Chapter 12: Administrative Powers of Personal Representatives

Question 1

What is appropriation?

Answer 1

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) + no specific beneficiary is affected.

Question 1

What statutory powers are given to PRs?

Answer 1

1. Power to sell, mortgage, or lease
2. Power to 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

When is it not permissible for a PR to make an appropriation?

Answer 2

In their own favour to satisfy a pecuniary legacy, unless the asset used to do so is cash or the equivalent cash (e.g., government stocks or quoted share) - unless permitted by the will.

Question 3

What can PRs do if a minor has a vested interest in property?

Answer 3

They can appoint trustees if the minor has a vested interest in the property.

There is a view that anyone with parental responsibility for the minor can give a valid receipt.

Question 4

What can PRs not do re minors?

Answer 4

Pay contingent gifts out early

Question 5

What is the simplest way to deal with uncertainty surrounding minor’s receipt of property ?

Answer 5

Have an express clause in the will providing for parental receipts and/or minors giving receipts from age 16.

Question 6

What is the power to insure?

Answer 6

Trust property can be insured against any risks to the full value of the property.

Any insurance monies received are held as capital + used to reinstate the lost or damaged property.

Question 7

What is the 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 arrangements with agents.

Question 8

When will PRs be liable for actions of agents when they have delegated?

Answer 8

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 9

What is the general rule re carrying on a deceased’s sole trade?

Answer 9

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.

Question 10

When can PRs run the deceased’s business?

Answer 10

The will may include express provisions allowing the PRs to run the deceased’s business as a going concern.

Question 11

What should PRs do if there is a partnership involved?

Answer 11

The partnership agreement must be consulted.

Question 12

What should PRs do if the deceased was a shareholder and want to know whether they should carry on the business?

Answer 12

They need to check the articles of association

Question 13

What is a PRs power to invest?

Answer 13

Trustee Act 2000 authorises trustees to make any kind of investment that they could make if they were absolutely entitled to assets of the trust.

They can invest estate property in anything they would invest in personally with statutory exceptions of the purchase of land abroad + the purchase of an interest in land with someone else.

Note - testator is permitted to restrict investment powers in the will, e.g., by prohibiting unethical investments.

Question 14

What standard investment criteria must PRs adhere to?

Answer 14

1. The suitability to the trust of the investment, and
2. The need for diversification of the trust’s investments

Question 15

When could PRs be found liable to beneficiaries re investments?

Answer 15

If the PRs invest in something not suitable for the trust or if they fail to diversify - could be found liable to a beneficiary who is harmed by the failure.

Question 16

What is the power to maintain a minor?

Answer 16

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.

Otherwise, the trustees must accumulate the income.

Applies whether the interest is vested or contingent.

Question 17

What happens to accumulated income once a beneficiary turns 18?

Answer 17

Normally added to capital - but will be paid out to a beneficiary who obtains a life interest at age 18.

Question 18

What happens to the income if a minor reaches 18 but still has a contingent interest?

Answer 18

The ongoing income thereafter must be paid to them until their continent interest is satisfied - when they will receive the capital plus accumulated income

Question 19

What is the power to advance capital?

Answer 19

Section 32 Trustee Act 1925 allows trustees discretion to advance capital to a beneficiary (minor or not) who has a vested or contingent interest in capital.

The entire vested or presumptive share may be advanced.

Any advance is brought into account on an absolute entitlement arising (unless the will specifies otherwise).

Question 20

When will consent be needed for PRs to apply the power of advancement?

Answer 20

Will need the consent of any prior life interest beneficiary.

Question 21

What happens if an advance is made before a beneficiary satisfies a contingency?

Answer 21

The amount so advanced is not recoverable

Question 22

What is the impact of having a sole PR on their powers?

Answer 22

None - a sole PR has the same powers as 2 or more and thus can give a valid receipt for the proceeds of sale of land.

Question 23

What kind of authority do joint PRs have?

Answer 23

Joint and several authority - the act of one binds all others and the estate.

However, all PRs must join for the transfer of land and shares.

Question 24

The PRs’ powers are fiduciary - what does this mean?

Answer 24

They must be exercised in good faith in the interest of the estate as a whole.