Dealing with the assets Flashcards
What issues might PRs face?
3 issues:
- There may be creditors of whom they are unaware of unknown relatives
- They may not know the whereabouts of some beneficiaries who may have lost contact with the deceased’s family
- There could be a successful claim against the estate under the Inheritance act
How can PRs protect themselves - Unknown beneficiaries and creditors
If they wait at least two months after advertising before distributing the estate then they will be protected from liability, however the claimant will have the right to claim back assets from the beneficiaries who received them. They should advertise for claimants as early as possible. They must give notice of the intended distribution of the estate by:
- Advertisement in the London Gazette
- Advertisement in a newspaper circulating in the district in which land owned by the deceased is situated
How can PRs protect themselves - Missing beneficiaries and creditors
If PRs know that there is a person with a claim but they cannot find them there is no protection. Where PRs can’t trace a known beneficiary they need to consider:
- Keeping back assets in case the claimant appears
- Taking an indemnity from the beneficiaries that they will meet any claims if the claimant reappears
- Taking out insurance to provide funds
- Benjamin order - court order authorising PRs to distribute the estate on the basis that the claimant is dead
How can PRs protect themselves - Inheritance act
The PRs will be personally liable if the assets have been distributed and an applicant under the Inheritance act then successfully obtains an order for reasonable financial provision from the estate. PRs can protect themselves from this liability by waiting more than 6 months before distributing assets
Collecting the assets - Assets which automatically devolve to the PRs
Assets which pass under the will or intestacy rules. Real property and personal property.
Collecting the assets - When does devolution happen?
For executors devolutions happens immediately on death. For administrators devolution happens when the grant of representation is issued.
Collecting the assets - What does devolution allow them to do?
Devolution gives the PRs ownership of the assets in the estate but their duty is to collect them in as soon as is practicable.
Paying funeral and testamentary expenses and debts
Any assets in the estate can be used for the payment of debts and expenses. The will may direct from which part of the estate the debts, funeral account, testamentary and administration expenses should be paid. In the absence of such direction PRs must follow the statutory rules for the incidence of liabilities.
Paying funeral and testamentary expenses and debts - Residuary beneficiaries
Where possible the wishes of the beneficiaries of the residuary estate should be respected by the PRs. It is appropriate that the residuary beneficiaries should be consulted before any sale takes place. Generally beneficiaries gave clear views as to which assets they desire to be retained for transfer to them
Paying funeral and testamentary expenses and debts - Statutory rules applying to the payment of funeral and testamentary expenses
Depends on whether the estate is solvent or insolvent
Paying funeral and testamentary expenses and debts - Statutory rules applying to the payment of funeral and testamentary expenses - Solvent estate - S. 35 (secured debts)
S. 35 deals with secured debts - debts owing by the deceased which are charged on particular items of property - the effect is that a beneficiary taking the asset takes it subject to the debt and will be responsible for paying the debt
Paying funeral and testamentary expenses and debts - Statutory rules applying to the payment of funeral and testamentary expenses - Solvent estate - S. 34(3) (order of distribution)
This is the statutory order which the PRs must follow:
1) Property undisposed of by will subject to retention of a fund to meet pecuniary legacies
2) Property included in a residuary gift subject to retention of a fund to pay
3) Property specifically given for the payment of debts
4) Property charged with the payment of debts
5) The fund if any retained to meet pecuniary legacies
6) Property specifically devised or bequeathed rateably according to value
7) Property appointed by will under a general power rateable according to value
Broadly assets forming part of the residue are to be used before using property given to specific legatees
Paying funeral and testamentary expenses and debts - Statutory rules applying to the payment of funeral and testamentary expenses - Insolvent estate - Distribution
The order of distribution in the Administration of Insolvent estates of deceased persons should be followed - ranks debts and expenses in order of priority for payment:
1) Secured creditors - those holding a mortgage or charge over the deceased’s property
2) Funeral and testamentary expenses and debts
3) unsecured creditors
Paying the legacies - Transferring property
The method of transferring the property will depend on its particular nature
Paying the legacies - Pecuniary legacies - Time of payment
The general rule is that pecuniary legacies are payable at the end of the executor’s year - one year after the testator’s death. PRs are not bound to distribute the estate to the beneficiaries before the expiration of one year from the death
