Administration: Post Grant Practice Flashcards
What should money collected be paid into?
a PR’s bank account (opened specifically to hold estate money and to prevent this being mixed with their personal funds)
a law firm client account
What is the duty regarding debts?
duty to pay debts with ‘due diligence’ –not defined but creditors should normally be paid before the end of the ‘executor’s year’
What is the first expense consideration?
ensure that any pre-grant loan the PRs took out to pay IHT is repaid as soon as possible to minimise the expense of interest payments
How are secured debts paid?
Loan < asset secured, no other assets can be used to repay.
Loan > asset, creditor ranked as unsecured creditor.
What is the order of paying unsecured debts?
- Property not disposed of by a will
- Residue
- Property Will sets aside
- £ in pecuniary legacy fund
- Property specifically given
What is the doctrine of marshalling?
PRs take assets out of order, doctrine of marshalling.
Creditors not bound by rules and no obligation to return money.
Allows disappointed beneficiaries to compensate himself against property which ought to have been used to pay debt. Can claim against assets inherited by other benificiaries.
What are the CGT considerations when choosing assets to sell?
- PRs acquire estate assets at their market value on the date of death
- PRs should consider selling assets which have not risen in value
- Assets falling rapidly in value should usually be sold in any event
- sell an asset increased in value after death the ‘profit’ they make may be subject to CGT if the gain is greater than any tax-free allowance.
- Assets that have risen in value may be transferred directly to a beneficiary without triggering a CGT charge
What are the ease of sale considerations when choosing assets to sell?
- Quoted shares and other financial investment products can usually be sold fairly quickly and easily.
- Unquoted shares, business interests and land will usually take longer to sell.
- Cars and household possessions can usually be sold fairly easily but may not produce the amount needed
What is PR’s responsibility regarding income tax and CGT?
- Finalise income tax and CGT position for the tax year of death. Outstanding tax or refund.
- Pay income tax and CGT that becomes due during the administration period. CGT on taxable gains made following a disposal of estate assets and pay income tax on any income received during the administration period
Can PRs pay residuary legacy before making all other outstanding payments?
They may make an interim distribution if sufficient assets in their control to meet other oustanding
To ensure the PRs fulfil their duty to accurately distribute the estate what must they consider?
- Identity of the beneficiaries
- Nature of the interest
- Property to which they are entitled
What steps are taken to identify the Identity of the beneficiaries?
- Review will to identify those entitled to legacies & apply rules of construction
- Apply intestacy rules if full or partial intestacy occurs.
What steps are taken to Identify the Nature of the interest?
- Establish if a vested or contingent interest, or, an interest under an express trust in the will.
- Assess what ‘share’ each beneficiary is entitled to.
What steps are taken to identify the Property to which they are entitled?
- Establish which items fall within a general gift of chattels or collection of items.
- Apply the effect of s 21 / 24 Wills Act.
- Provided an asset is not required for the payment of debts, or a legacy has not failed, the PRs can make a transfer to the beneficiary
What is the method of transfer for chattels?
delivery to the beneficiary
What is the method of transfer for £ legacies?
cheque or bank transfer
What is the method of transfer for shares?
stock transfer form
What is the method of transfer for land?
Assent for a legal estate in land (land registry form AS1)
What should you be aware of regarding relieving provisions?
Unless the will specifically provides otherwise, the beneficiary must bear the cost of the transfer of the asset (but inherits the item free of IHT)
What are the timing considerations for distributing to beneficiaries?
- Claims against the estate: under IPFDA – ten months after the grant issued
- S 27 TA notice: Shouldn’t make distributions until after 2 month deadline
What is the order of payment of legacies?
- specific
- general
- residuary
What happens if it is not possible to pay all the legacies?
they abate (reduce) in reverse order.
What happens if it is not possible to pay all the legacies of one category?
they abate proportionately
What is necessary when calculating the final residue?
final accurate figures for tax liabilities (including IHT) and other expenses such as interest payable on loans and professional legal fees.
What should PRs obtain when making a distribution?
Receipt
What are the options for obtaining receipt where there is a minor beneficiary with a vested interest?
- Express clause in Will giving PRs power to accept receipt from a minor (16 or 17) is enforceable
- S3 Children Act 1989 – parents/guardians can give receipt
- PRs can hold property until child turns 18
- Appoint trustees (s42 AEA) and make payment to them
- Pay legacy to court (s63 TA 1925)
What is the estate accounts duty?
duty to produce an account of the estate administration if required by the court.
What symbolises the end of the administration?
Date estate accounts signed
Who signs estate accounts?
all PRs and residuary beneficiaries
What does signing estate accounts indicate?
residuary beneficiaries agreement with how the estate administered
What is the usual effect of signing estate accounts?
releases the PRs from further liability to account.
What are the usual three main sections of estate accounts?
Capital Account
Income Account
Distribution Account
