transferring assets to beneficiaries

Question 1

Appropriation

Answer 1

When paying general and residuary legacies the PRs are free to choose which assets to appropriate to the beneficiaries in settlement of their entitlement (s.41 Administration of Estates Act 1925 (‘AEA’)).

The power of appropriation does not allow appropriation where the value of the asset at the date of appropriation exceeds the entitlement of the beneficiary concerned.

If the value of the asset at the date of appropriation is less than the beneficiary’s entitlement the PRs will need to make a further balancing transfer.

Question 2

Obtaining receipt

Answer 2

• PRs should obtain confirmation of receipt from the beneficiary when making a distribution.
• An issue arises if minor beneficiaries have a vested interest because they cannot give good receipt. Where this applies the PRs have the following options:

1) An express clause in the will which gives PRs the power to accept receipt from a minor aged 16 or 17 (but no younger) is enforceable

2) By virtue of s 3 Children Act 1989 (where a parent/guardian provides receipt)

3) PRs to hold the gifted property themselves until the child is 18

4) Appoint trustees to hold the property for the minor (s 42 AEA) and make payment to the trustees

5) Pay the legacy into court (s 63 Trustee Act 1925)
 

Question 3

S 25 administration of estates act

Answer 3

• PRs have a duty under s 25 AEA to keep an account of the estate assets (a record of the estate assets and how these have been administered). The PRs or their legal advisors will prepare the estate accounts.

Question 4

Capital account

Answer 4

• 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.

Question 5

Income account

Answer 5

• 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.

Question 6

Distribution account

Question 6

Distribution account

Answer 6

• 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.