Distribution and estate accounts Flashcards
What is the first step that PRs must take when distributing assets?
Make payments of the legacies
This is the initial obligation before any further distribution can occur.
What is the final step of administration for PRs?
Full distribution of the residuary
Can PRs make an interim distribution of the residuary?
Yes, before the end of administration
This allows for partial distributions while administration is ongoing.
What should PRs obtain from beneficiaries?
Receipts
This is important for record-keeping and accountability.
What must PRs consider before distribution?
- Identity of the beneficiaries - review the will, apply rules of construction
- Nature of interest (vested, contingent, express trust)
- Property to which the beneficiary is entitled
- Method of transfer
- Relieving provisions
What must PRs establish regarding property entitlement?
What items fall within the general gift
What is the method of transfer for chattels?
Delivery
What is the method of transfer for cash?
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 (Land registry form AS1)
Who bears the cost of the transfer of the asset unless the will states otherwise?
The beneficiary
What is the duty of PRs regarding the timing of administration?
Not to delay the administration and complete it within a year of death
What should PRs consider regarding claims against the estate?
Delay distributions until 10 months after the grant being issued if a claim under the IPFDA 1975 may be brought
What should PRs do if they have entered a s27 TA notice?
Do not make a distribution until after the 2 month deadline for being notified of a claim.
What is the order of payment of legacies?
- Specific
- General
- Residuary
What happens if it is not possible to pay all legacies?
The legacies abate (reduce) in reverse order.
What is often the issue with pecuniary legacies?
Pecuniary legacies will often have no direction as to which particular assets in the estate should be used to meet them.
What must be done to ascertain the value of the residue?
- pay all debts, testamentary expenses and other legacies
- ascertain the final accurate figures for tax liability and other expenses (interest on loans, pro legal fees)
How can a law firm’s client account be used in the estate process?
If a law firm has been used, money in the client account can be used to pay the final invoice for fees, and the balancing figure would be distributed in accordance with the residuary entitlement.
What is appropriation in the context of legacies?
When paying general and residuary legacies, the PRs are free to choose which assets to appropriate to the beneficiaries in settlement of their entitlement.
What is a restriction on appropriation?
PRs cannot appropriate where the value of the asset exceeds the entitlement of the beneficiary concerned.
What must PRs do if the value of the asset is less than the beneficiary’s entitlement?
The PRs will need to make a further balancing transfer.
What is a key issue when obtaining receipts from minor beneficiaries?
Minors cannot give good receipt. Therefore options include:
- an express clause in the will which allows receipt from 16 or 17 yr olds
- receipt from a parent or guardian
- holding property until the child is 18
- appointing trustees
- paying the legacy into court.
What are estate accounts?
An account of the estate assets must be kept and should be signed by both PRs and residuary beneficiaries.
What is the usual significance of the date the estate accounts are signed?
The date account is signed is usually the end of administration.
What does the Capital Account set out?
It sets out assets and liabilities at death and records what has happened to each item during administration (i.e sold or transferred).
The remainder goes to the residuary
What does the Income Account show?
It sets out how income was received, with expenses deducted as liabilities, showing the balance available for distribution to the residuary beneficiaries.
What does the Distribution Account include?
It sets out beneficiaries’ entitlement, including any distributions made during the course of administration and the final balance due to be distributed.
