Dealing with the assets Flashcards
What will the administration of the estate require the PRs to do?
Once they’ve obtained the grant the PRs will have to administer the estate:
1) Collect the deceased’s assets
2) Pay the deceased’s funeral and testamentary expenses and debts
3) Distribute the legacies - specific gifts first
4) Complete the administration (tax) and distribute the residuary estate
5) Estate accounts
What issues might PRs face?
1) There may be creditors of whom they are unaware of unknown relatives
2) They may not know the whereabouts of some beneficiaries who may have lost contact with the deceased’s family
3) There could be a successful claim against the estate under the Inheritance act (Family Provision)
How can PRs protect themselves - Unknown beneficiaries and creditors
The PRs can protect themselves by advertising for claimants in the London Gazette or in a newspaper in the district in which land owned by the deceased is and waiting at least two months after advertising before distributing the estate. However the claimant will have the right to claim back assets from the beneficiaries who received them. They should also make searches in the land registry and land charges registers to reveal the existence of any liability in relation to the deceased’s ownership of land.
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 then they need to consider:
- Keeping back assets in case the claimant appears (unpopular with other beneficiaries)
- 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 - Family Provision
The PRs will be personally liable if the assets have been distributed and an applicant under the Inheritance act 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. Assets which pass independently do not devolve on the PRs. Executors - devolution happens immediately on death. Administrators this happens when the grant 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. They need to preserve the assets pending completion of the administration. The PRs have the same powers as trustees.
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. They shouldn’t sell property given specifically by will.
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 - Solvent estate - Secured debts
This is where there are sufficient assets to pay all the expenses.
A beneficiary taking assets which are subject to a charge takes it subject to the debt and will be responsible for paying the debt unless a contrary intention is shown in the will
Paying funeral and testamentary expenses and debts - Statutory rules - Solvent estate - Unsecured debts
The assets must be applied in this order:
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 pecuniary legacies not already provided for
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 - Insolvent estate - Distribution
The order of distribution 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
Pecuniary legacies - Provision for payment in the will
Typically, the gift of the residuary estate will be ‘subject to’ or ‘after payment of’ the pecuniary legacies. In both cases the legacies should be paid from the fund of residue before the division of the balance between the residuary beneficiaries.
