Administration: Post-Grant - Distribution of the Estate

Question 1

what are considerations for the PRs with regards to beneficiaries’ beneficial entitlements when distributing?

Answer 1

1) identity of Bs =
- apply construction rules
- consider substitution clauses
- class gifts
- if a B or their spouse witnessed
- if B was issue that pre-deceased their child can inherit
- if deceased divorced spouse treated as pre-deceased

2) nature of interest =
- establish if B has vested or contingent interest or whether B had an interest under an express trust
- establish what share B is entitled to

3) identify property =
- establish what items fall under collection or general gift of chattels

Question 2

what timing considerations must the PRs have regard to when distributing the estate?

Answer 2

• PRs have a duty not to delay the administration and should aim to complete it within one year of death
• PRs should consider whether an IPFDA 1975 claim may be brought against the estate - so they may delay distributions until 10 months after the grant (6-month deadline to issue the claim and a further 4 months to serve notice of the claim)
• if PRs made a section 27 notice, they should not distribute until after 2 months from the notice for unknown beneficiaries and creditors to come to light

Question 3

how would the PRs transfer the following property to the beneficiaries?

• chattels
• pecuniary legacies
• shares
• land

Answer 3

• chattels = delivery to B
• pecuniary legacies = cheque or bank transfer
• shares = stock transfer form
• land = assent for legal estate in land - Form AS1

Question 4

who pays the cost of transferring the legacies to the beneficiaries?

Answer 4

B bears cost of transfer of asset (but not IHT) unless will provides otherwise

Question 5

what is the order of payment of legacies under a will?

Answer 5

unless the will states otherwise, PRs must pay legacies in the following order:

1) specific legacies = PRs know what asset to transfer (e.g., i give my gold ring)

2) general legacies = usually no direction on what estate assets are used to meet them (e.g., i give £1,000 or i give 100 ordinary shares in ABC plc)

3) residuary legacies

PRs must fully pay the specific legatees before distributing to general legatees, and must fully pay general legatees before residuary legatees

Within each category, if not all of the legacies can be paid, they abate proportionately

Question 6

when is the residuary legacy paid and using what funds?

Answer 6

When all debts, testamentary expenses and other legacies are paid, PRs can ascertain value of residue

you need accurate financial figures for tax, expenses, interest on loans, legal fees, etc.

Question 7

when can PRs exercise their general power of appropriation?

what are the requirements and limitations of appropriating assets?

Answer 7

PRs are free to choose which assets to appropriate to Bs in settlement of their entitlement

this can be done for general and residuary legacies

requirement = MUST OBTAIN CONSENT of B who the assets are going to (not the other Bs)

limitation = PRs CANNOT appropriate where an asset is valued (as at date of appropriation) more than B’s entitlement

if value of asset is less than B’s entitlement, PRs can appropriate and make a further balancing transfer

Question 8

what should the PRs obtain after making distributions?

Answer 8

PRs MUST obtain confirmation of receipt from a B when making a distribution

(special rules for minors)

Question 9

what are the options for distributing legacies to minors with vested interests?

Answer 9

• an express clause in a will that gives PRs power to accept receipt from 16+ is enforceable
• a parent or guardian can provide receipt on behalf of a minor
• PRs can hold the property on trust for B until they reach 18
• PRs can appoint trustees to hold property on trust for B until they reach 18, and PRs pay to trustees
• PRs can pay the legacy into court

Question 10

what are interim distributions?

Answer 10

PRs can make early payment of part of a residuary share before the end of administration

this is only if PRs are confident that sufficient assets will remain to meet outstanding payments

then B receives a balancing payment at the end

(note: interim distributions –> prepare estate accounts –> make final distribution)

Question 11

what are the PR’s duties regarding estate accounts?

Answer 11

PRs have a duty to keep an account of the estate assets and how they were administered

estate accounts must be signed by both PRS AND RESIDUARY BENEFICIARIES

no prescribed format for estate accounts

CONTENTS OF ESTATE ACCOUNTS =

1) Capital account = sets out assets and liabilities at death; records what happened to each asset during administration (sale/distribution); liabilities are included (pecuniary/specific legacies; IHT); solicitor fees included ==> balance of capital available to distribute to residuary Bs

2) Income account = sets out income received by estate during administration + how it was spent + deducts income expenses + income tax payable by estate shown ==> balance of income available to distribute to residuary Bs

3) Distribution account = sets out residuary beneficiary’s entitlement + includes interim distributions and final balance