ADMINISTRATIVE POWERS OF PERSONAL REPRESENTATIVES

Question 1

10

PERSONAL REPRESENTATIVES’ POWERS

Answer 1

1. Power to Sell, Mortgage, or Lease
2. Powerto Appropriate
3. Power to Accept Receipts for a Minor’s
   Property
4. Power to Insure
5. Power to Delegate
6. Power to Indemnify for Expenses
7. Power to Run the Deceased’s Business
8. Power to Invest
9. Power to Maintain a Minor
10. Power to Advance Capital

Question 2

Power to Sell, Mortgage, or Lease

Answer 2

PRs have the power to sell, mortgage, or lease estate property. This helps pay various administration expenses (tax,
funeral costs, debts, pecuniary legacies).

Question 3

2

Powerto Appropriate

Answer 3

EXAMPLE
1. PRs have the power to appropriate. Appropriation is the use of an asset to satisfy a legacy or interest in the estate, provided the** beneficiary consents** (unless the will provides otherwise, which is common) and** no specific beneficiary is affected.
2. It is not permissible for a PR to make an appropria-tion in their own favour to satisfy a pecuniary legacy, unless the asset used to do so is cash or the equivalent of cash **(for example, government stocks or quoted share)—unless per-mitted by the will.
3. A will leaves £5,000 to a benefciary. The estate is low on cash but has other assets, including a valuable jewellery collection that the testator did not leave to any specifc ben-efciaries. One item in the collection is an emerald necklace worth £5,000. The PR can use the power of appropriation to give the necklace to the benefciary instead of the £5,000 in cash. Unless the will provides otherwise, the benefciary must consent to the appropriation.

Question 4

2

power to Accept Receipts for a Minor’s
Property

Answer 4

1. A minor is unable to give a valid receipt for monies or assets transferred to them. PRs can appoint trustees for a minor if the minor has a vested interest in the property.
2. Note that there is a view that anyone with parental responsibility for the minor can give a valid receipt. The simplest way to deal with any uncertainty is to have an express clause in the will providing for parental receipts and/or minors giving receipts from age 16. Contingent gifts cannot be paid out early.

Question 5

Power to Sell, Mortgage, or Lease

Answer 5

PRs have the power to sell, mortgage, or lease estate prop-erty. This helps pay various administration expenses (tax,funeral costs, debts, pecuniary legacies).

Question 6

Power to Insure

Answer 6

Trust property can be insured against any risks to the full val-ue of the property. Any insurance monies received are held
as capital and used to reinstate the lost or damaged property

Question 7

Power to Delegate

Answer 7

PRs can delegate functions to agents on such terms as they determine. Unless covered in the will, PRs must review ar-rangements with agents. They are liable for the act or default of an agent only if they failed to adhere to their statutory duty of care in appointing or reviewing the agent.

Question 8

Power to Indemnify for Expenses

Answer 8

PRs may indemnify themselves (that is, reimburse themselves for all properly incurred expenses).

Question 9

3

Power to Run the Deceased’s Business

Answer 9

1. The general rule is that PRs have no authority to carry on the deceased’s sole trade unless they do so to sell it as a going concern.
2. However, the will may include express provisions allowing the PRs to run the deceased’s business as a going
   concern.
3. For partnerships, the partnership agreement must be consulted. If the deceased was a shareholder, thecompany’s articles of association should be reviewed.

Question 10

2

Power to Invest

Answer 10

1. The Trustee Act 2000, which applies to PRs, authorises trust-ees to make any kind of investment that they could make if they were absolutely entitled to assets of the trust. In other words, they can invest estate property in anything they would invest in personally with statutory exceptions of the purchase of land abroad and the purchase of an interest in land with someone else (for example, a benefciary). Note that a testa-tor is permitted to restrict investment powers in the will, for example, by prohibiting unethical investments.
2. Although PRs may invest in almost anything, they have a duty to make the trust productive, and their investment decisions can be reviewed under the ‘standard investment criteria’, which are:
   *The suitability to the trust of the investment; and
   *The need for diversifcation of the trust’s investments.

Question 11

4

Power to Maintain a Minor

Answer 11

1. Section 31 Trustee Act 1925 provides that when property is held for a minor beneficiary and the gift carries the right to intermediate income, the trustees may apply the income for the maintenance, education, or benefit of the minor.
2. Other-wise, the trustees must accumulate the income. This pro-vision applies whether the interest is vested or contingent.
3. Once the beneficiary is 18, the accumulated income is normally added to capital (but it will be paid out to a beneficiary who obtains a life interest at age 18).
4. Note that an express will provision may override or amend section 31;
   EXAMPLE
   A clause in the will might state:
   “Section 31 of the Trustee Act 1925 shall apply as if the age of 21 years were substituted for all references to the age of 18 wherever they occur in section 31 (references to ‘infancy’ being construed accordingly)”.
   This would give the trustees discretion to accumulate income (if not used) until the benefciary is age 21.

Question 12

4

Power to Advance Capital

Answer 12

1. Section 32 Trustee Act 1925 allows trustees discretion to advance capital to a benefciary (minor or not) who has a vested or contingent interest in capital.
2. The entire vested or presumptive share may be advanced—although any prior life interest benefciary must give their consent.
3. Any advance is brought into account on an absolute entitlement arising (unless the will specifes otherwise).
4. If an advance is made before a beneficiary satisfies a contingency, the amount so advanced is not recoverable. Once more, the will may vary the terms of the statute.

Question 13

4

EXERCISE OF PERSONAL
REPRESENTATIVES’ POWERS

Answer 13

1. A sole PR has the same powers as two or more and thus can give a valid receipt for the proceeds of sale of land.
2. Joint PRs have joint and several authority, so the act of one binds all others and the estate.
3. However, all PRs must join for the transfer of land and shares.
4. PRs’ powers are fduciary and **must therefore be exercised in good faith in the interest of the estate as a whole.