Session 2 Flashcards
What is IPFDA 1975 and the claims?
This allows for people to bring a claim against someone’s estate.
Key requirements:
1) eligibility: deceased must be domiciled in England and Wales, must be made within 6 months of grant of representation, applicant must be someone who is recognised as eligible.
A cohabitee must have been living with the deceased for the whole of two years ending immediately before death.
A former partner can bring a claim but only if they have not remarried.
2) ‘reasonable financial provision’ to determine this- the court will apply 1 of 2 standard.
1) surviving spouse standard
2) maintenance standard
as well as common and specific guidelines depending on the applicant.
3) There is then a wide scope allowed by the court to satisfy the claim
What are the post death changes?
1) claim under IPFDA
2) If a original beneficiary does not want to keep their entitlement. Possible to re-direct the gift- treated as a transfer made by that person as they received it after the administration. Possible to mitigate this by a variation. This is a direction from an original beneficiary to the deceased personal representatives to transfer the property to another person instead. there are conditions attached to this- if satisfied, the gift is read back to the date of the deceased’s death and treated for IHT as having been made by the deceased to the new beneficiary directly. It must comply with following conditions for the IHT writing back effect to be achieved:
s142(1)- variation made by original beneficiary in writing- in 2 years of death- contain an express statement by the beneficiary stating 142 should apply- should not be made for consideration
For CGT purposes- considered as a disposal so CGT could be possible- to avoid this, s62 of TCGA permit a writing back effect similar to 142. Same conditions as s142
2) disclaimer- similar to the above but operates as a refusal to accept the property to which a beneficiary is entitled.
A beneficiary can only disclaim before acceptance
If disclaimed, s142 and s62 apply in the same way
3) precatory trust- gift passed to a beneficiary under a will, but with a wish expressed as to how the beneficiary should pass on that asset to others. Refers to letter of wishes- s143 of the IHTA applies. If distribution is made by the original beneficiary in line with deceased wishes within 2 years of death, they are treated for IHT as gifts made by testator and not the original beneficiary.
no equivalent for CGT- treated as a disposal by original beneficiary
What are the roles of PR?
Statutory duty to collect in the deceased assets, ensure debts paid and any outstanding tax liabilities are met then obligation to distribute assets in line with will.
To act as PR- appointed by will or operation of statutory rules.
If appointed by will, known as executor.
If no executor willing or able to act, PR appointed under non contentious probate rules- known as administrator.
Not automatically a trustee, but similar, both fiduciary in nature.
A PR will be a trustee where appointed directly within a will (eg as a trustee)
A solicitor can be involved if appointed themselves or if other executors ask them for help
What are the PR duties?
both statutory and common law rules.
Before grant applied for, they have a common law rule to dispose of the body and provide information to HMRC and pay any IHT due.
Once grant obtained, is to collect in the deceased assets and to administer it according to law.
Have to keep the assets secure, pay debts and liabilities, meeting any administration expenses, paying any legacies and distributing the legacy of the estate to those entitled.
PR must keep a list of assets and values and record any steps they have taken too- usually in the estate accounts.
PR have a general duty to act with due diligence and within a reasonable time.
Complete the administration within 12 months
There is also a statutory duty of care- same as that imposed on trustees from trustees act.
What are the PR powers?
1) statutory
2) if deceased testate- the powers granted by the will
Express clauses may go beyond statute, or exclude or modify statutory powers.
These powers take precedent over statutory power.
They have the power to sell assets, charge, lease, insure invent, maintain a minor, advance capital, charge for services, delegate, appoint/retire trustees.
What is the liability of PR and the protection availble?
If a PR accepts office, they are personally liable for any loss resulting from a breach of duty which they commit.
Also liable for breaches made by other PR if they did not make a reasonable effort to monitor that co PR conduct.
A PR who fails to carry out their duties can be removed by the court and appoint someone else or even administer the estate themselves
Number of different ways a PR can protect themselves:
1) court intervention- court directions
2) s48 AJA- application under that to distribute in accordance with a legal opinion
3) s27 of trustees act 1925 protects against claims made by unknown beneficiaries and unknown creditors-
4) Benjamin order- possible to distribute estate on the basis that the missing beneficiary is dead.
5) Declaration of death act- application can be made for a beneficiary who is thought to be dead or not known to be alive for seven years or more.
6) Insurance
7) payments into court- eg a legacy for a missing child- pay that to court then distribute. If that child comes to light, then can claim money back from court
8) indemnities- beneficiary promises to reimburse PR of any claim
9) s61 trustees- a PR may appeal to court for exoneration for their breach
What are the requirement for a grant and what are the main types?
this is the evidence for a PR-
Grant of representation is that representation
3 grants:
1) probate- where the deceased left a valid will. This appoints executors and at least one will act
2) letters of administration (with will)- left a will, but either appoints no executors or it did but unable to act
3) letters of administration- no will.
Some assets can be collected in without a will:
1) small assets (small amounts of funds in banks accounts) these can be distributed under the administration of estates small payments act 1965.
2) personal household possession
3) cash in the house
What pre grant steps are there?
1) register death and arrange funeral
2) secure assets
3) locate will
4) if died intestate- investigate and confirm this
5) identify the beneficiaries and compile an accurate list of deceased assets and liabilities
Who can be an executor?
The entitlement to act derives from the appointment under the will.
Cannot be a PR if they are a minor or lack capacity
Only one executor is required, even where there is a minor or a lift interest that arises as a result of the terms of the will.
max amount of executors = 4
If a PR dies after having taken out the grant, the remaining PR’s carry on the administration
IF a sole surviving executor dies before administration is complete, either s7 Administration of estates act would apply, or a grant de bonis non.
What happens if they are applying for grant of administration with will?
Administrators will be appointed by the court. derives from non contentious probate rules:
Order in rule 20 broadly follows the entitlement to the estate assets
If applying for grant of administration (eg complete intestacy) - rules from NCPR 22 apply. Minimum is 1 unless a minor or life interest- then 2 needed
What happens if a PR is unwilling or unable to act
1) renunciation- may formally renounce their right to apply for probate, but must sign a form of renunciation.
2)intermeddling- cannot renounce if they have taken active steps fulfilling their appointment
3) reservation of power (grant of double probate)- if they do nit want to act initially, but may want to later. If they then want to act, they apply for a grant of double probate. Only appropriate if administration not complete
4) use of an attorney- can appoint someone to act on their behalf
5) citations- a court direction for those who refuse to renounce and also refuse to act, using the citation process to force an unwilling PR to act, remove them, or substitute them for another PR
What is the PR duty to report to HMRC and the payment of IHT?
PR must determine if the estate is accepted or non accepted.
1) low value accepted estate
2) exempt accepted estate
If these do not apply, then the estate is not accepted- form IHT 400 must be filled out with payment for IHT due. This must be sent to registry within 12 months of death and interest is due on any unpaid IHT six months from the end of the month of death.
To raise funds to settle IHT- a loan from a beneficiary- direct payment scheme-or even a bank loan.
If the PR find out the date of death provided in IHT 400 was inaccurate, and too much/too little IHT has been paid. Revised figures sent to HMRC under form C.
After IHT paid or none due, the PR can then apply for grant
How do they apply for grant?
1) either online
2) PA1P if there is a will
3) PA1A if no will
Along this, relevant info sent to Probate registry- fees and copy of will.
Depending on circumstance, form of renunciation, confirmation of notice of reservation of power, power of attorney or affidavit evidence may be required.
What is an affidavit?
1) affidavit of due execution would be used where the PR believes the will to be valid, but it is not clear that the execution requirements have been complied with. This is made by one of the witnesses to confirm the date of signature. If there is reason to doubt the testator had knowledge and approval, an affadiavit of due execution may be required
2) affidavit could be used and produced by one of the witnesses if there is alterations made to the will and so they do not need to rely on statute and common law rules.
3) An affidavit of plight and condition can be used to confirm the condition of the will (eg if there was a staple mark etc) If evidence of another document that was meant to be attached to the will, an affidavit of search may be required
4) if the will or codicil cannot be found, NCPR 54 allows a copy of the will to be submitted if there is a court order approving this. An affidavit should be used when applying for this
How do they collect in assets and pay debts?
The method of collection will vary depending on the asset involved and the procedures the institutions have in place
They also have to pay off debts, - if a solvent estate (where the assets are sufficient to pay the funeral testamentary administration and expenses, debts and liabilities)
Insolvent estate (where the assets are not sufficient to do so)
for secured debts s.35 AEA 1925, states charged property will bear the primary liability for payment of the debt that is is secured against unless the will has contrary intention.
There is a statutory order for unsecured debts
If PR do take assets out of order to pay creditors, the beneficiaries who’s assets have been wrongly taken, can use the doctrine of marshalling .
Cash should be used first, then they would need to sell. When considering assets to sell, they need to consider CGT and the deceased wishes
