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Wills > Post-Grant Administration Steps > Flashcards

Post-Grant Administration Steps Flashcards

1
Q

When collecting in assets of deceased what must PRs do in relation to personal possessions?

A

They must store and safeguard them

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2
Q

When collecting in money of the deceased what must PRs do?

A

They should pay money into:

separate bank account of the PRs specifically for estate money

Or

law firm client account

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3
Q

When should PRs pay debts of deceased?

A

As soon as assets are collected in

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4
Q

What happens if a PR fails to pay debts when they have assets available to do so?

A

They will be liable to the creditor and beneficiary for any consequent loss

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5
Q

What should PRs do in relation to any pre-grant loan they took out to pay IHT?

A

They should repay it as soon as possible to avoid any expense on interest payments

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6
Q

How should PRs deal with payment of expenses?

A

PRs should pay general administration expenses as and when they arise during administration

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7
Q

Can the deceased exclude any assets for the purpose of paying their debts and liabilities?

A

No - any such clause is void

All assets are available for such a purpose

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8
Q

What is meant that the estate is insolvent?

A

The assets are insufficient to pay all the funeral, testamentary and administration expenses, debts and liabilities

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9
Q

What is meant that the estate is solvent?

A

The assets are sufficient to pay all the funeral, testamentary and administration expenses, debts and liabilities

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10
Q

What are the rules for paying debts/liabilities of an insolvent estate?

A

Must be paid in the statutory order set out in the Administration of Insolvent Estates of the Deceased Persons Order 1986.

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11
Q

What are the rules for paying off secured debts?

A

If the amount of the outstanding debt is less than the value of the asset secured no other estate asset can be used to repay the secured debt UNLESS the Will states otherwise

To the extent the outstanding loan is greater than the value of the asset, the creditor will usually rank as an unsecured creditor

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12
Q

What are the rules for paying off unsecured debts/expenses in solvent estates?

A

Assets used to pay unsecured debts must follow statutory order unless otherwise stated in Will

If stated otherwise in Will, that intention prevails

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13
Q

What is the statutory order for paying unsecured debts in solvent estates?

A

1) Property not disposed of by will

2) Residue

3) Property the will sets aside

4) Money in the pecuniary legacy fund

5) Property specifically given eg chattels

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14
Q

What is the doctrine of marshalling?

A

Allows a beneficiary who is disappointed that his inheritance has been reduced to claim against the assets inherited by another beneficiary that should have been used to repay the debts

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15
Q

When will assets need to be sold to cover debts/expenses?

A

Only when there is insufficient cash to make these payments

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16
Q

When PRs need to sell assets to pay debts/expenses, what should they consider?

A
  • capital gains tax implications
  • how easily or quickly a sale can be carried out
  • wishes of beneficiaries
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17
Q

What CGT implications do PRs have to consider if considering to sell assets to pay for debts/expenses?

A
  • PRs should consider if assets have risen in value
  • opt where possible to sell assets that have not risen in value to avoid CGT
  • assets which have fallen in value should be sold to preserve value of estate
  • if asset that has risen in value and above personal allowance then CGT will be payable
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18
Q

If an asset has risen in value and is transferred directly to a beneficiary will this give rise to CGT?

A

No.

Transfer from PR to beneficiary not treated as disposal for CGT and beneficiary inherits asset as valued at death.

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19
Q

Do PRs have to consider the wishes of beneficiaries if considering to sell assets to pay for debts/expenses?

A

Should consider them but PRs are not bound by them

If beneficiary wants to receive a particular assets as part of their inheritance PRs should respect that where possible

20
Q

What responsibilities do PRs have in relation to income tax and CGT?

A
  • PRs must finalised deceased’s income tax and CGT position for tax year of death - may need refund/pay more tax
  • pay income tax and CGT that becomes due during administration
21
Q

Are tax liabilities an estate expense?

A

Yes - payable from estate and deductible from value of whole tax estate for IHT

22
Q

Do income for the deceased benefit from personal allowance?

A

Yes - if income is from before death

No - if income is received for period after death

23
Q

What rate do PRs pay income tax at?

A

Basic rate = 20%

24
Q

What form do PRs give beneficiaries for income tax purposes when estate income is distributed?

A

Form R185

25
Q

What can beneficiaries do with a form R185?

A
  • beneficiaries who don’t pay income tax can use R185 to claim a tax refund
  • beneficiaries who are higher/additional rate taxpayers will need to make a ‘top-up’ payment to HMRC and use R185 when completing their own tax rate
26
Q

Can PRs claim a tax-free allowance for CGT?

A

Yes

27
Q

When is gain to be assessed for CGT?

A

Date of death to date of disposal

28
Q

What happens if assets lose value?

A

Losses can be off-set against gains

29
Q

Are any assets exempt from CGT?

A

Chattels if disposal is for less than £6,000

30
Q

If PRs transfer asset to beneficiaries do they have to pay CGT?

A

No

31
Q

What should PRs consider in terms of tax efficiency in relation to distribution of assets?

A

PRs should consider if it is more tax efficient for PRs to:

  • sell asset as part of administration

or

  • transfer it to the beneficiary so the beneficiary can sell it
32
Q

What happens when the PRs have paid all debts and expenses?

A

Duty to distribute the remaining estate assets to beneficiaries according to will/intestate rules

33
Q

The residue will distributed last because only then will it be determined. Can a beneficiary entitled to the residue access it earlier?

A

Yes, if PRs are confident there will be sufficient assets to meet all other payments then may make early payment of share of residue and then pay balance at the end

34
Q

What must PRs know in order to make their distributions?

A
  • identity entitled beneficiaries
  • nature of beneficiaries interest
  • property they are entitled to
35
Q

What timing considerations are there in relation to distribution?

A
  • should distribute within one year of death ideally
  • if claim under IPFDA may be brought, PRs may wish to delay distributions until 10 months after grant being issued (being beyond any deadline for claim)
  • if S 27 notice used, not until after two month notice period
36
Q

What is the order that legacies should be paid out in?

A

(1) specific

(2) general

(3) residuary

37
Q

What happens if it is not possible to pay all the legacies?

A

They abate in reverse order:

  • residue goes first to pay other legacies
  • if insufficient funds to pay all specific legacies after residue has been abated, then general beneficiaries take no benefit
  • if there are sufficient funds to meet all specific gifts but not all general legacies, the general beneficiaries take a reduced inheritance
  • specific gifts take priority

Within each category, if not all legacies can be paid, they abate proportionately

38
Q

Where should money for pecuniary or general legacies come from?

A

Unless specifically stated otherwise in will, from residue fund.

39
Q

What should PRs do with regards to receipt?

A

They should obtain confirmation of receipt from the beneficiary when making a distribution

40
Q

Who needs to sign the estate accounts?

A
  • all PRs
  • residuary beneficiaries
41
Q

What requirements are there for estate accounts?

A
  • They must be clear and comprehensible.
  • serve as record of estate assets and how they have been administered
  • no prescribed format
  • should contain capital account, income account, and distribution account
42
Q

What should the capital account of the estate accounts detail?

A
  • Sets out the estate assets and liabilities at death.
  • Records what has happened to each item during the administration, for example, whether assets have been sold or transferred to a beneficiary.
  • Liabilities such as pecuniary/specific legacies and IHT are included, as are any solicitor’s fees for carrying out the administration.
  • The capital account will then show a balance which is available for distribution to the residuary beneficiaries.
43
Q

What should the income account of estate accounts detail?

A
  • Sets out the income received in relation to the estate assets during the administration and summarises how this was spent.
  • Income expenses are then deducted as liabilities.
  • The income account will then show a balance which is available for distribution to the residuary beneficiaries.
  • If the PRs receive rent from the tenant of an estate property the income would be shown in the income account and any income tax payable on the income would be shown as an income liability.
44
Q

What should distributive account detail?

A
  • The distribution account sets out the residuary beneficiaries’ entitlement.
  • It includes distributions made during the course of the administration of the estate (‘interim
    distributions’) and the final balance due to be distributed.
45
Q

What does the signing of the estate accounts signify?

A

The end of administration of the estate

Wills (14 decks)

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