Personal Representatives Flashcards
Duties of a PR
- Duty to act within the scope of their powers
- Subject to fiduciary duties
- PR is personally liable for loss caused by breach of duty
Appointment of executors
- The role of the PR is to collect in the assets and administer the estate
- A PR appointed by will is referred to as an executor
Executors are appointed by will and their authority to act derives from the will
Advising a client on the duties of a PR BEFORE issue of a grant
- Dispose of the deceased’s body
- Duty to provide information about the estate to HMRC and pay IHT
- Notify HMRC about assets and liabilities (IHT 400 and IHT due)
These duties must be completed before the grant of representation is obtained
How long does a PR have to carry out the administration of the estate?
General duty to carry out the administration with due diligence and within a reasonable time
- reasonable time is considered to be within 12 months of the date of death
Appointment of professional executors
Only professional executors and trustees may charge for their time
Renunciation of Power
If an executor is unwilling to act, they may formally renounce their right to apply for probate and the administration process continues as though they had not been appointed
- Executor must sign form of renunciation and this is included in application
- Renunciation is final - cannot change mind without court approval
- Advise client that this action is FINAL
Intermeddling
An executor cannot renounce if they have intermeddled with the estate
Intermeddling:
- when a person takes steps indicating they have accepted their appointment and are fulfilling the duty to administer the estate
- For example, obtaining, receiving or holding the deceased’s assets, forgiving any debts or liabilities, paying debts, selling assets or disposing of personal propertyy
Acts of common humanity, such as arranging a funeral or taking steps to secure the estate assets are NOT intermeddling
Reserving power
If an executor does not want to act initially, and will not apply for the original grant, but wants to retain the option to apply for probate later, they can reserve the power to do so
- There must be at least one other executor who does take out the grant of probate. There must be at least one executor who is still acting
- Need to indicate that they are reserving power on the form to apply for grant of probate
- an executor who has intermeddled can still reserve power
Reserving power if a co-executor cannot be reached
If the co-executor cannot be reached - the executor can apply for grant of probate with powers reserved for the co-executor
- This is practical as waiting for the second executor to become available could delay administration
- Power can also be reserved to a minor who could apply once they reach 18
What is the grant of double probate?
Where a second grant of probate is issued for the same estate (runs concurrently with the original grant), allowing an executor who was not part of the initial grant to also act as an executor.
- when a grant has been issued with power reserved to another executor and that executor then wishes to act
- this is only appropriate if the administration is not yet complete
Questions to ask a client if advising them on option to reserve or renounce power?
What steps has the client already taken in relation to administering the estate?
- If the client has taken steps which amount to ‘intermeddling’ they cannot renounce power, but they can reserve power
(Note: would not ask client ‘have you intermeddled’, but instead, ask ‘what steps have you taken so far?’)
How many other executors are there?
- To reserve power, there must be at least one other executor
Appointing an attorney to act on their behalf
- After executor has obtained a grant, a PR may delegate their functions to an attorney for a maximum of 12 months
What happens if all executors are unable or unwilling to act?
- A grant of probate cannot be issued
- Instead, a grant of letters of administration (with will) would be appropriate and an administrator would be appointed under NCPR 20
Options if an administrator is unwilling to act
Renounce:
- this is FINAL (as there is no right to reserve power)
- a form of renunciation must be signed and submitted to the probate registry with the application for the grant
- a potential administrator can renounce at any time before the grant is issued. They can renounce even if they have intermeddled
Appoint an attorney:
- after the administrator has been appointed under the grant, a PR may delegate their functions to an attorney for max 12 months
Can an administrator reserve power?
NO - unlike an executor, an administrator cannot reserve power
Advising a client - why do they need to get grant?
- Need to obtain the grant ASAP
- The grant is important for practical purposes as most institutions are unwilling to release funds to PRs without seeing the grant (advising client on the practical steps to take)
Advising a PR client - what must happen before the PR can obtain the grant?
The issue of the grant cannot happen until information is delivered to HMRC and any IHT due is paid
- cannot obtain grant until complied with HMRC duties
What do PRs complete an IHT400 for?
The PRs report to HMRC about the assets and liabilities of an estate by completing IHT 400
- it is not completed for an excepted estate
Reporting to HMRC - IHT account
PRs deliver an account to HMRC specifying:
- all of the property comprising deceased’s taxable estate, the value of each item at the date of death and any exemptions and reliefs that apply
- Deadline for submitting the account is 12 months from the end of the month in which the death occurred
Deadline for paying IHT
6 months from the end of the month in which the death occurred, after which interest becomes payable on unpaid tax
Practical advice to PR client on submitting the account and paying IHT
PRs should submit the account and pay IHT due as soon as possible
This is because the grant will not be issued until information about the estate has been provided to HMRC and any IHT has been paid. The grant is needed to carry out the administration
IHT Instalment Option
IHT due in respect of certain assets may be paid by 10 equal annual instalments
- first instalment due by usual deadline
- remaining instalments due on anniversary date, with interest charged
Following assets:
- land and buildings
- company shares/securities giving the deceased control
- some unquoted company shares
- farms or interest in a farming business
- business or interest in a business
- timber
What are PRs duties and how are they owed to?
- Duty to collect in assets
- Duty to administer the estate
- Duty to provide inventory and account
These duties are owed to beneficiaries and creditors
PR liabilities and claims against PRs
PRs owe duties to estate beneficiaries and creditors
- Claim of action against a PR for breach of PR duties is called a devastavit
- Claimant can pursue a claim for loss to the estate, account of unauthorised profit or transaction set aside for breach of fiduciary duty
Claim against a PR may be based on
- Maladministration (incorrectly administering the estate to the wrong beneficiaries, using residuary estate to meet liabilities, paying legacies before debts without sufficient funds for the creditors)
- Misuse of assets (making personal use of the estate assets)
- Negligence (unreasonable delay in administration, failing to invest or breach of duty of care)
- Breach of fiduciary duty (breach of no conflict rule / no profit rule / self-dealing)
What you need to ask if a client tells you they / another person is able to act but would rather not or is unwilling to act?
What steps have you/x person taken to deal with the estate?
- If no = explain that this is good as it means they can step away (renounce) or for the time being only with the option to return later (reserve power)
What is the first step a Personal Representative needs to take?
The death of an individual must be registered within 5 days of being confirmed by a medical practitioner and is the first thing to do because you need the death certificate and burial.cremation certificate
Payment options available to raise funds for IHT?
- Direct Payment Scheme: Banks or building societies can be asked to a direct payment from the deceased’s accounts to HMRC by telegraphic transfer. PRs must complete IHT 423
- Borrowing from a beneficiary with funds outside the succession estate or for which a grant is not required (e.g., joint bank account)
- Borrowing from bank, at interest rate
