstanding tax liabilities are met, and then distribute to the beneficiaries who are entitled.

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10
Q

What does it mean that the PR has a fiduciary duty?

A

All duties must be performed in accordance with their duty of care.

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11
Q

If someone dies intestate or the will does not appoint a PR, what rules are used to appoint?

A

Non Contentious Probate Rules 1987 (NCPR).

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12
Q

When does legal title to the estate pass to the PRs?

A

It passes to them by virtue of their appointment, however, they may decide to formally transfer the deceased’s assets into their name before distributing.

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13
Q

When does the role of a PR cease?

A

When the estate administration is complete.

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14
Q

If continuing trusts are created what must the PRs do?

A

They must transfer the property to the trustees as part of administration. The PRs should record the date on which the assets are transferred to the trustees even if they are both the executor and trustee.

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15
Q

When will a PR be a trustee?

A

When the will expressly appoints them

There is intestacy as PRs hold the estate “on trust with a power to sell”

Statutory trust arises under intestacy - PRs will be trustees on behalf of the minor beneficiary

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16
Q

What is the role of a solicitor in the administration of an estate?

A
  1. They may be instructed to provide advice in relation to the administration.
  2. Solicitor might be appointed as executor
  3. Might be instructed on contentious matters
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17
Q

What are the three types of duties a PR has?

A

common law, statutory and fiduciary

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18
Q

Can PR be personally liable?

A

Yes, for loss caused by breach of duty.

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19
Q

What is a PRs common law duty?

A

To dispose of the deceased’s body.

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20
Q

What is a PRs statutory duty?

A

To provide information to HMRC and pay IHT.

These duties must be complied with before the grant can be obtained.

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21
Q

How do PRs notify HMRC about the assets and liabilities of the estate?

A

Through IHT400

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22
Q

What assets must the PRs pay IHT on?

A

Assets in their control i.e. the succession estate. Can use estate funds for this.

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23
Q

What are the PRs duties under the grant?

A
  1. Collect and get in the real and personal estate and administer it in accordance with the law.
  2. Duty to provide inventory and account.
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24
Q

What does “collect” mean in relation to the real and personal estate?

A
  • identify and locate the deceased’s assets
  • identify the deceased’s liabilities and creditors
  • obtain control, possession or legal ownership of the assets
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25
Q

What does administer the estate mean?

A
  • keep the assets secure
  • paying the deceased debts and liabilities
  • meeting administration expenses
  • paying legacies
  • distributing the residue
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26
Q

What is a duty to provide inventory and account?

A

PRs must keep a list of the assets and values (inventory) and record steps they have taken in the administration (account). This information is usually recorded in the Estate Accounts?

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27
Q

What happens if a beneficiary or creditor ask to see the estate accounts but they are refused?

A

An application to the court can be made for an order to produce an inventory and account.

28
Q

What is the duty of diligence?

A

PRs have a general duty to carry out the administration with due diligence and within a reasonable time.

29
Q

When should the PRs complete the administration by?

A

Should complete the administration within 12 months of the date of death known as the “executors year”.

However, if it is not completed within 12 months it doesn’t necessarily mean there has been a breach but they may be required to justify any delay.

30
Q

How long is a PRs role for?

A

The role is for life. If additional assets are discovered after administration is complete the PRs have a duty to administer.

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 administered.

31
Q

What is the statutory duty of care?

A

Duty of care imposes a higher standard for professional PRs such as as solicitors.

A higher standard will be imposed upon those possessing special knowledge or experience, as will those who hold themselves out to have special knowledge

32
Q

What are the fiduciary duties solicitors are under?

A

They must not:

place themselves in a position of conflict

profit from their position

33
Q

If the deceased died intestate where does the PR powers derive from?

A

Statutory powers only will apply.

34
Q

If the deceased left a will where do the PRs powers derive from?

A

statutory powers apply to the extent that they do not conflict with the express powers in the will.

Express powers in a will take priority over statutory powers

35
Q

What are PRs statutory powers?

A
  1. power to sell, charge or lease.
  2. Power to appropriate
  3. Power to insure
  4. Power to invest
  5. Power to charge for services
  6. Reimbursement of PRs expenses
  7. Power to delegate
  8. Power to appoint trustees (gifts to minors)
  9. Power to accept receipt from parent
  10. Power to run business
36
Q

What is the PRs power to appropriate?

A

PRs have the power to appropriate an asset in satisfaction of a beneficiary’s entitlement and PRs can decide which assets are used to meet this. However:

  • A specific beneficiary must not be prejudiced
  • Consent of recipient beneficiary is required (common for the will to include a clause removing this requirement).
  • The value of the asset must be considered at the date of transfer rather than date of death
  • If the value of an asset exceeds the beneficiary’s entitlement, the PRs may not appropriate

-If the value of the asset is less they may appropriate and make a cash transfer of the balance

37
Q

If the PRs are exercising their power to insure how do they pay insurance premiums?

A

They pay it out of the estate income or capital.

38
Q

What is the statutory power to invest?

A

PRs have a duty to preserve the estate and actively invest

PRs are also permitted to acquire freehold or leasehold land in the UK

PRs must carry out regular reviews of investments (commonly annually)

Duty to obtain advice unless PRs reasonably conclude it is unnecessary or inappropriate

39
Q

Can PRs claim remuneration?

A

Professional PRs can claim reasonable remuneration provided they are not acting alone, and that co-PRs give their written consent

A lay PR, or professional PR acting alone, needs an express power in the will to charge for services

40
Q

Can PRs be reimbursed for expenses?

A

All PRs may reimburse themselves for expenses properly incurred when acting on behalf of the estate.

41
Q

Can PRs delegate their powers?

A

Yes, can employ agents and delegate their powers (can appoint one of the PRs if qualified but not beneficiary), except for the following:

How and whether assets should be distributed

Whether fees or costs are payable from income or capital

The appointment of trustees

42
Q

If PRs delegate their powers what requirements must be satisfied?

A

o Do so in writing to the agent; and
o Provide them with a written policy statement which the agent must agree to comply with

43
Q

Can PRs accept receipt from a parent on behalf of a minor?

A

A minors parent or guardian has the power to give good receipt to PRs on minor’s behalf.

If a testator does not want the parent or guardian to receive the legacy, the will can be drafted expressly to give legacy to trustees

An express clause within a will which permits PRs to accept receipt from a beneficiary aged 16 or older is effective

44
Q

Can a minor over 16 or over give receipt?

A

An express clause within a will which permits PRs to accept receipt from a beneficiary aged 16 or older is effective

45
Q

What is the power to run a business?

A

If a testator was a shareholder = company will survive testator’s death. Articles/SHA will include provisions about death of a key shareholder

If testator was a partner = Partnership Agreement should contain provisions about continuing after the death of a partner

If the testator was a sole trader = PRs can sell the business as a going concern within a year of death

46
Q

In relation to the power to run a business, will the PRs be personally liable to creditors?

A

Yes, but may indemnify themselves from the estate for liabilities incurred when running the business

47
Q

Can a PR act alone?

A

If more than one PR is appointed they should exercise discretionary unanimously (unless PRs are joint executors and will states otherwise)

However, when exercising power to sell or transfer a jointly appointed PR will usually have the authority to act alone.

A sole PR may not deal with stocks and shares which are registered in the joint names of the PRs.

48
Q

Who do PRs have a duty to?

A

Beneficiaries and creditors

49
Q

What is a claim of action against a PR for breach of duty called?

A

A devastavit (wasting of assets) and may be brought where there is loss to the estate because of the PRs wrongdoing.

50
Q

Even if there is no loss to the estate, can a claim be brought against a PR?

A

Yes if they have breached their fiduciary duty. The claimant may seek account of unauthorised profit/transaction to be set aside.

51
Q

What could a claim against a PR be based on?

A

Maladministration, misuse of assets, negligence and breach of fiduciary duty.

52
Q

What is maladministration?

A

Incorrectly administering the estate by making distributions to the wrong beneficiaries.

Using the 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

53
Q

What could the misuse of assets include?

A

Making personal use of the estate assets.

54
Q

What could a negligence claim against PRs include:

A

unreasonable delay in carrying out the administration

failing to invest or making poor investment decisions in breach of duty of care.

55
Q

What could a breach of fiduciary duty include?

A

Breach of no conflict rule.

Breach of the no profit rule.

Self-dealing

56
Q

How could a PR be removed?

A

By court order under s50 Administration of Justice Act 1950 appointing a replacement PR; or

Administration Action where the court takes over the administration itself.

57
Q

What protections do PRs have in relation to liability?

A
  1. seeking court directions
  2. s48 AJA 1985 application
  3. s27 Trustee Act 1925 notice
  4. Benjamin Order
  5. Presumption of Death Act 2013
  6. Insurance
  7. Indemnity
  8. Payment to court
  9. Exoneration by the court
  10. Exemption clauses in a will
58
Q

what is seeking court directions?

A

If PRs foresee difficulties they may seek court guidance

This could include an administration action application or an application for guidance on a specific matter

59
Q

What is a s48 AJA 1985 application?

A

Seeking a court order is time consuming and expensive

PRs may instead make an application under AJA to distribute in accordance with a written legal opinion and court grant permission to rely on it.

60
Q

What is a s27 Trustee Act 1925 notice?

A

To prevent personal liability to unidentified beneficiaries and creditors, the trustees may publish a notice of their intention to distribute to known beneficiaries two months after the date of advertisement. The notice must be placed in:

I. The London Gazette

II. Newspaper circulating in the area in which any land held on trust is situated, and

III.Any other newspaper which is appropriate

61
Q

Who does a s27 Act 1925 notice protect against?

A

ONLY protects against unknown beneficiaries or creditors NOT known but missing beneficiary or creditor

It also does not protect against beneficiaries who receive more than their entitlement to the estate

This means PRs who are also beneficiaries may still be liable to other beneficiaries

62
Q

What is a Benjamin Order?

A

Applicable where KNOWN BUT MISSING BENEFICIARY

Permits the PR to distribute on the basis that the missing beneficiary has died.

This relieves PRs from liability even if the assumption transpires 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

63
Q

What is the Presumption of Death Act 2013?

A

PRs may make an application for a court order declaring that a person thought to have died, or not known to have been alive, for seven years or more has died.

Order will confirm presumed date of death

This will be quicker than a Benjamin Order

64
Q

What is an indemnity as a form of PR protection?

A

PRs could seek an indemnity from beneficiaries they can trace
o The beneficiaries promise to reimburse PRs for any loss PRs suffer as a result of being sued by a disappointed beneficiary or creditor

Indemnity from existing beneficiaries is only as good as the person giving it

65
Q

What is payment to court?

A

PRs could pay the legacy amount into court and distribute the balance of the estate

May be suitable where a beneficiary can be located but is refusing to accept their inheritance

66
Q

What is exoneration by the court?

A

Under s 61 Trustee Act 1925, a PR my apply to the court for an order exonerating them, in whole or part, from personal liability for breach.

An order will not be made unless the court considers that the PR:

Acted honestly and reasonable

Ought fairly to be excused for breach of trust and omitting to obtain directions of the court in the matter

67
Q

How can exemption clauses in a will protect the PR?

A

The testators will may contain clauses which exclude or restrict liability for a PRs wrongdoing.

WAE (11 decks)

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