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.
