W4 Flashcards
What is estate administration?
Estate administration is the process of collecting the deceased’s assets, paying debts and liabilities, and distributing the remaining assets in accordance with the deceased’s will or the intestacy rules.
Who are the personal representatives (PRs) in estate administration?
The personal representatives (PRs) are the people permitted by law to administer a deceased’s estate. A PR appointed by a person’s will is called an executor, while a PR appointed by operation of statute is called an administrator.
What is the grant of representation?
The grant of representation is a court order that confers authority on the PRs to carry out the administration of the estate. It establishes the PRs’ right to deal with the deceased’s assets and confirms the validity of the deceased’s will or that the deceased died intestate.
What is the role of a personal representative (PR) in estate administration?
The role of a PR is to administer the estate of a deceased. This involves collecting the deceased’s assets, paying the deceased’s debts and estate expenses, and distributing the estate funds to the correct beneficiaries.
What is the importance of obtaining the grant of representation in estate administration?
Obtaining the grant of representation is a priority for all PRs as it confirms their authority to act and allows them to collect and distribute the deceased’s assets. Many asset holders require sight of the grant before releasing funds to the PRs.
What are the powers, duties, and liabilities of a personal representative (PR) in estate administration?
The role of a PR is fiduciary in nature, similar to that of a trustee. They have powers to carry out the administration, but must also fulfill legal and fiduciary duties. PRs may also act as trustees of any trust arising following the deceased’s death. They may seek assistance from solicitors in carrying out their duties.
What is the process of applying for a grant of representation in estate administration?
The process of applying for a grant involves initial steps taken following death, determining who will be appointed as PR, options for those who do not wish to act as PR, compliance with Non-Contentious Probate Rules, reporting to HMRC and paying inheritance tax, and completing the application.
What are the steps involved in the collection and distribution of assets in estate administration?
The steps involved in the collection and distribution of assets include collecting the deceased’s assets, paying the deceased’s debts, addressing estate tax liabilities, managing beneficiary tax liabilities, making distributions, and preparing estate accounts. These steps may be carried out in parallel to ensure a smooth administration process.
What are the legal requirements for a personal representative (PR) in estate administration?
Under the Administration of Estates Act 1925, a PR must collect and get in the real and personal estate of the deceased and administer it according to law. The role of a PR is fiduciary in nature, and they must perform all duties in accordance with their duty of care.
What is the difference between an executor and an administrator in estate administration?
An executor is a PR appointed by a person’s will and derives authority from the will itself. They may act from the death of the deceased, and the grant of representation confirms their authority. An administrator is a PR appointed by operation of statutory rules and derives authority from the grant. They have no authority to act until the grant is issued.
What are the powers and duties of a personal representative (PR) in estate administration?
The powers of a PR include collecting and getting in the deceased’s assets, administering the estate according to law, and distributing the assets to the beneficiaries. The duties of a PR include fulfilling their fiduciary duty of care, acting in accordance with legal requirements, and ensuring the proper administration of the estate.
Under what circumstances would a personal representative (PR) also be a trustee of the estate?
A PR will be a trustee of some or all of the estate property if the will expressly appoints executors to act in the capacity of a trustee of any trust arising. Additionally, a statutory trust may arise under an intestacy, in which case the PRs will be the trustees of that trust on behalf of the minor beneficiary.
What is the role of a solicitor when instructed by the personal representatives (PRs) in estate administration?
When instructed by the PRs, a solicitor may assist with the administration if the PRs are unable to carry out the tasks themselves due to time constraints or a lack of technical knowledge or confidence. The solicitor must act on the PRs’ instructions and check the identity of the PRs. The cost of providing legal advice is an administration expense and can be paid using the estate assets.
What is the role of a solicitor when appointed as an executor under a will?
If a solicitor acts as an executor, they become a professional PR and owe duties to the estate, creditors, and beneficiaries. The solicitor may act alone or in conjunction with another executor. The solicitor’s services are charged to the estate, and the testator should be given sufficient information to make an informed decision about the appointment and related costs.
In what situations may a solicitor be involved in contentious probate matters?
A solicitor may be involved in contentious probate matters when the terms or validity of the will is challenged, when a disappointed beneficiary wants to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975, or when the solicitor is acting for the estate PRs or beneficiaries to bring or defend a claim. The solicitor owes a duty to their client in these situations.
What are the key duties of a personal representative (PR) in estate administration?
The duties of a PR in estate administration include providing information about the estate to HMRC and paying any inheritance tax due, collecting and administering the deceased’s estate, and providing an inventory and account of the administration. PRs must administer the estate according to the law, act with due diligence, and complete the administration within the executor’s year (12 months from the date of death).
What are the fiduciary duties of a personal representative (PR)?
The role of a PR is fiduciary in nature, and PRs are subject to fiduciary duties. They are personally liable for loss caused by a breach of duty. PRs have various statutory and common law duties, including reporting to HMRC and paying inheritance tax, administering the estate according to law, and acting with due diligence.
What are the duties of a personal representative (PR) before the issue of a grant?
Before the issue of a grant, the duties of a PR include the common law duty to dispose of the deceased’s body and the statutory duty to provide information about the estate to HMRC and pay any inheritance tax due. The PRs must notify HMRC about the assets and liabilities of the estate and complete form IHT 400. These duties must be complied with before the grant of representation is obtained.
What is the significance of completing the administration of an estate within the executor’s year?
PRs should complete the administration of an estate within the executor’s year, which is 12 months from the date of death. This timeframe is important as it provides a guideline for the efficient administration of the estate. However, the exact duration may vary depending on the complexity of the estate and any unforeseen circumstances.
What are the duties of a solicitor when instructed by the personal representatives (PRs) in estate administration?
When instructed by the PRs, a solicitor should assist with the administration if the PRs are unable to carry out the tasks themselves. The solicitor must act on the PRs’ instructions and check the identity of the PRs. The cost of providing legal advice is an administration expense and can be paid using the estate assets.
What does the duty to ‘collect in’ entail for PRs?
To comply with the duty to ‘collect in’, PRs must identify and locate the deceased’s assets, including sums owed to the deceased, as well as identify the deceased’s liabilities and creditors. They must also obtain control, possession, or legal ownership of the assets.
What is the duty of a PR to administer the estate?
Once assets have been collected in, the PRs must administer the estate in full. This includes keeping the assets secure, paying the deceased’s debts and liabilities, meeting administration expenses, paying legacies, and distributing the residue to those legally entitled.
What is the duty of a PR to provide an inventory and account?
PRs must keep a list of assets and values (inventory) and a record of the steps they have taken in the administration (account). This information is usually recorded in the Estate Accounts. Beneficiaries or creditors may ask to see the estate accounts, and if the PRs refuse or have not maintained adequate records, an application to court for an order to produce an inventory and account may be made.
What is the duty of due diligence for PRs?
PRs are free to make their own decisions about how best to carry out their duties but must always act within the scope of their powers conferred by the will and/or statute. They have a general duty to carry out the administration with due diligence and within a reasonable time. If a breach of duty occurs, the court can make a declaration as to the breach and direct an inquiry as to damages.
What is the executor’s year and what happens if the administration takes longer?
The executor’s year refers to the obligation for PRs to complete the administration within 12 months of the date of death. If the administration takes longer than 12 months, it does not necessarily mean a breach has occurred, but PRs are required to justify any delay. PRs have an obligation to complete the administration within a reasonable time, and they may still have duties even after the administration is complete if additional assets are discovered or unknown creditors or beneficiaries come forward.
What powers do PRs require to carry out their administrative duties?
PRs require the power to deal with the estate assets, such as the power to sell, charge, lease, appropriate, insure, invest, charge for PR services, delegate powers, and appoint trustees. The method of obtaining control over the assets will depend on the nature of the asset.
What is the statutory duty of care for PRs?
PRs are subject to the same statutory duty of care as trustees when they exercise powers under the TA 2000. The duty of care imposes a higher standard for professional PRs, such as solicitors, than lay trustees. It also applies to those possessing special knowledge or experience, as well as those who hold themselves out as having such special knowledge or experience. The duty of care applies when PRs exercise their power to invest, delegate, insure, and purchase land.
What fiduciary duties do PRs have?
PRs must comply with their duties relating to the administration process and fulfill these using the powers conferred on them by statute and/or will. As fiduciaries, PRs must not place themselves in a position of conflict, profit from their position without authorization, or act contrary to the interests of the estate beneficiaries. Payment for services will not constitute a breach of the ‘no profit’ rule if PRs act in a professional capacity or the payments are authorized under the will.
What are the powers of a personal representative (PR) to administer the estate?
PRs have powers to sell, charge, lease, appropriate, insure, invest, charge for PR services, delegate powers, and appoint trustees. These powers are derived from statute and/or the will/codicil. PRs must always act within the scope of their powers and an ultra vires act will be a breach of duty.
What powers do PRs have to sell, charge, or lease estate assets
PRs have wide powers to sell estate assets, which may be necessary to repay the deceased’s debts and any loan taken out to meet the inheritance tax liability.
What are the powers of PRs under the Administration of Estates Act 1925 (AEA)?
The AEA confers powers specifically on PRs, including the power to sell, charge, lease, appropriate, insure, invest, charge for PR services, delegate powers, and appoint trustees. Additionally, PRs can exercise powers that apply to trustees under the Trustee Acts 1925 and 2000 (TA 1925 & TA 2000) and the Trusts of Land Appointment of Trustees Act 1996 (TOLATA).
What is the role of PRs as fiduciaries?
The role of a PR is fiduciary in nature, and PRs are subject to wider fiduciary duties. They must not place themselves in a position of conflict, profit from their position without authorization, or act contrary to the interests of the estate beneficiaries. PRs must comply with their duties relating to the administration process and fulfill these using the powers conferred on them by statute and/or will.
What is the duty of PRs to provide an inventory and account?
PRs must keep a list of assets and values (inventory) and a record of the steps they have taken in the administration (account). This information is usually recorded in the Estate Accounts. Beneficiaries or creditors may ask to see the estate accounts, and if the PRs refuse or have not maintained adequate records, an application to court for an order to produce an inventory and account may be made.
What is the power of appropriation in relation to a beneficiary’s entitlement?
The power of appropriation allows Personal Representatives (PRs) to use an asset to satisfy a beneficiary’s entitlement. PRs have the authority to decide which assets are used for this purpose.
What are the rules that govern the power of appropriation?
The power of appropriation is subject to several rules: a specific beneficiary must not be prejudiced, the consent of the recipient beneficiary is required, and the value of the asset is considered at the date of transfer/appropriation rather than the date of death. If the value of an asset exceeds the beneficiary’s entitlement, PRs may not appropriate it. If the value is less, PRs may appropriate it and make a balancing cash transfer.
How can PRs appropriate an asset to a beneficiary?
PRs can appropriate an asset to a beneficiary if the will does not specifically give it to someone else, and the beneficiary consents to the appropriation. In the example given, the PRs can give the friend the testator’s antique desk instead of cash, as long as the friend consents and receives a further amount to make the total value received equal to the gift amount.
What power do PRs have in relation to insurance?
PRs have the power to take out insurance to comprehensively insure estate assets and for their full value. They are authorized to pay the insurance premiums out of either estate income or capital.
What powers do PRs have in relation to investment?
PRs have a duty to preserve the estate and actively invest if they retain assets for a period of time. They can exercise the general power of investment, seek appropriate advice, and have regular reviews of investments. They must have regard to the standard investment criteria and follow the statutory duty of care.
What is the power of charging for services and who can claim remuneration?
Professional PRs, such as solicitors, may claim reasonable remuneration for their services, provided they are not acting alone and the co-PRs give their written consent. Lay PRs or professional PRs acting alone need express power in the will to charge for their services. Payment as remuneration for services is not treated as a gift under the Wills Act 1837.
Can PRs reimburse themselves for expenses incurred when acting on behalf of an estate?
Yes, all PRs, whether acting in a professional capacity or not, may reimburse themselves for expenses properly incurred when acting on behalf of an estate. For example, travel costs incurred during estate administration.
What power do PRs have in relation to delegation?
PRs are permitted to employ agents and delegate their powers, except for certain decisions such as how and whether assets should be distributed, whether fees or costs are payable from income or capital, and the appointment of trustees/nominees/custodians. PRs may not appoint a beneficiary as their agent but may appoint one of the PRs if they are sufficiently qualified. Delegation must be done in writing and accompanied by a written policy statement.
What power do PRs have in relation to gifts to minors?
When a legacy is given absolutely to a minor, PRs can hold the relevant assets on trust for the minor, investing them in accordance with statutory powers and utilizing maintenance and advancement powers until the minor reaches 18. Alternatively, PRs can appoint trustees (usually the minor’s parent/guardian) and give the legacy to the trustees instead of retaining it.
What happens to a business after the death of a testator who ran it?
If a testator was a shareholder in a company, the company as an entity will survive the testator’s death, subject to provisions in the company articles and/or shareholders agreement. If the testator was a partner in a business partnership, the partnership agreement should contain terms for the partnership to continue. If the testator ran a sole trader business, PRs have a limited common law power to sell the business as a going concern within a year of death.
What are express powers in relation to PRs?
Express powers are provisions in a will or codicil that grant specific powers to PRs. These powers can be drafted using a precedent that contains a set of express provisions, some of which restate the existing statutory position and others that amend it. Many firms refer to or incorporate the STEP provisions, a set of express powers drafted by the Society of Trusts and Estate Practitioners.
Can a joint PR act alone?
If there are multiple PRs, they are generally required to make decisions together and exercise discretionary powers unanimously. However, if the PRs are joint executors appointed by will and the will states otherwise, they may act alone.
What authority does a jointly appointed Personal Representative (PR) have when selling or transferring an estate asset?
When exercising a lawful power to sell or transfer an estate asset during the administration, a jointly appointed PR will usually have the authority to act alone. For example, a PR acting alone has the authority to pass title to the deceased’s personal possessions to a third party and bind the other PRs.
Can a sole Personal Representative (PR) deal with stocks and shares registered in the joint names of the PRs?
As an exception, a sole PR may not deal with stocks and shares that are registered in the joint names of the PRs.
What are the personal liabilities of a Personal Representative (PR) and what protection is available to them
A PR is personally liable for any loss resulting from a breach of duty which they commit. They may also be liable for breaches committed by other PRs if they did not make a reasonable effort to monitor the co-PRs’ conduct. To protect themselves, PRs can seek court directions, rely on a written legal opinion, follow the notice procedure, obtain a Benjamin Order, take out insurance, or make payments into court.
What is a devastavit claim and when can it be brought against a Personal Representative (PR)?
A devastavit claim is a claim of action against a PR for breach of their PR duties. It may be brought where there is loss to the estate because of PR wrongdoing. The claimant seeks a court order for the PR to make good the loss using their personal assets.
What are some examples of breaches that can lead to a devastavit claim against a Personal Representative (PR)?
A devastavit claim against a PR may be based on maladministration, misuse of assets, negligence, or breach of fiduciary duty. Examples include incorrectly administering the estate, making personal use of estate assets, unreasonably delaying administration, and self-dealing.
How can a Personal Representative (PR) be removed from their role?
A PR who fails to carry out their duties properly may be effectively removed as PR by a court order appointing a replacement PR or through an administration action where the court takes over the administration itself.
What personal liability do Personal Representatives (PRs) have if they also act in a trustee capacity?
If PRs also act in a trustee capacity, they will be subject to trustee duties and be personally liable for loss suffered as a result of a breach of trust.
What methods can Personal Representatives (PRs) use to protect themselves from personal liability?
PRs can seek court directions, make a Section 48 AJA 1985 application, follow the notice procedure under Section 27 Trustee Act 1925, obtain a Benjamin Order, seek protection through insurance, make payments into court, or obtain an indemnity from a beneficiary.
What is the purpose of seeking court directions as a method of protecting Personal Representatives (PRs)?
Seeking court directions is a prudent course of action for PRs who foresee difficulties in the administration, such as ambiguity in the will. It involves making an application to the court for guidance on a particular matter.
What is a Section 48 AJA 1985 application and when can it be made by Personal Representatives (PRs)?
In cases where there is a question over the construction of the will, PRs may make an application under Section 48 Administration of Justice Act 1985 to distribute the estate in accordance with a written legal opinion. This can be done if there is no dispute and the opinion is given by a qualified person.
What is the purpose of the notice procedure under Section 27 Trustee Act 1925?
The notice procedure under Section 27 Trustee Act 1925 is used by PRs to prevent liability to unidentified beneficiaries and creditors. It involves publishing a notice of their intention to distribute to known beneficiaries, protecting PRs from claims by unknown beneficiaries and creditors.
What is a Benjamin Order and when can it be sought by Personal Representatives (PRs)?
A Benjamin Order is sought by PRs when there are known but missing beneficiaries. It permits the PRs to distribute the estate on the assumption that the missing beneficiaries have died. If the assumption turns out to be incorrect, the PRs are relieved from personal liability if they administered the estate in accordance with the court order.
What is the Presumption of Death Act 2013 and how can it be used by Personal Representatives (PRs)?
Under the Presumption of Death Act 2013, PRs can make an application for a court order declaring that a person thought to have died, or not known to have been alive, for seven years or more has died. The order confirms the presumed date of death and relates to the deceased’s property and affairs.
What is the purpose of seeking court guidance as a method of protecting Personal Representatives (PRs)?
Seeking court guidance is a way for PRs to obtain clarification on matters such as the construction of the will. It can be done through an administration action application or an application for guidance on a particular matter.
What is the purpose of making a Section 61 Trustee Act 1925 payment into court?
Making a Section 61 Trustee Act 1925 payment into court is a method that PRs can use to protect themselves from personal liability. By paying the disputed amount into court, PRs can avoid personal liability if the court determines the distribution of the funds.
What is an indemnity and how can it be used to mitigate the risk of being sued by a disappointed beneficiary or creditor?
An indemnity is a promise from the beneficiaries to reimburse the PRs for any loss they suffer due to being sued by a disappointed beneficiary or creditor. However, an indemnity is only as good as the person giving it, and it may be difficult to trace those providing the indemnity.
What is one potential option for PRs if a beneficiary can be located but is refusing to accept their inheritance?
One potential option is for the PRs to pay the legacy amount into court and distribute the balance of the estate. However, the person who would otherwise benefit from the share paid into court may not favor this option.
Under what circumstances can a PR apply to the court for exoneration?
Under section 61 of the Trustee Act 1925, a PR may apply to the court for an order exonerating them, in whole or part, from personal liability for breach of trust. The court will consider factors such as whether the PR acted honestly and reasonably, and whether they ought fairly to be excused for the breach of trust.
What are exemption clauses in a will and how do they affect a PR’s liability?
Exemption clauses in a will are clauses that exclude or restrict liability for a PR’s wrongdoing. These clauses may cover innocent mistakes to gross negligence and may offer different levels of protection to lay and professional PRs. The example below shows a clause that exempts lay executors from liability but still allows claims against professional executors and excludes the statutory duty of care for all executors.
What is the difference between a grant of probate and a grant of letters of administration (with will)?
A grant of probate is the correct grant when the deceased left a valid will that appoints executors, at least one of whom is going to act. The executors named in the will make the application and are named on the grant. A grant of letters of administration (with will) is the correct grant when the deceased left a valid will but no executors are acting.
When is a grant of letters of administration the appropriate grant?
A grant of letters of administration is the correct grant when the deceased died intestate, meaning they did not make a valid will. Administrators are appointed under Rule 22 NCPR, and the grant confirms their authority to act.
What are the main types of grant of representation?
The main types of grant of representation are: 1) Grant of probate, which is issued when the deceased left a valid will that appoints executors; 2) Grant of letters of administration (with will), which is issued when the deceased left a valid will but no executors are acting; 3) Grant of letters of administration, which is issued when the deceased died intestate.
When is a grant required in the administration of an estate?
A grant is required when dealing with assets that do not fall within the category of assets that can be dealt with without a grant. Some assets, such as accounts worth up to £5,000, can be released without a grant, but for other assets, a grant is necessary.
What assets can be administered without a grant?
Some accounts worth up to £5,000 can be released without a grant under the Administration of Estates (Small Payments) Act 1965. Many banks and financial institutions will release sums up to £15,000 without sight of a grant. Household possessions and cash in the home can also be dealt with without proof of title.
What is the purpose of a grant of probate even if the will does not dispose of any property?
A grant of probate is still required even if the will does not dispose of any or all of the deceased’s property.
Can a named executor give their right to someone else to take out the grant?
No, a named executor cannot simply give their right to someone else to take out the grant. However, a named executor may formally appoint someone to act on their behalf under a power of attorney.
What is the role of Personal Representatives (PRs) in disposing of chattels?
PRs are normally able to dispose of chattels without having to produce formal proof of their authority. This applies when items were owned solely by the deceased. If there was a joint owner, their consent would be required before the PRs could effect a sale.
What should PRs check before selling items as part of the estate administration process?
Before any items are sold, PRs should check whether any particular items were gifted specifically by the deceased’s will. This ensures that items intended for specific beneficiaries are not mistakenly sold.
Which assets do not require a grant in order to be released to the PRs?
Assets which pass outside of the succession estate, such as property owned as joint tenants, donationes mortis causa, life policies written in trust, discretionary pension lump sums nominated for a third party, and assets held in a trust in which the deceased had an interest, do not require a grant in order to be released. The death certificate, together with any other documentation required by the asset holder, is sufficient for their release.
What are the advantages of having some assets within an estate that can be administered without a grant?
Having some assets within an estate that can be administered without a grant provides several advantages: it releases money that can be made available to beneficiaries without waiting for the grant or administration to be completed, it provides a source of funds to meet expenses including inheritance tax (IHT), and if the estate is small or comprises only assets that do not require a grant, it can be a cost-effective way to carry out the administration. However, unless an estate comprises only assets where a grant is not required, the PRs will still need to obtain a grant of representation.
What are some practical steps that need to be taken after someone dies?
Some practical steps that need to be taken after someone dies include registering the death, arranging the funeral (usually done by family members), locating the original will (and any codicils) to identify the beneficiaries, compiling a complete list of the deceased’s assets and liabilities, notifying each institution the deceased had dealings with, and valuing estate assets. These steps are part of the administration process.
What happens if the deceased’s assets are given to the incorrect people?
If the deceased’s assets are given to the incorrect people, it can lead to legal complications. The PRs have a duty to ensure that the assets are distributed according to the deceased’s wishes as stated in their will or according to the intestacy rules if there is no will.
Who calculates and pays the inheritance tax?
The Personal Representatives (PRs) are responsible for calculating and paying the inheritance tax (IHT) on behalf of the estate. They must ensure that the correct amount of IHT is paid to HM Revenue and Customs (HMRC).
What are some preliminary pre-grant steps in the administration of an estate?
Some preliminary pre-grant steps in the administration of an estate include registering the death, locating the original will and any codicils, compiling a complete list of the deceased’s assets and liabilities, notifying each institution the deceased had dealings with, and valuing estate assets. These steps help prepare for the application for a grant of representation.
Who usually registers a death and arranges the funeral?
Family members usually register a death and arrange the funeral. However, in some cases, the Personal Representatives (PRs) or instructed solicitors may take on these responsibilities.
What should the PRs do with the death certificate?
The PRs should obtain official copies of the death certificate and send them to institutions where the deceased held assets, such as banks, building societies, and insurance companies. It is also useful for a solicitor to keep a copy of the death certificate on file for reference.
What is the moral obligation regarding funeral wishes set out in a will?
There is a moral, rather than legal, obligation to follow funeral wishes set out in a will. The will should be checked for specific instructions regarding burial or cremation, religious ceremonies, or the use of the body for medical purposes. The cost of the funeral is a post-death administration expense payable from the estate funds and may be taken into account when calculating inheritance tax (IHT).
What is the duty of the Personal Representatives (PRs) regarding the preservation of estate assets?
The PRs have a duty to preserve the value of the estate assets and may be personally liable for any loss or damage to the assets. They should take steps to ensure that valuable items and documents are kept safe, secure vacant properties, notify insurers and the DVLA if necessary, and consider the security of any digital assets and the possible closure of social media accounts.
What should the Personal Representatives (PRs) do with the original will and any codicils?
At the start of the administration process, the PRs should obtain the original will and any codicils. A copy of the will is not sufficient for obtaining a grant unless special permission has been obtained from the Probate Registry. The PRs should satisfy themselves that the will is valid, correctly executed, and witnessed. They should also review any codicil in the same manner as the will.
What steps should be taken if a will cannot be located?
If there is evidence that a will was made but it cannot be located, the Personal Representatives (PRs) will need to find out what happened. They should determine if the will was revoked or if it is simply lost. If a valid will has been lost, appropriate steps must be taken to re-construct it.
Is it necessary to register a will on the national register?
Registering a will on the national register is entirely optional. There are commercial organizations that offer a fee-based search service against a national wills register.
Who is legally entitled to see a will before a grant is obtained?
Only the executors appointed in a will are legally entitled to see it before a grant is obtained. Once the grant is issued, the will becomes a public document.
What is the purpose of compiling a schedule of assets and liabilities in estate administration?
The PRs need to compile an accurate list of the deceased’s assets and liabilities to identify and value the estate assets, identify the deceased’s creditors, work out the necessary steps for managing asset distribution, calculate the Inheritance Tax (IHT) due, establish whether the estate is solvent, and estimate each beneficiary’s entitlement. This information is essential for obtaining the grant and calculating IHT.
What steps should PRs take to establish the value of different types of assets in an estate?
PRs should contact appropriate organizations to notify them of the death, provide a copy of the death certificate, request confirmation of the value of assets at the date of death, and request instructions for closing accounts or transferring ownership. The steps for establishing the value of commonly held assets such as bank accounts, joint accounts, low-value chattels, quoted shares, private company shares, partnership interests, sole trader businesses, and land vary and may require specialist valuers or estate agents.
What information should PRs collect regarding the debts owed by the deceased?
PRs need to collect details of the debts owed by the deceased at the time of death. This includes credit card statements, loan documents, and amounts due to utility and phone companies. PRs should also take steps to locate possible creditors who are not known to the family or PRs. Repayment of the deceased’s debts is usually taken into account when calculating Inheritance Tax (IHT).
How do lifetime transfers made by the deceased impact Inheritance Tax (IHT)?
The value of lifetime transfers made by the deceased in the 7 years before their death can impact the IHT due following their death. Large transfers may result in an additional tax charge in addition to the tax due on the death estate assets. PRs should ask questions of the family to establish the nature, date, amount or value, and identity of the donee for any lifetime transfers.
What is the role of an executor in estate administration?
An executor is a Personal Representative (PR) appointed by a will. They derive their authority to act from the will. Any adult with capacity may be appointed as an executor, with a minimum of one executor required and a maximum of four named on the grant of probate. If an executor named in the will cannot act, the remaining executors may still apply. If a sole surviving executor dies before the administration is complete, either a substitute executor or a grant de bonis non may apply.
Why is it important for PRs to establish the nature and amount of the deceased’s debts?
Establishing the nature and amount of the deceased’s debts is important because the value of the debt reduces the value of the estate for Inheritance Tax (IHT) purposes. However, there are situations where the repayment of certain debts from estate funds is not possible, and PRs should make necessary inquiries to understand the nature and amounts of the deceased’s debts.
What information should PRs gather to establish the value of land owned by the deceased?
PRs usually instruct estate agents to prepare a valuation of land owned by the deceased. Multiple estate agents may be instructed, and the average value is used to avoid queries from HMRC regarding tax purposes. PRs may need to view the land registry official copies to establish the basis of joint property ownership and the identity of co-owners.
What steps should PRs take to notify organizations of the death and obtain information about the deceased’s assets?
PRs should notify organizations of the death, provide a copy of the death certificate, request confirmation of asset values at the date of death, and request instructions for closing accounts or transferring ownership. This applies to bank accounts, joint accounts, low-value chattels, quoted shares, private company shares, partnership interests, sole trader businesses, and land.
Why is it important for PRs to manage the expectations of beneficiaries in estate administration?
The administration process often takes longer than some beneficiaries expect, typically months rather than weeks. It is best to manage expectations from the start and provide beneficiaries with a realistic timescale for the distribution of the estate.
What happens if an executor named in a will is unable to act as a PR?
An executor named in a will is unable to act as a PR if they pre-deceased the testator, are a minor, or lack capacity. However, their appointment by will is still valid, and power can be reserved to a minor who can make an application later when they reach the age of 18.
What happens if more than four executors are appointed in a will?
If more than four executors are appointed in a will, they must decide who will take out the grant. Power can be reserved to any remaining executors, allowing them to apply at a later date if a vacancy arises and the administration remains incomplete. In this case, they would apply for a grant of double probate.
What happens if one of the executors named in a will dies before the testator?
If one of the executors named in a will dies before the testator, the remaining executors can continue with the administration. If the number of executors falls below the minimum needed, an additional executor can be appointed. The chain of representation applies if the last surviving executor appoints an executor of their own estate.
What options are available if a PR is unwilling or unable to act?
An unwilling PR may renounce probate, have power reserved, or appoint an attorney. An unwilling administrator may renounce their right to apply for a grant or appoint an attorney. A minor or someone who lacks capacity cannot be appointed as a PR.
What happens if a PR is unable or unwilling to act?
If a PR is either unable or unwilling to act, the remaining PRs may continue with the administration. If no PR remains, the chain of representation may apply, or a grant of letters of administration de bonis non may be issued.
What are citations used for in the context of probate?
Citations may be used to force an unwilling PR to act, remove their right to act, or authorize another person to act in their place.
What is the purpose of a grant of letters of administration de bonis non?
A grant of letters of administration de bonis non is issued when the administration is incomplete, there are no remaining personal representatives, and there has been a previous grant of representation. It allows for the administration to continue.
What happens if a PR dies before completing the administration?
If at least one PR remains, the remaining PRs may continue with the administration. If no PR remains, the chain of representation applies, or a grant of letters of administration de bonis non is issued.
What happens if an executor appointed under a will is limited in their authority?
If the appointment of an executor under the will is limited to specific assets, jurisdiction, or time, this limitation will be reflected in the authority conferred by the grant.
Under what circumstances is an executor unable to act?
An executor appointed under a will may be unable to act if they pre-deceased the testator, are a minor, lack capacity, or are the testator’s former spouse/civil partner and the divorce/dissolution took place after the will was made.
What options does an executor have if they are unwilling to act?
If an executor is unwilling to act, they have several options: renunciation, reserving power, appointing an attorney, or not applying for the grant of probate at all. Renunciation involves formally giving up their right to apply for probate, while reserving power allows them to retain the option to apply later. They can also appoint an attorney to act on their behalf.
What is the process of renunciation by an executor?
Renunciation involves an executor formally giving up their right to apply for probate. The executor must sign a form of renunciation, which is then submitted to the probate registry as evidence of why they are not making the application. The renunciation will be noted on the grant when it is issued, and it is final - the executor cannot later change their mind without court approval.
What is intermeddling and how does it affect an executor’s ability to renounce?
Intermeddling refers to when a person takes steps indicating that they have accepted their appointment as an executor and are fulfilling the duty to administer the estate, even if they do not wish to act as an executor. Examples include obtaining, receiving, or holding the deceased’s assets, paying debts, or selling assets. An executor cannot renounce if they have intermeddled with the estate.
In what situation can an executor reserve power?
An executor can reserve power if they do not want to act initially but want to retain the option to apply for probate later. To reserve power, there must be at least one other executor who does take out the grant of probate. The power reserved allows the executor to apply for the same grant as originally issued.
What is the process of reserving power by an executor?
To reserve power, an executor who does not want to act initially must give notice to the other executor(s) who are applying for probate. The executor(s) taking out the grant must give notice of their intention to apply to the executor who is reserving power. The reservation of power will be noted on the grant when it is issued.
How can an executor appoint an attorney to act on their behalf?
An executor who does not want to be directly involved in the administration may appoint another person as an attorney to act on their behalf. The power of attorney can be given after the executor has obtained a grant of probate or before a grant has been obtained. The power of attorney must be provided to the probate registry as part of the application.
What options does an executor have if they are unwell or believe the role is too complex?
If an executor does not wish to act due to being unwell or believing the role is too complex, they can choose to renounce their right to apply for probate or appoint an attorney to act on their behalf
What options does an executor have if there are family disputes or insufficient funds to meet expenses and liabilities?
If an executor anticipates family disputes or believes there are insufficient funds to meet expenses and liabilities, they may be unwilling to assume the responsibility. In such cases, they can choose to renounce their right to apply for probate or appoint an attorney to act on their behalf.
What is the process of renunciation if an executor has intermeddled with the estate?
An executor cannot renounce if they have intermeddled with the estate. Intermeddling refers to taking steps indicating that they have accepted their appointment and are fulfilling the duty to administer the estate. The court will not accept an attempt to renounce if the executor has intermeddled.
What is the maximum duration for which a power of attorney can be given to an executor?
After obtaining a grant of probate, an executor can delegate their functions to an attorney for a maximum of 12 months. This period can be renewed if needed. Notice should be given to the other executors.
What options does a potential administrator have if they do not wish to act?
A potential administrator can renounce their right to apply for the grant, appoint an attorney to act on their behalf, or reserve power (unlike an executor).
What is the process of renunciation and when can it be done for administrators?
Renunciation is when a potential administrator formally gives up their right to apply for the grant, allowing the next person best entitled to apply to do so. Renunciation can be done at any time before the grant is issued, even if the potential administrator has already intermeddled with the estate (unlike executors).
What happens if those entitled to apply refuse to act but also refuse to renounce their right to apply?
In such situations, it is possible to obtain a court direction (using the citation process) to require a person to take out a grant, remove their right to apply, or authorize another person to take on the administration.
What are the different categories of professional applications for a grant of representation?
Professional applications fall into three categories: mandatory online application (includes most grants of probate), online application possible but not mandatory (includes some simple applications under NCPR 20 and 22), and mandatory paper application (includes non-standard grants and more complicated applications under NCPR 20 and 22).
What is the purpose of the statement of truth in the application for a grant of representation?
The statement of truth is a promise made by the applicants to comply with their legal obligations to administer the estate.
What is the purpose of Schedule 3 NCPR?
Schedule 3 NCPR provides a list of specific cases that require a grant of probate, including second grants of probate, grants to a PR where chain of representation applies, grants where the original will is missing or there are issues with the will, grants to attorneys, and grants under NCPR 20 if a life interest arises.
What are the two types of application forms for probate?
The two types of application forms for probate are PA1A and PA1P. PA1A is used when the deceased did not leave a will (NCPR 22 applies), while PA1P is used when the deceased left a valid will, regardless of whether executors are appointed.
What information is required in probate applications?
In probate applications, applicants need to confirm the identity of the deceased and the applicants, justify the type of grant requested and their entitlement to act as PR, provide information about the value of the estate and inheritance tax (IHT) status, and complete the legal statement on the probate form confirming the information provided is correct and they will administer the estate properly.
What details should be included in the identity of the deceased and applicants?
The identity of the deceased should include their full name (as per death certificate), date of birth and death. If the deceased owned assets in a different name, it should be stated. Each applicant’s full name, address, and contact details should also be included.
What is the purpose of confirming the grant required in probate applications?
Confirming the grant required in probate applications ensures that the correct type of grant is issued. This includes grants of probate for executors appointed by will, grants of letters of administration (with or without a will), and grants of letters of administration for intestate estates.
What should be done if an executor’s true name differs from the name in the will?
If an executor’s true name differs from the name in the will, it should be explained. For example, if the will calls the executor Francis Donnelly but their true name is Frank Donnelly.
What evidence is needed if someone named in the will is not applying for probate?
If someone named in the will is not applying for probate, evidence is needed to explain why they are not applying. This can include a death certificate, a form of renunciation, or confirmation that notice was given to those to whom power is reserved.
What should applicants under NCPR 20 state in their application?
Applicants under NCPR 20 should state which category of applicant they fall within, clear off anyone with a better right to apply, and state whether any beneficiary is a minor or if any life interest arises. In the case of a minor or life interest, at least two administrators are then required.
What information is required about the estate value and IHT status in probate applications?
In probate applications, the value of the gross and net estate passing under the grant (the succession estate) should be provided. If an IHT 400 was completed, applicants must confirm that it has been sent to HMRC and the IHT due was paid. HMRC will provide confirmation to the Probate Registry using form IHT 421.
What is settled land in probate applications?
Settled land refers to a specific interest in land under a trust governed by the Settled Land Act 1925. If the deceased had an interest in settled land, a separate grant is required to deal with the legal estate.
What is the purpose of the legal statement in probate applications?
The legal statement in probate applications is a formal confirmation by the applicants that they will comply with their obligation to collect in and duly administer the estate. It also confirms that the information provided is correct and that they will administer the estate properly.
What items are needed to complete an application for a grant of representation?
To complete an application for a grant of representation, additional items should be provided depending on the estate. These items may include probate registry fees, death certificate, testamentary documents, form of renunciation, IHT forms, power of attorney, and affidavits.
What is the purpose of probate registry fees and how are they determined?
Probate registry fees are required to be paid by applicants. The amount of the fee depends on whether a professional is applying and the value of the estate. Estates worth less than £5,000 do not require a fee. The number of sealed copies of the grant requested by the personal representatives also incurs a small fee per copy.
Why are sealed copies of the grant necessary and how are they used?
Sealed copies of the grant are necessary when contacting asset holders. For example, if the deceased had accounts with multiple banks, the personal representatives would provide each bank with a sealed copy as evidence of their entitlement. The number of sealed copies required depends on the estate assets, typically one per asset holder and a few spare copies.
What documents need to be submitted for testamentary documents and renunciation?
If the deceased left a valid will, the original will must be submitted with the application. Any codicils to the original will, including those that have been subsequently revoked, must also be submitted. If an executor appointed by the will does not wish to act, they may renounce their right to take out the grant of probate. Renunciation is possible if the executor has not intermeddled, and a form of renunciation must be included in the application.
What are the requirements for submitting IHT forms?
If the estate is excepted, there will be no Inheritance Tax (IHT) payable, and the personal representatives are not required to submit an IHT form as part of the grant application. For non-excepted estates, an IHT400 form will have been completed and sent to HMRC. HMRC then provides confirmation (by IHT 421) to the Probate Registry, which is required before the grant can be issued.
What is the role of a power of attorney in the grant application process?
Where an executor or beneficiary appoints an attorney to make an application on their behalf, the attorney’s details must be provided in the application form along with an express declaration of why the named executor is not applying. The power of attorney, commonly Form PA11, is completed by the donor and submitted with the application for the grant.
When is affidavit evidence required in the grant application process?
Affidavit evidence may be required if there is a valid will but there is something about the document that renders its validity uncertain.
What are the steps involved in collecting assets and paying debts in the probate process?
The process of collecting assets and paying debts involves PRs collecting in the estate assets using the method prescribed by the asset holder. Estate cash should be held in a PR bank account or a law firm client account. PRs owe a duty to estate creditors to pay the deceased’s debts. The solvency of the estate determines the payment of debts, liabilities, and administration expenses.
What is the significance of holding estate cash in a PR bank account or a law firm client account?
Estate cash should be held in a PR bank account or a law firm client account to prevent it from being mixed with personal funds. Solicitors must comply with accounts rules and provide credit interest of a fair and reasonable sum for money held in the firm’s client account.
What is the duty of PRs regarding the payment of debts in the probate process?
PRs have a duty to pay the deceased’s debts with due diligence. While the term ‘due diligence’ is not defined, creditors should normally be paid before the end of the ‘executor’s year’. Failure to pay debts when assets are available can result in liability to the creditor and any beneficiary for consequent loss.
What protection can PRs obtain against personal liability to unknown creditors?
PRs can obtain protection against personal liability to unknown creditors by complying with the Section 27 TA 1925 notice procedure. This procedure provides protection if PRs have made reasonable efforts to notify potential creditors and allows them to distribute the estate without personal liability to unknown creditors.
How should estate cash be handled in the probate process?
Estate cash should be paid into a PR’s bank account opened specifically to hold estate money or a law firm client account. Solicitors must comply with accounts rules and provide credit interest of a fair and reasonable sum for money held in the firm’s client account.
What is the duty of PRs regarding the payment of debts and expenses in the probate process?
PRs have a duty to pay the deceased’s outstanding debts and funeral expenses as soon as assets can be collected. They must pay debts with due diligence, normally before the end of the ‘executor’s year’. Failure to pay debts when assets are available can result in liability to the creditor and any beneficiary for consequent loss.
What is the purpose of the undertaking given by PRs in connection with a loan during administration?
The purpose of the undertaking given by PRs (Personal Representatives) in connection with a loan during administration is to use the first moneys raised to repay the loan.
What are some general administration expenses that PRs should pay during the administration?
Some general administration expenses that PRs should pay during the administration include the cost of valuing the estate assets, probate fees, and notice costs.
What determines the order in which estate assets are used to pay debts and liabilities?
The order in which estate assets are used to pay debts and liabilities depends on whether the estate is solvent or insolvent, as well as whether the debts are secured or unsecured.
How are debts and expenses paid in an insolvent estate?
In an insolvent estate, debts must be paid in the statutory order specified in the Administration of Insolvent Estates of Deceased Persons Order 1986.
What is the difference in the order of debt repayment for solvent and insolvent estates?
For a solvent estate, the chronological order of debt repayment is not a primary concern. However, there is a statutory order (Sch 1 Part II AEA) that determines the application of assets towards the payment of unsecured debts and administrative expenses. In an insolvent estate, debts must be paid in the statutory order specified in the Administration of Insolvent Estates of Deceased Persons Order 1986.
What is a secured debt and how is it treated in the distribution of assets?
A secured debt is a debt that has been charged on part of the deceased’s property during their lifetime, such as a mortgage on their house. The charged property bears primary liability for the payment of the secured debt, and no other estate assets can be used to repay the secured debt if the outstanding loan amount is less than the value of the asset secured.
What are unsecured debts and how are they repaid?
Unsecured debts, such as credit card debt and utility bills, are repaid in the statutory order specified in the will. Assets in each category are exhausted in full before moving to the next category.
What happens to property not disposed of by a will in terms of debt repayment?
Property not disposed of by a will, such as property passing by partial or full intestacy, is subject to the retention of a pecuniary legacy fund for any pecuniary legacies. It is then used to repay unsecured debts and expenses before moving on to other categories of assets.
How are debts and legacies paid in a specific scenario where a testator leaves their estate?
In a specific scenario where a testator leaves their estate, the debts are repaid from the residue of the estate. If there is a legacy fund, it is retained for pecuniary legacies. The residue is then distributed to the beneficiaries according to the terms of the will.
What happens to an insolvent estate when the debts exceed the value of the residue?
In an insolvent estate where the debts exceed the value of the residue, the whole residue is used to repay the debts, and the beneficiaries receive nothing.
What happens when the debts exceed the value of the legacy fund in a specific scenario?
In a specific scenario where the debts exceed the value of the legacy fund, the original legacies are reduced proportionally, and the beneficiaries receive a reduced amount.
How can a contrary intention in a will affect the order of debt repayment?
A contrary intention expressed in a will can override the statutory order in Sch 1 Part II AEA for unsecured debts. For example, a general direction for the residue to bear the burden of debts can be included in a will.
How can express wording in a will affect the treatment of secured debts?
Express wording in a will can override the general rule in s 35 AEA that secured assets are subject to the related debt. This means that the testator can specify whether other estate assets should be used to repay the secured debt.
What is the purpose of retaining a pecuniary legacy fund in a will?
The purpose of retaining a pecuniary legacy fund in a will is to ensure that there is sufficient money set aside to pay specific pecuniary legacies before distributing the residue of the estate.
What is the doctrine of marshalling?
The doctrine of marshalling allows a beneficiary whose assets have been wrongly taken to pay a creditor to compensate themselves by going against the property that should have been used to pay the debts.
Are creditors obligated to return money paid to them if assets were wrongly used to pay them?
No, creditors are not bound by the rules and are under no obligation to return the money paid to them.
What factors should be considered when deciding which assets to sell to meet the debts?
When deciding which assets to sell, factors such as capital gains tax implications, ease and speed of sale, wishes of beneficiaries, and the current value of the assets should be considered.
How can PRs avoid capital gains tax when selling assets?
To avoid capital gains tax, PRs should consider selling assets that have not risen in value or assets that have fallen rapidly in value. Assets that have risen in value may be transferred directly to a beneficiary without triggering a CGT charge.
What assets are quicker and easier to sell?
Quoted shares and other financial investment products are usually quicker and easier to sell. Unquoted shares, business interests, and land will usually take longer to sell. Cars and household possessions can be sold fairly easily but may not produce the required amount.
Are PRs bound to comply with the wishes of beneficiaries when selling assets?
PRs are not bound to comply with the wishes of a beneficiary, but they should take these wishes into account when making decisions and avoid selling the item if possible.
What are the responsibilities of PRs in relation to income tax and capital gains tax during the administration?
PRs are required to finalize the income tax and capital gains tax for the deceased. They must pay any income tax and capital gains tax that becomes due during the administration period.
What are the tax liabilities of the deceased and how are they paid?
The tax liabilities of the deceased, including income tax and capital gains tax, are an estate expense and payable from the estate assets. Refunds due are considered assets of the estate.
What is the effect of death on capital gains tax?
Death does not constitute a capital gains tax disposal. Transferring assets to a beneficiary also does not constitute a capital gains tax disposal. Post-death gains are taxed in the hands of PRs if assets are disposed of by PRs during the administration or taxed in the hands of a beneficiary who disposes of the asset after it has been transferred to them by the PRs.
How is income generated between the date of death and the distribution of assets taxed?
Income generated between the date of death and the distribution of assets is taxed as estate income in the hands of the Personal Representatives (PRs). The PRs pay income tax at the basic rate, which depends on the type of income. They are not entitled to claim an income tax personal allowance. After the assets are distributed to beneficiaries, any income generated by the assets is taxed as the beneficiary’s income.
What happens if the only source of income from an estate is savings interest of less than £500?
If the only source of income from an estate is savings interest of less than £500, and the tax due would be less than £100, HMRC does not require any reporting of estate income.
What is a Form R185 and when is it given to beneficiaries?
A Form R185 is given to beneficiaries when the estate income is distributed. It records the income tax paid by the PRs in respect of the income received by a beneficiary.
Are Personal Representatives (PRs) entitled to claim the same tax-free allowance for Capital Gains Tax (CGT) as individuals?
Yes, Personal Representatives (PRs) are entitled to claim the same tax-free allowance for Capital Gains Tax (CGT) as individuals. This is unlike income tax, where PRs are not entitled to claim an income tax personal allowance.
When are estate gains potentially subject to Capital Gains Tax (CGT)?
Estate gains are potentially subject to Capital Gains Tax (CGT) if Personal Representatives (PRs) make a disposal or sale of estate assets during the administration period. If the assets have increased in value since the date of death, there will be a gain when they are sold. PRs will pay CGT if the amount of the gain is greater than the tax-free allowance.
How are estate gains treated for Capital Gains Tax (CGT) purposes?
For Capital Gains Tax (CGT) purposes, the value of estate assets is re-set (re-based) to their date of death value. This means that any gains made by the deceased during their lifetime in relation to assets they still owned at the date of death are not taxed. Only post-death gains are chargeable for CGT.
What happens if assets have fallen in value since the date of death?
If assets have fallen in value since the date of death, there will be a loss. The amount of the loss can be offset against other gains made during the administration period.
What are the options for Personal Representatives (PRs) when carrying out the administration of non-cash assets?
When carrying out the administration of non-cash assets, Personal Representatives (PRs) have two options: they can sell an asset to raise cash and then distribute it to the entitled beneficiary/creditor, or they can transfer an asset directly to a beneficiary. PRs have the power of sale in relation to all estate assets and the power of appropriation to transfer assets in satisfaction of a beneficiary’s entitlement.
What are the CGT implications of selling an asset as part of the administration versus transferring it to a beneficiary?
If an asset is sold as part of the administration, any gain made on the disposal is taxed in the hands of the Personal Representatives (PRs). However, if the asset is transferred to a beneficiary, it is not considered a disposal, so no chargeable gain occurs. The beneficiary acquires the asset at the probate value for CGT purposes.
What is the main residence relief for Capital Gains Tax (CGT) and when can it be applied?
Main residence relief is a relief from Capital Gains Tax (CGT) that applies when a property is sold. It allows the property to be transferred to a beneficiary, and the beneficiary can sell it later once they satisfy the criteria for main residence relief. This can be beneficial in terms of CGT liability.
What is the chattel exemption for Capital Gains Tax (CGT)?
In most cases, Personal Representatives (PRs) can sell chattels without having to worry about Capital Gains Tax (CGT). A gain made on the disposal of a tangible moveable asset is exempt from CGT if the disposal is for a consideration of £6,000 or less.
