Role of Personal Representative Flashcards
Duties, Powers and Liabilities
What is the role of a of personal representative in general?
To administer the estate of the deceased.
Statutory duty to collect in deceased’s assets, ensure the deceased’s debts are paid and outstanding tax liabilities are met and to then distribute assets to the beneficiaries who are entitled
What is the nature of a PRs role?
Fiduciary
When will a PR be an executor?
If they are appointed by will
If a PR is an executor, their authority derives from what?
The Will
When will a PR be an administrator?
If they are not appointed by a Will but instead under the NCPR
If a PR is an administrator, their authority derives from what?
Derives from the grant
Legal title lies with the PRs by virtue of what?
Their appointment
Are PRs also automatically trustees of the estate?
No not automatically
When will PRs also be trustees of the estate?
- the Will expressly appoints the executors to act as trustees of any trust arising
- there is an intestacy - PRs hold the estate generally ‘on trust with a power to sell’
- a statutory trust arises under an intestacy; the PRs will be trustees of that trust on behalf of the minor beneficiary
When would a solicitor become involved in the administration of an estate?
- solicitor has been instructed by the PRs for advice on the administration
- solicitor has been appointed as executor under the deceased’s will
- solicitor has been instructed to act on behalf of a party to a contentious probate matter
If a solicitor is instructed by the PRs for advice on administration, who are the solicitor’s clients?
The PRs, not the beneficiaries
If a solicitor is appointed as an executor who do they owe duties too?
Estate creditors and beneficiaries
If a solicitor is instructed on a contentious probate matter, who do they owe duties too?
Their client - whoever instructed them
Is a PR liable for any loss caused by breach of duty?
Yes - personally liable
Do PRs have a duty to act within scope of their powers when carrying out administration?
Yes
What duties do PRs have before issue of the grant?
- disposing of deceased’s body
- duty to provide HMRC with information about the estate and pay any IHT due
What is the PRs duty to HMRC?
- must notify them of assets and liabilities of estate
- must complete IHT 400 form if estate is not excepted
- must pay any IHT due
- must be done before grant obtained
What are the duties of the PR under grant?
- collect and get in the real and personal estate of the deceased and administer it according to law
- provide an inventory and account of the estate assets
- duties owed to estate beneficiaries and creditors
How do PRs comply with their duty to collect in real and personal estate of the deceased?
- identify and locate deceased’s assets (including sums owed to them)
- identify the deceased’s liabilities and creditors
- obtain control, possession or legal ownership of the asset
How do PRs comply with their duty to administer the estate?
- keeping assets secure
- paying the deceased’s debts and liabilities (in accordance with statute)
- meeting administration expenses
- paying legacies
- and distributing the residue to this who are entitled
How do PRs comply with their duty to provide ‘inventory and account’?
PRs must keep a list of assets and values (inventory) and a record of steps they have taken in administration (account)
Do beneficiaries and creditors have an entitlement to see the inventory and account produced by PRs? What happens if they refuse?
Yes
If they refuse then can make an application to court for an order to produce an inventory and account.
Do PRs have freedom to make their own decisions about how to administer the estate?
Yes to a certain extent.
They are free to make their own decisions but they must always act within scope of the powers conferred on them by Will/statute.
What will amount to a breach of a PRs duty to comply with due diligence in administering the estate?
Will depend on the facts of the case
What are the consequences for breach of due diligence by PRs?
Court can make declaration as to breach and direct an inquiry as to damages
What duties do the PRs have in relation to timings?
- must carry out the administration within a reasonable time
- should complete the administration within 12 months of date of death
- if it takes longer than 12 months - PRs required to justify delay
When does a PRs role end?
When administration is finalised
What are the consequences of a PRs appointment being for life?
- if additional assets are discovered after the administration is complete the PRs have a duty to administer them
- there is an ongoing risk to personal liability if creditors or beneficiaries who were not known of at the time, come to light after the estate is fully administered and demand their entitlement
When are PRs also subject to the statutory duty of care under s 1 Trustee Act 2000?
When they exercise the powers under the Act to which the duty applies
Who are subject to a higher standard of duty of care under the s 1 TA 2000 duty?
Professionals or anyone possessing special knowledge or experience and those who hold themselves out as having special knowledge or experience
What fiduciary duties do trustees have?
Unless authorised by court, or fully informed beneficiaries, PRs must not:
- place themselves in a position of conflict eg not purchase asset from estate even if for fair value
- profit from their position. Payments for services of professional or payments under the will will not breach this duty
Where do PRs derive their powers from?
If the deceased left a Will, then the Will potentially (if it confers any additional powers) and statute
If no Will, then just statute
If there are PR powers under a Will and statute but they conflict, what provisions take precedent?
The express powers conferred under a Will
What is the statutory powers of PRs to sell, charge or lease?
PRs have wide powers to sell estate assets
What is the statutory power of PRs to appropriate?
PRs have the power to appropriate an asset in satisfaction of a beneficiary’s entitlement and PRs can decide which assets are used to meet this.
What limitations are there on the PRs power to appropriate?
Can only use it if:
- specific beneficiary is not prejudiced
- recipient beneficiary consents
- if value of asset does not exceeds the beneficiary’s entitlement
Value of asset is that of time of transfer (not date of death)
Any shortfall in beneficiary’s entitlement can be made up by cash transfer.
What is the statutory power of PRs to insure? (TA s 19)
PRs have power to take out insurance to insure estate assets comprehensively and for full value
Can pay insurance premiums out of estate income or capital
What is the statutory power of PRs to invest? (s 3 - 8 TA)
PRs have duty to preserve estate and actively invest if they retain assets for long period of time.
What limitations are there on PRs power to invest?
- can only acquire freehold or leasehold land in the UK
- must carry out regular reviews of investments
- must meet standard investment criteria
- duty to obtain advice also applies unless PRs reasonably conclude that in the circumstances it is unreasonable or inappropriate
What is the statutory power of PRs to charge for services? (s 29 TA 2000)
- professional PRs may claim reasonable remuneration for services provided they are not acting alone and have written consent of co-PRs
- lay PR or professional PR acting alone needs to be given express power in the will to charge for services
Is payment as remuneration for services to be treated as a gift under the will?
No
What is the statutory power of PRs for reimbursement of PR expenses? (s 31 TA 2000)
All PRs may reimburse themselves for expenses properly incurred when acting on behalf of the estate
What is the statutory power of PRs to delegate? (s 11 TA 2000)
PRs are permitted to employ agents and delegate their powers except for the following:
- how and whether assets should be distributed
- whether fees or costs are payable from income or capital
- the appointment of trustees/nominees/custodians
Who may a PR delegate their powers to?
- not a beneficiary
- another PR if they are sufficiently qualified
What must be done for delegation to be legal?
- delegation must be in writing
- there must be a written policy statement which the agent must agree to comply with
- use of an agent and the terms of the policy document must be kept under review
What options do PRs have if a minor is to receive a legacy under the will to get around the fact minors cannot give valid receipt until they are 18?
- PRs can hold relevant asset on trust for minor until 18 - can invest assets, use statutory powers of maintenance and advancement where appropriate
- could appoint trustees of the legacy and give legacy to trustees
- could accept receipt from parent on behalf of minor
- can give to minor over 16 if express clause in will allowing them to give good receipt
What is the power of PRs to run a business?
- limited common law for PRs to sell business as going concern within a year of death
- PRs may only access assets in business at date of death
- PRs are personally liable to business creditors
- PRs may idemnify themselves from estate for liabilities incurred when running the business for realisation only
- limited power above - common to have express power in Will
Can a joint PR act alone?
No - decisions should be made together and discretionary powers should be exercised unanimously
PRs can usually solely exercise a lawful power to sell or transfer an estate asset
When will a PR face personal liability?
- for losses that result from their own breach of duty
- may also be liable for breaches committed by other PRs if they did not make a reasonable effort to monitor the co-PRs conduct
Who do the PRs owe their duties to?
Beneficiaries and creditors
What claims may a beneficiary or creditor bring against a PR?
- devastavit - claim of action against PR for breach of their PR duties that results in loss to estate
- claim for account of unauthorised profit arising from breach of fiduciary duty
How will a PR make good any loss to the estate following a successful claim against them?
By using their personal assets
What grounds can a claim against a PR be based on?
- maladministration
- misuse of assets
- negligence
- breach of fiduciary duty
What would amount to maladministration?
- incorrectly administering the estate by making distributions to the wrong beneficiaries
- using the residuary estate to meet liabilities which should have been paid from other parts of the estate
- paying legacies before debts without retaining sufficient funds for creditors
Aside from personal liability, what other consequence may a PR faced?
They can be removed from the role of PR
What two ways can a PR be removed from the role of PR?
- a court order under s 50 Administration of Justice Act 1950
- an administration action, where the court would take over the administration itself
If the PR is worried about difficulties in administration, what can they apply for from the court?
They can apply for court guidance in relation to administration problems.
What is guidance given under s 48 of the Administration of Justice Act 1985?
- PRs can get a written legal opinion by someone qualified to do so about how to distribute the estate
What can s 27 of the Trustee Act 1925 provide protection for PRs?
Protects creditors from liability in relation to unidentified beneficiaries and creditors.
What must PRs do to benefit from the protection provided by s 27 of the Trustee Act 1925?
To avoid liability, creditors must publish notice of intention to distribute to known beneficiaries two months after date of notice.
Notice must be place in:
- London Gazette
- Newspaper circulating in the area in which any land held on trust is situated and
- any other newspaper which is appropriate
s 27 of the Trustee Act 1925 protects the PRs from unknown beneficiaries. Who do it not protect?
Does not protect beneficiaries who receive more than their entitlement to the estate
How can a Benjamin Order protect PRs?
Can protect PRs against claims from known but missing beneficiaries by allowing them to distribute on basis that missing beneficiary is dead
What must PRs do to obtain Benjamin Order?
Must make full enquiries to attempt to establish the true position and demonstrate no reasonable prospect of knowing the true position without disproportionate expense.
Who is not protected by a Benjamin Order?
Does not protect beneficiaries who receive more than their entitlement to the estate
How can the Presumption of Death Act 2013 protect a PR?
PRs can make an application under act for court order declaring that beneficiary is dead
What criteria must be met for a person to be presumed dead under the Presumption of Death Act 2013?
Must be thought to have died or not known to be alive for seven years or more.
How can insurance protect PRs?
PRs can purchase insurance to cover risk that the beneficiary or creditor returns after administration is complete and makes claim against PRs for what they should have received
How can an indemnity protect the PRs?
PRs could seek an indemnity from beneficiaries they can trace
How can an exoneration by the court protect PRs?
Court can make order exonerating PRs from personal liability
What criteria must be met for the court to make an order to exonerate PRs from personal liability?
- PRs acted honestly and reasonably
- PRs ought fairly to be excused for: (i) breach of trust and (ii) omitting to obtain directions of the court in the matter
How can the Will protect PRs?
May be express clause excluding r restricting their liability
