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Question 1

What is the purpose of the Grant of Letters of Administration (with will)?

Answer 1

The Grant of Letters of Administration (with will) is used for estates where there is a valid will but no acting executor. Administrators are appointed under this grant in accordance with NCPR 20.

Question 2

How is entitlement to apply for the Grant of Letters of Administration determined?

Answer 2

The entitlement to apply for the Grant of Letters of Administration depends on the provisions in the will. If the deceased died intestate, the entitlement to apply depends on the familial relationship with the deceased and a beneficial entitlement to the estate.

Question 3

What is the minimum and maximum number of administrators required for the Grant of Letters of Administration?

Answer 3

The minimum number of administrators required is one, unless there is a life or minor interest, in which case two administrators are needed. The maximum possible number of administrators is four.

Question 4

What is the authority to act for an executor and an administrator?

Answer 4

An executor is a personal representative (PR) appointed by a will, while an administrator is a PR appointed under the Non-Contentious Probate Rules 1987 (NCPR). Their authority to act derives from the grant.

Question 5

What are the different types of grants of representation?

Answer 5

The different types of grants of representation include the Grant of Probate, which is needed if the deceased left a valid will and appoints executors who are going to act. The Grant of Letters of Administration (with will) and the Grant of Letters of Administration are relevant when no executors can be appointed.

Question 6

Who is entitled to apply for the Grant of Letters of Administration (with will) according to NCPR 20?

Answer 6

According to NCPR 20, the statutory order of entitlement to be appointed as an administrator under a Grant of Letters of Administration (with will) is as follows: a) executor; b) trustee of the residuary estate; c) any residuary beneficiary (whether taking absolutely or for life), or, where there is a partial intestacy, a beneficiary of the estate under intestacy; d) the PRs of anyone in (c) other than a trustee or life tenant of the residue; e) any other beneficiary or a creditor; f) PRs of anyone in (e).

Question 7

How does the entitlement to the Grant of Letters of Administration correlate with the distribution of the estate?

Answer 7

The entitlement to the Grant of Letters of Administration correlates with the distribution of the estate under the will, not the applicant’s familial relationship with the deceased. A person in a lower category cannot apply if someone in a higher category is able and willing to act.

Question 8

What is the process of ‘clearing off’ in the application for the Grant of Letters of Administration?

Answer 8

In the application for the Grant of Letters of Administration, ‘clearing off’ refers to the requirement for applicants to explain why anyone with a better right to apply is not doing so. Applicants do not need to explain why a person in the same category with an equal entitlement is not making the application.

Question 9

What happens if there are three residuary beneficiaries (c) and no executor (a) or trustee of the residuary estate (b)?

Answer 9

If there are three residuary beneficiaries (c) and no executor (a) or trustee of the residuary estate (b), all three beneficiaries have an equal right to apply for the Grant of Letters of Administration.

Question 10

What is the purpose of the Grant of Letters of Administration

Answer 10

The Grant of Letters of Administration is used when the deceased died without a valid will. Administrators (not executors) are appointed under this grant in accordance with NCPR 22.

Question 11

Who is entitled to apply for the Grant of Letters of Administration according to NCPR 22?

Answer 11

According to NCPR 22, the statutory order of entitlement to apply to be appointed as an administrator under a Grant of Letters of Administration is as follows: a) surviving spouse or civil partner; b) children of the deceased; c) father and mother of the deceased; d) whole blood siblings (share both parents); e) half-blood siblings (share one parent); f) grandparents; g) uncles/aunts of whole blood; h) uncles/aunts of half blood. Issue of b, d, e, g, and h are included where their parent has pre-deceased.

Question 12

What determines who can act as an administrator in the case of someone lacking mental capacity?

Answer 12

In the case of someone lacking mental capacity, Rule 35 will determine who can act as an administrator. Ideally, there would be someone else with an equal or greater entitlement to apply. However, if there is not, Rule 35 will determine who can act.

Question 13

Can a minor act as an administrator?

Answer 13

A minor may not act as an administrator, although it is possible for someone to apply for a grant on their behalf. However, an application by an adult with equal entitlement to apply is given priority over an application made on behalf of a minor (Rule 32).

Question 14

How many administrators are required for letters of administration?

Answer 14

In respect of both letters of administration (with will) and letters of administration, only one administrator is required, unless there are minors or life interests in the estate, in which case two will be required (s. 114 Senior Courts Act 1981).

Question 15

When are affidavits required in the application for a grant of representation?

Answer 15

Affidavits can be required when there is evidence to suggest a problem with the validity or enforcement of a will or codicil. They can be needed where there is evidence of due execution, alterations made to a will, the physical condition of the will, or steps taken to locate missing documents.

Question 16

What is an affidavit and what is its purpose?

Answer 16

An affidavit is a formal written statement of fact which a person signs under oath, making a formal promise that the contents of the document are true. It is used as evidence in support of legal proceedings, particularly in cases where there is doubt about the validity or interpretation of a will or codicil.

Question 17

When is an affidavit of due execution used?

Answer 17

An affidavit of due execution would be used where the person applying for a grant believes the will to be valid but it is not clear that the execution requirements set out in section 9 of the Wills Act 1837 have been complied with. It confirms that the will was executed in accordance with the formalities required.

Question 18

What is the purpose of an affidavit as to alterations?

Answer 18

An affidavit as to alterations can be used to confirm the timing of alterations made to a will. It provides evidence of when the alterations were made, whether before execution (and valid) or after execution (and potentially invalid).

Question 19

When might an affidavit of plight and condition be required?

Answer 19

An affidavit of plight and condition may be required when there are physical signs that suggest a will may be incomplete or have been tampered with. It confirms the physical condition of the will at execution and after death, providing evidence to support its interpretation and distribution of assets.

Question 20

What documents are required for an application for a grant of representation?

Answer 20

For all applications, the required documents include PA1A or PA1P or an online application, the application fee, per sealed grant needed, and a certified copy of the death certificate. Additional documents may be required depending on the specific circumstances, such as a will/codicil, a form of renunciation, or an IHT 421 form.

Question 21

What is the purpose of an affidavit of search?

Answer 21

An affidavit of search can be used to confirm the steps taken to locate missing documents. It provides evidence that a thorough search has been conducted to find any relevant documents that may be required for the application for a grant of representation.

Question 22

What are the legal requirements for making an affidavit?

Answer 22

The legal requirements for making an affidavit include the requirement that the authenticating statement (known as ‘jurat’) is signed by all parties and dated, completed and signed by the person witnessing (an independent solicitor or commissioner for oaths), and their name, address, and qualification must be stated. The jurat must follow immediately on from the text and not on a separate page.

Question 23

When might an affidavit of knowledge and approval be required?

Answer 23

An affidavit of knowledge and approval may be required when there is reason to doubt the testator’s knowledge and approval of the contents of the will. This could be due to factors such as the testator being blind or unable to read the contents of the will. The affidavit would confirm that the testator understood and approved the contents of the will.

Question 24

Who should sign the affidavit regarding the condition of a will?

Answer 24

The affidavit should be signed by someone who is able to confirm the condition of the will when it was executed, and its condition later when it was found following the death of the testator.

Question 25

What is the purpose of estate accounts and when are they signed?

Answer 25

PRs (Personal Representatives) are subject to a statutory duty to keep estate accounts. Signing the estate accounts indicates the end of the administration

Question 26

What is the order of payment for legacies in general law?

Answer 26

In general law, unless the will states otherwise, legacies are paid in the following order: specific, general, residuary. If it is not possible to pay all of the legacies, they abate (reduce) in reverse order. For example, if funds are insufficient to pay all other legacies, the residuary beneficiary takes no benefit. If funds are insufficient to pay all specific legacies, the general beneficiaries take no benefit. If there are sufficient funds to meet all specific gifts but not all general legacies, the general beneficiaries take a reduced inheritance.

Question 27

What factors should PRs consider when making distributions to beneficiaries?

Answer 27

To ensure the PRs fulfill their duty to accurately distribute the estate, they must carefully consider the identity of the beneficiaries, the nature of their interest, and the property to which they are entitled. They should review the will to identify those entitled to legacies and apply rules of construction. They should also apply intestacy rules if full or partial intestacy occurs. PRs should establish if a beneficiary has a vested or contingent interest or an interest under an express trust in the will. They should assess what share each beneficiary is entitled to and establish which items fall within a general gift of chattels or collection of items.

Question 28

What are some practical considerations when making distributions to beneficiaries?

Answer 28

Provided an asset is not required for the payment of debts or a legacy has not failed, the PRs can make a transfer to the beneficiary entitled. In doing so, they should consider the method of transfer (e.g., delivery, cheque, bank transfer, stock transfer form, Assent for a legal estate in land), relieving provisions (beneficiary bears the cost of transfer), and timing considerations (considering claims against the estate and the two-month deadline for being notified of claims by unknown beneficiaries and creditors).

Question 29

What is the purpose of interim distributions in the administration of an estate?

Answer 29

The delay in getting money to residuary beneficiaries can sometimes give rise to financial difficulty for the beneficiary. Therefore, provided PRs are confident that sufficient assets will remain within their control to meet any outstanding payments later, they may make early payment of part of a residuary beneficiary’s share before the end of the administration. This is referred to as interim distributions. The beneficiary receives a balancing payment at the end.

Question 30

What happens if the value of the estate is less than the statutory legacy?

Answer 30

If the value of the estate is less than the statutory legacy, the whole estate passes to the spouse. In such cases, the children or other beneficiaries may not have a beneficial entitlement to apply for the Grant of Letters of Administration.

Question 31

Why might an affidavit of date be necessary?

Answer 31

An affidavit of date may be necessary when there is doubt about the date on which the will was signed. This can occur when the date is missing, incomplete, or when more than one date is included. The affidavit confirms the correct date of signing.

Question 32

In what situations might an affidavit of physical condition of the will be required?

Answer 32

An affidavit of physical condition of the will may be required when there are problems with the interpretation of the will due to its physical condition. This can include alterations made to the text, pin holes indicating removed staples, paperclip indentations suggesting attachment of another document, non-consecutive page/clause numbering, or signs of attempted revocation.

Question 33

What factors should PRs consider when making distributions to beneficiaries?

Answer 33

PRs must work out who should inherit the deceased’s assets and what they are entitled to receive by reference to the deceased’s will and/or intestacy rules. They must establish whether there are sufficient funds to pay all the debts/expenses as well as the legacies. If funds are insufficient to meet all the legacies, the residue followed by the general legacies abate in priority to the specific legacies. PRs have the power to decide which assets to appropriate in full or part satisfaction of an entitlement to a general or residuary legacy. PRs should obtain a receipt from the beneficiaries when making distributions. Timing considerations, such as claims against the estate and the order of payment of legacies, should also be taken into account.

Question 34

What is the final step in the administration process?

Answer 34

The full distribution of the residue is the final step in the administration process. However, the delay in getting money to residuary beneficiaries can sometimes give rise to financial difficulty for the beneficiary. Therefore, provided PRs are confident that sufficient assets will remain within their control to meet any outstanding payments later, they may make early payment of part of a residuary beneficiary’s share before the end of the administration, which is referred to as interim distributions. The beneficiary receives a balancing payment at the end.

Question 35

What is the power of appropriation and when can PRs use it?

Answer 35

The power of appropriation allows PRs to choose which assets to transfer to beneficiaries in settlement of their entitlement. However, this power does not allow appropriation where the value of the asset at the date of appropriation exceeds the entitlement of the beneficiary concerned. If the value of the asset at the date of appropriation is less than the beneficiary’s entitlement, the PRs will need to make a further balancing transfer.

Question 36

What forms are needed when applying for a grant of probate?

Answer 36

o Fill out a PA1P form.
o Submit the original will.

Question 37

What forms are needed when applying for Grant of Letters of Administration (with will)

Answer 37

o Fill out a PA1A form or online via HMCT service.
o Submit a NCRP20 form.
o Provide the original will to the Probate Registry.

Question 38

What forms are needed when applying for Grant of Letters of Administration

Answer 38

o Fill out either an NCPR20 or NCPR22 form.
o Fill out a PA1A form.
o Pay an application fee (plus a probate registry fee if applicable, no fee for estates worth less than £5,000).
o Provide a certified copy of the death certificate.

Question 39

What are the preliminary steps to be taken after someone has died?

Answer 39

1. Locate the original will (and any codicils) to identify beneficiaries. In the absence of a will, intestacy rules determine estate distribution. Also gives an indication of who the PRs are.
2. Register the death and arrange the funeral, usually done by family members, but PRs (Personal Representatives) can handle this.
3. Identify any potential problems with the will or codicil before applying for a grant of representation.
4. Need to confirm everything to do with IHT is sorted. Compile a complete list of the deceased’s assets, liabilities at the date of death, and their lifetime transfers. Need to know beneficiaries and see if they are exempt.
5. Notify institutions the deceased had dealings with about the death. Provide official copies of the death certificate to institutions where the deceased held assets. If there is a centralised system it will notify government institutions but if this centralised system is not in place then PRs will need to notify the institutions individually.
6. Ensure valuable items and documents are kept safe.
7. When valuing estate assets, be aware of specific rules and record the value of the deceased’s share of jointly owned assets.

Question 40

What options do PRs have when minor beneficiaries cannot give good receipt?

Answer 40

When minor beneficiaries cannot give good receipt, PRs have several options: an express clause in the will allowing receipt from minors aged 16 or 17, receipt provided by a parent/guardian under the Children Act 1989, holding the gifted property until the child is 18, appointing trustees to hold the property for the minor, or paying the legacy into court.

Question 41

What is the purpose of estate accounts and who prepares them?

Answer 41

Estate accounts are prepared by the PRs or their legal advisors. They provide a record of the estate assets and how they have been administered, including the calculation of the residue. The accounts should be signed/approved by both PRs and residuary beneficiaries.

Question 42

What are the three component parts of estate accounts?

Answer 42

The three component parts of estate accounts are the Capital Account, Income Account, and Distribution Account. The Capital Account sets out the estate assets and liabilities at death, the Income Account summarizes the income received and expenses during administration, and the Distribution Account sets out the entitlement of residuary beneficiaries and distributions made.

Question 43

What are the administrative powers of trustees in relation to investment and delegation?

Answer 43

Under the Trustee Act 2000, trustees have broad powers of investment and a power to acquire land for the trust. They must consider standard investment criteria, obtain and consider proper advice, and keep investments under review. Trustees also have a statutory power to delegate these functions to an agent, but must keep the agency arrangement under review.

Question 44

What duties apply to trustees when exercising their powers of investment and delegation?

Answer 44

When exercising their powers of investment and delegation, trustees have a statutory duty of care and must act in accordance with the general duty of care set out in the Trustee Act 2000. They must consider the standard investment criteria, obtain and consider proper advice, and act fairly and honestly without any ulterior purpose.

Question 45

What are the default powers of trustees under the Trustee Act 2000?

Answer 45

The default powers of trustees under the Trustee Act 2000 include the general power of investment, power to acquire land, and power of delegation. These powers can be excluded, restricted, or modified by the trust instrument.

Question 46

What are the standard investment criteria that trustees must consider?

Answer 46

The standard investment criteria include suitability and diversification. Trustees must consider whether the proposed investments are suitable for the trust and whether there is a need to diversify the trust investments. The extent of diversification will depend on the size and nature of the trust.

Question 47

What factors should trustees consider when assessing the suitability of trust investments?

Answer 47

When assessing the suitability of trust investments, trustees should consider factors such as the size of the trust fund, the intended duration of the trust, the rights of different beneficiaries, and the need to balance preservation of assets with appropriate growth. Trustees must act even-handedly between beneficiaries.

Question 48

What are the key principles set out in Cowan v Scargill regarding investment?

Answer 48

Cowan v Scargill [1985] Ch 270 established that trustees must act in the best interests of beneficiaries, balancing their financial interests and considering the overall interests of all beneficiaries. The personal views of trustees are not relevant, and they must exercise their powers fairly and honestly without any ulterior purpose.

Question 49

What is the significance of the date the estate accounts are signed?

Answer 49

The date the estate accounts are signed is usually treated as the end of the administration. It signifies that the PRs and residuary beneficiaries agree with how the estate was administered and the calculation of the residue.

Question 50

What is the duty of trustees in relation to investments?

Answer 50

The duty of trustees is to take advantage of the full range of investments authorized by the terms of the trust, instead of narrowing the range. Their obligation is to produce the best financial return for the trust fund, in order to preserve the value of the pensions of the current and future members of the pension scheme.

Question 51

Under what circumstances can moral and ethical considerations be relevant to trustee decisions?

Answer 51

Moral and ethical considerations may be relevant to trustee decisions if trustees have a straightforward choice between two investments of economical equivalence. Additionally, the ethical views of beneficiaries can be taken into account if all beneficiaries are of sound mind and agree on the decision. In the case of charitable trusts, non-financial considerations can also be considered if they conflict with the aims of the charity or hamper its work.

Question 52

What factors can charitable trustees consider when making investments?

Answer 52

Charitable trustees can consider whether making ethically questionable investments is likely to undermine the work of the charity, such as deterring potential donors from supporting the charity. They can also consider whether investments might conflict with the aims of the charity or hamper its work. Trustees are required to balance the risk to the charity of financial loss from not making the investment against the detriment and disadvantages to the charity of making the investment.

Question 53

What are the requirements for obtaining proper advice in trustee investment decisions?

Answer 53

Under the Trustee Act 2000, trustees are required to obtain and consider proper advice before exercising their powers of investment. Proper advice is provided by a person who is reasonably believed by the trustee to be qualified to give it, based on their ability and practical experience of financial and other matters relating to the proposed investment. However, there are exceptions where seeking advice may be unnecessary, such as when the cost outweighs the benefit or when the trustee has sufficient knowledge and expertise to make the decision without advice.

Question 54

What is the statutory duty of care for trustees in relation to investments?

Answer 54

The statutory duty of care requires trustees to exercise such care and skill as is reasonable in the circumstances. This includes taking into account any special knowledge or experience that a trustee has or holds themselves out as having. For professional trustees, the standard of care is higher and takes into account the special knowledge or experience that it is reasonable to expect of a person acting in that capacity. The common law duty of care also applies, requiring trustees to exercise the standard of diligence and care expected of an ordinary prudent business person.

Question 55

What are the powers of delegation available to trustees?

Answer 55

Trustees have broad powers of delegation under the Trustee Act 2000. They can delegate their powers of investment and powers to acquire land, but not their distributive obligations. Delegation of investment powers requires a written agreement that complies with the trustees’ requirements. The agent to whom the function is delegated is bound by any restrictions on the exercise of its investment powers. Trustees should comply with their duties when selecting agents and entering into agreements with them.

Question 56

What are the powers of maintenance and advancement available to trustees?

Answer 56

Under the Trustee Act 1925, trustees have powers of maintenance and advancement. The power of maintenance allows trustees to pay income for the maintenance, education, or benefit of a minor beneficiary. The power of advancement allows trustees to pay capital for the advancement of a beneficiary whose interest has not yet vested in possession. These powers can be used for both minor and adult beneficiaries, subject to certain conditions and the consent of other beneficiaries with prior interests.

Question 57

What is the difference between the statutory duty of care and the common law duty of care for trustees?

Answer 57

The statutory duty of care, found in the Trustee Act 2000, requires trustees to exercise such care and skill as is reasonable in the circumstances. It takes into account any special knowledge or experience that a trustee has or holds themselves out as having. The common law duty of care, which applies more widely, requires trustees to exercise the standard of diligence and care expected of an ordinary prudent business person. The Trustee Act 2000 codifies the duty of care in certain circumstances but does not replace the common law duty of care.

Question 58

What are the requirements for delegating trustee functions?

Answer 58

Delegation of trustee functions, such as investment powers and powers to acquire land, requires a written agreement that complies with the trustees’ requirements. The agreement should include a term ensuring compliance with a written policy statement prepared by the trustees. The policy statement should provide guidance on how the agent should exercise their functions in line with the best interests of the beneficiaries. Trustees are required to comply with their duties when selecting agents and entering into agreements with them.

Question 59

What factors can trustees consider when making dispositive powers related to maintenance and advancement?

Answer 59

When making dispositive powers related to maintenance and advancement, trustees can consider the needs of the beneficiary, the purpose of the trust, and the interests of other beneficiaries. They can use the power of maintenance to pay income for the maintenance, education, or benefit of a minor beneficiary. The power of advancement allows trustees to pay capital for the advancement of a beneficiary whose interest has not yet vested in possession. These powers can be used for both minor and adult beneficiaries, subject to certain conditions and the consent of other beneficiaries with prior interests.

Question 60

What is the statutory duty of care for trustees and how does it apply to professional trustees?

Answer 60

The statutory duty of care, found in the Trustee Act 2000, requires trustees to exercise such care and skill as is reasonable in the circumstances. For professional trustees, the standard of care is higher and takes into account the special knowledge or experience that it is reasonable to expect of a person acting in that capacity. This is because professional trustees are being paid to provide a service. Lay trustees may also have a higher standard of care if they have particular skills that would make them desirable trustees.

Question 61

What are the powers of maintenance and advancement available to trustees and how do they apply to beneficiaries?

Answer 61

Under the Trustee Act 1925, trustees have a power of maintenance that allows them to pay income for the maintenance, education, or benefit of a minor beneficiary. They also have a power of advancement that allows them to pay capital for the advancement of a beneficiary whose interest has not yet vested in possession. These powers can be used for both minor and adult beneficiaries, subject to certain conditions and the consent of other beneficiaries with prior interests.

Question 62

What is the purpose of the statutory power of advancement?

Answer 62

The statutory power of advancement allows trustees to use the trust’s capital to benefit a beneficiary, such as buying a car, using the capital. However, the trustees are not obligated to use this power.

Question 63

How does the trustees’ duty change when there is a successive interest trust?

Answer 63

In a successive interest trust, the trustees have a duty to hold the capital on trust until the first beneficiary reaches a certain age or dies. They may use the statutory power of advancement to buy a car for the first beneficiary using the capital, but this would require the first beneficiary’s consent.

Question 64

What are the duties of the trustees in relation to the income in a successive interest trust?

Answer 64

In a successive interest trust, the trustees must pay the income to the first beneficiary. They do not have the power to use the income for other purposes, such as funding driving lessons. The capital is held on trust until the first beneficiary dies, and then the trustees have a duty to distribute it to the second beneficiary.

Question 65

What is the statutory power of maintenance and when can it be used?

Answer 65

The statutory power of maintenance allows trustees to use the trust income for the maintenance, education, or benefit of a minor beneficiary. It can be used for both current and accumulated income. However, once the beneficiary reaches 18, the power can no longer be used, and any accumulated income must be added to the capital.

Question 66

Who can receive the trust income in relation to the statutory power of maintenance?

Answer 66

The trust income should be paid to the minor’s parent or guardian, or applied directly to a provider of goods or services acquired for the minor’s benefit. This is because a minor cannot give good receipt for the income.

Question 67

What are the key points to note about the exercise of the statutory power of maintenance?

Answer 67

The exercise of the statutory power of maintenance is a fiduciary power, and the trustees must act in good faith in the interests of the beneficiary. The income must be used for the primary benefit of the minor beneficiary, but it does not matter if it indirectly benefits their parent or guardian. It is improper to unquestioningly pay the income to the minor’s parent or guardian without considering its use for the minor’s benefit.

Question 68

What happens to accumulated income in relation to the statutory power of maintenance?

Answer 68

Any previously accumulated income that has not been paid out using the power of maintenance must be added to the capital once the beneficiary reaches 18. Therefore, it is good practice for trustees to consider exercising the power shortly before a minor beneficiary turns 18.

Question 69

What is the entitlement to income for adult beneficiaries with vested interests?

Answer 69

Adult beneficiaries with vested interests in capital usually have the right to receive the trust income as it arises, unless someone has a prior interest or the trust instrument contains a duty to accumulate the income.

Question 70

What is the purpose of the statutory power of maintenance in relation to minor beneficiaries?

Answer 70

The statutory power of maintenance allows trustees to use the trust income for the maintenance, education, or benefit of minor beneficiaries. It can be used in respect of both current and accumulated income. The power is available until the beneficiary reaches 18.

Question 71

What is the statutory power of advancement and when can it be used?

Answer 71

The statutory power of advancement, found in section 32 of the Trustee Act 1925, allows trustees to pay capital to or for the benefit of a beneficiary before their interest vests in possession. The power of advancement can be used by both adult and minor beneficiaries, and it applies to both vested and contingent interests.

Question 72

What are the limitations and requirements of the statutory power of advancement?

Answer 72

The statutory power of advancement can be modified or excluded by the trust instrument. It allows trustees to pay up to 100% of a beneficiary’s prospective entitlement to the capital, even if they have a contingent interest. However, the consent of beneficiaries with a prior interest is required. The trustees have a dispositive discretion and are not obligated to distribute capital if a request is made to use the power of advancement.

Question 73

What is the meaning of ‘advancement’ in the context of the power of advancement?

Answer 73

In the context of the power of advancement, ‘advancement’ refers to the use of capital to improve the material situation of the beneficiary. It can include providing an immediate financial benefit, such as avoiding an inheritance tax liability. Case law has recognized a broader meaning of advancement, including the improvement of the beneficiary’s moral well-being through charitable purposes.

Question 74

Who can the capital be paid to when exercising the power of advancement?

Answer 74

If the beneficiary is an adult, the trustees can pay the capital directly to them, but they must ensure that it has been used for the requested purpose. If the beneficiary is a minor, the capital should not be paid directly to them, as a minor cannot give good receipt. Instead, it should be paid either to the child’s parent or legal guardian or directly to the provider of goods or services being acquired on behalf of the beneficiary.

Question 75

What duty do trustees have after exercising the power of advancement?

Answer 75

After exercising the power of advancement, trustees have a duty to ensure that the money is being used for the purposes it was provided. If the beneficiary (or their parent or guardian) is found to be spending the money on something else, the trustees should not pay any further money to them. Instead, they may choose to pay money directly to a third party for the advancement of the beneficiary.

Question 76

When is the consent of beneficiaries with a prior interest required to exercise the power of advancement?

Answer 76

The consent of beneficiaries with a prior interest is required to exercise the power of advancement.

Question 77

What is the maximum amount of a beneficiary’s prospective entitlement to the capital that can be paid using the power of advancement?

Answer 77

The trustees may use the power of advancement to pay up to 100% of a beneficiary’s prospective entitlement to the capital, even if they have a contingent interest. This means that the power of advancement can be used to give a beneficiary their capital interest, even if they do not have Saunders v Vautier rights.

Question 78

What is the difference between exercising the power of advancement and collapsing the trust?

Answer 78

Exercising the power of advancement allows the trustees to pay up to 100% of the beneficiary’s interest, while collapsing the trust involves directing the trustees to distribute the beneficiary’s share of the trust. The choice between the two options depends on how the trustees choose to bring the payment into account.

Question 79

What is the impact of bringing a payment into account when a beneficiary becomes absolutely entitled?

Answer 79

When a payment is brought into account, the amount that the beneficiary will receive when their interest vests will be reduced proportionately to reflect the proportion of the capital that they received early. The choice made by the trustees in bringing the payment into account can have significant consequences for both the beneficiary who receives the advancement and all the other beneficiaries.

Question 80

What are some ways in which trustees can protect themselves against liability for breach of trust?

Answer 80

Trustees can protect themselves against liability for breach of trust by ensuring the trust instrument contains an ouster or exemption clause, taking out trustee liability insurance, seeking court directions before taking potentially liability-inducing actions, making a s 48 AJA 1985 application to rely on legal advice, surrendering their discretion to the court in exceptional cases, relying on the fully informed consent of beneficiaries, establishing a defense of beneficiary instigation or acquiescence, seeking equitable relief under s61 TA 1925, making a claim against a third-party adviser, making a claim for a contribution from a co-trustee or third party, and taking specific protective action in respect of missing or unidentified beneficiaries.

Question 81

What is the purpose of an ouster clause in a trust instrument?

Answer 81

An ouster clause in a trust instrument entirely removes a duty that the trustees would otherwise have. It is commonly used to remove duties that arise when a trust holds a majority shareholding in a company.

Question 82

What is the difference between an ouster clause and an exemption clause?

Answer 82

An ouster clause entirely removes a duty that the trustees would otherwise have, while an exemption clause limits or excludes trustee liability for particular sorts of breach. An exemption clause cannot protect trustees if they have acted dishonestly.

Question 83

What is trustee liability insurance and what does it cover?

Answer 83

Trustee liability insurance, also known as trustee indemnity insurance, protects trustees against personal liability for breach of trust. The insurance policy contains restrictions on when it will pay out, and it can protect trustees against liability for negligence but not fraudulent breaches of trust.

Question 84

What actions can trustees take to protect themselves when they are unsure of their powers or duties?

Answer 84

When trustees are unsure of their powers or duties, they can seek court directions before taking action that might result in liability. This allows them to obtain guidance from the court on the appropriate course of action.

Question 85

What is the purpose of protecting trustees from the outset?

Answer 85

Protecting trustees from the outset involves taking action to minimize their potential liability for breach of trust before they assume the role of trustee. This can include understanding the nature of the role and the risk of personal liability, requiring the inclusion of an ouster or exemption clause in the trust instrument, or taking out trustee liability insurance.

Question 86

What are some ways in which trustees can protect themselves during the administration of the trust?

Answer 86

During the administration of the trust, trustees can protect themselves by seeking court directions when unsure of their powers or duties, taking specific protective action in respect of missing or unidentified beneficiaries, and relying on the fully informed consent of beneficiaries. They can also establish a defense of beneficiary instigation or acquiescence, seek equitable relief under s61 TA 1925, make a claim against a third-party adviser, or make a claim for a contribution from a co-trustee or third party.

Question 87

What actions can trustees take after a breach of trust has been committed to protect themselves?

Answer 87

After a breach of trust has been committed, trustees can seek equitable relief under s61 TA 1925 or make a claim against a third-party adviser. They can also make a claim for a contribution from a co-trustee or third party, or take specific protective action in respect of missing or unidentified beneficiaries.

Question 88

What is the purpose of trustee liability insurance?

Answer 88

Trustee liability insurance, also known as trustee indemnity insurance, protects trustees against personal liability for breach of trust. The insurance policy contains restrictions on when it will pay out, and it can protect trustees against liability for negligence but not fraudulent breaches of trust.

Question 89

What actions can trustees take to protect themselves from liability for breach of trust?

Answer 89

Trustees can seek court directions, apply to the High Court under s48 Administration of Justice Act 1985, surrender their discretion to the court, or obtain beneficiary consent. These actions can provide guidance, legal authorization, or fully informed consent to protect trustees from liability.

Question 90

When should trustees seek court directions?

Answer 90

Trustees should seek court directions when they are unsure of their obligations or want to ensure that their plans for distributing the trust property will not expose them to a claim for breach of trust. This is especially important when there is ambiguity in the trust instrument or uncertainty in interpreting legislation or case law.

Question 91

What is the alternative to seeking court directions when there is uncertainty?

Answer 91

In cases where seeking court directions is expensive, trustees can apply for High Court authorization under section 48 Administration of Justice Act 1985. This involves obtaining a written legal opinion and applying for court authorization to rely on that opinion, without the need for a full court hearing.

Question 92

What is the purpose of seeking beneficiary consent?

Answer 92

Seeking beneficiary consent is an option for trustees who are unsure of their powers and duties or want to take actions that may be considered a breach of trust or fiduciary duty. By obtaining fully informed consent from all beneficiaries, trustees can protect themselves from liability.

Question 93

What factors should trustees consider when seeking beneficiary consent?

Answer 93

To obtain full protection, trustees should ensure that beneficiaries are given full information to enable them to provide consent. Withholding important information may invalidate the consent. Additionally, if consent is only obtained from some beneficiaries, the trustees will have a partial defense against claims by those beneficiaries.

Question 94

What can trustees do to protect themselves after a breach of trust?

Answer 94

After a breach of trust, trustees should identify the scope of their liability and consider potential defenses or reliefs. They may also take action against third parties. Possible actions include beneficiary instigation/consent/acquiescence, statutory limitation rules, defense of laches, statutory relief under section 61 TA 1925, and the Civil Liability Contribution Act 1978.

Question 95

Under what circumstances will trustees not be liable for breach of trust?

Answer 95

Trustees will not be liable for breach of trust if they received fully informed consent from all beneficiaries or if only some beneficiaries consented (providing a partial defense). Trustees may also have a defense if a breach was instigated or requested by a beneficiary, or if beneficiaries affirm the trustees’ actions after a breach.

Question 96

What is the option of impounding a beneficiary’s interest?

Answer 96

Impounding a beneficiary’s interest involves using some or all of the instigating beneficiary’s share of the trust fund to indemnify the trustees against a claim by other beneficiaries. The court has discretion to impound a beneficiary’s interest under section 62 TA 1925, even if the beneficiary did not benefit from the breach.

Question 97

What are the limitation periods for bringing a claim for breach of trust?

Answer 97

Under section 21(1)(a) of the Limitation Act 1980, the limitation period for bringing a claim for breach of trust is six years from the breach. However, this applies only to claims by beneficiaries with vested interests in possession. For beneficiaries with future interests, the limitation period starts when their interest vests in possession.

Question 98

What is the equitable defense of laches?

Answer 98

The equitable defense of laches allows trustees to argue that a beneficiary has unacceptably delayed their claim for breach of trust. To rely on this defense, trustees must demonstrate that the beneficiary knew of the breach but delayed their claim, making it unconscionable for the beneficiary to assert their beneficial interest.

Question 99

Under what circumstances can trustees seek relief under section 61 TA 1925?

Answer 99

Trustees may seek relief under section 61 TA 1925 if they acted honestly and reasonably and ought fairly to be excused for the breach of trust. This provides the court with discretion to excuse a trustee from liability in appropriate circumstances.

Question 100

What are the potential consequences for trustees after a breach of trust?

Answer 100

After a breach of trust, trustees may face legal action and potential liability. They should consider the scope of their liability, potential defenses or reliefs, and actions that may be taken against third parties. Seeking legal advice is crucial in understanding the specific consequences and options available.

Question 101

What are the options available to trustees when there is uncertainty about the interpretation of a will or trust?

Answer 101

When there is uncertainty about the construction of the terms of a will or trust, trustees can seek a written legal opinion from a qualified professional and apply for High Court authorization to rely on that opinion. This provides clarity without the expense of a full court hearing.

Question 102

What is the purpose of surrendering discretion to the court?

Answer 102

Trustees may surrender their discretion to the court when they are deadlocked or precluded from acting due to a conflict of interest. This allows the court to make decisions on their behalf in relation to specific problems that require addressing.

Question 103

In what situations is section 61 of the Trustee Act 1925 most likely to be used?

Answer 103

Section 61 of the Trustee Act 1925 is most likely to be used in cases where a trustee has inadvertently acted outside their powers, such as making an unauthorised investment or distributing to the wrong person. It is more likely to be successful in cases involving lay trustees rather than professionals.

The court has a wide discretion to consider all the circumstances of the case when applying section 61 of the Trustee Act 1925. The court will not use this section lightly as it may deny the beneficiaries a remedy. It can be used to excuse individual trustees while others remain liable.

Question 104

What options do trustees have when they find themselves potentially liable for breach of trust?

Answer 104

Trustees who find themselves potentially liable for breach of trust can consider taking action against third parties, such as professional advisers, who provided negligent advice. They may also seek a contribution from their co-trustees under the Civil Liability Contribution Act 1978.

Question 105

Under what circumstances can a trustee seek a full indemnity under the Civil Liability Contribution Act 1978?

Answer 105

In very rare cases, the court may award a contribution amounting to a full indemnity under the Civil Liability Contribution Act 1978. This is likely only in cases where a particular trustee is morally culpable for the breach, a trustee is also a beneficiary, or a trustee acts as a solicitor to the trust and the breach is committed in reliance on their advice.

Question 106

What factors does the court consider when determining the amount of contribution under the Civil Liability Contribution Act 1978?

Answer 106

The court has a discretion to require one party to make a just and equitable contribution to another under the Civil Liability Contribution Act 1978. While the court will presume equal responsibility, they may depart from this presumption based on the facts of the case. Unequal contributions may reflect differing levels of culpability for the loss.

Question 107

What are some practical steps that should be taken after a breach of trust occurs?

Answer 107

After a breach of trust occurs, trustees should check the trust instrument for an exemption clause, consider potential defences such as reliance on court directions or statutory relief, check for relevant insurance or indemnity from other beneficiaries, and identify potential claims against third parties who provided negligent advice.

Question 108

How can trustees protect themselves against liability for potential breaches of trust when making distributions to beneficiaries?

Answer 108

Trustees can protect themselves by seeking a Benjamin order, publishing a notice under section 27 of the Trustee Act 1925, retaining a fund to satisfy the claims of missing or unknown beneficiaries, paying money into court, taking out missing beneficiary insurance, or seeking an indemnity from the beneficiaries to whom they do distribute.

Question 109

What is the purpose of seeking a Benjamin order?

Answer 109

A Benjamin order allows trustees to make distributions on the assumption that a missing beneficiary has died. It is only available in the case of missing beneficiaries and protects trustees but not other beneficiaries. However, it does not relieve trustees of ongoing duties and can be an expensive option.

Question 110

When is publishing a notice under section 27 of the Trustee Act 1925 advisable?

Answer 110

Publishing a notice under section 27 of the Trustee Act 1925 is advisable in the case of unknown beneficiaries. It puts unknown beneficiaries on notice of the trustee’s intention to distribute the fund between known beneficiaries. This option protects trustees but not other beneficiaries and is not available in the case of missing beneficiaries.

Question 111

What are the potential risks and benefits of retaining a fund to satisfy the claims of missing or unknown beneficiaries?

Answer 111

Retaining a fund can be risky in the case of unknown beneficiaries as it may not fully protect trustees or other beneficiaries if they don’t retain a large enough fund. However, it is more appropriate in the case of missing beneficiaries and provides protection for trustees and other beneficiaries, although ongoing trustee duties remain.

Question 112

What is the purpose of taking out missing beneficiary insurance?

Answer 112

Taking out missing beneficiary insurance is possible in the case of unknown and missing beneficiaries. While it does not protect against a claim, the trustee should be able to recover from the insurer. It is a cheaper option than a Benjamin order in cases where there are missing beneficiaries.

Question 113

Under what circumstances might a trustee seek an indemnity from beneficiaries?

Answer 113

A trustee may seek an indemnity from beneficiaries in the case of unknown and missing beneficiaries. While it does not protect against a claim for breach of trust, the trustee can try to recover from the indemnifying beneficiary.

Question 114

What is the purpose of the Civil Liability Contribution Act 1978?

Answer 114

The purpose of the Civil Liability Contribution Act 1978 is to allow trustees who are jointly and severally liable for breach of trust to seek a contribution from their co-trustees. The court has the discretion to require one party to make a just and equitable contribution to another based on the facts of the case.

Question 115

What is the purpose of a Benjamin Order?

Answer 115

A Benjamin Order is a court order that permits trustees to distribute a trust fund on the basis of a particular assumption, usually when they know of the existence of a beneficiary but are unable to locate them.

Question 116

How does a Benjamin Order protect trustees in the distribution of a trust fund?

Answer 116

A Benjamin Order relieves trustees from personal liability if they distribute the trust property based on the assumption made in the order, even if the assumption turns out to be incorrect. However, a disappointed beneficiary or creditor can make a claim against other beneficiaries who received the property.

Question 117

What is the purpose of a s 27 TA1925 notice?

Answer 117

A s 27 TA1925 notice is used by trustees when they are unsure if they have properly identified all the beneficiaries. It is a notice published to known beneficiaries, informing them of the intention to distribute the trust property. After a two-month notice period, the trustees can distribute to known beneficiaries without personal liability to unknown beneficiaries.

Question 118

What is the purpose of retaining funds in the distribution of a trust fund?

Answer 118

Retaining funds allows trustees to set aside trust assets to satisfy the claims of missing beneficiaries who may come forward after distribution. It is useful when trustees can identify all beneficiaries but cannot locate all of them. However, retaining funds may require ongoing administrative duties and can be risky in cases of unknown beneficiaries.

Question 119

What is the purpose of paying funds into court under s 63 TA 1925?

Answer 119

Paying funds into court under s 63 TA 1925 gives the court legal control over the funds and allows trustees to retire. It relieves trustees from open-ended administrative duties in respect of the trust fund. However, this option should only be taken if all realistic options for tracing beneficiaries have failed.

Question 120

What is missing beneficiary insurance and how does it protect trustees?

Answer 120

Missing beneficiary insurance is a policy taken out by trustees to guard against the risk of missing or unknown beneficiaries emerging after the trust fund has been distributed. If a beneficiary later comes forward, the trustees will be liable to them but can claim on the insurance policy. It is cheaper than seeking a Benjamin order and provides certainty against future claims.

Question 121

What is the purpose of obtaining an indemnity from beneficiaries?

Answer 121

Obtaining an indemnity from beneficiaries allows trustees to distribute the entire trust fund even when they cannot identify or locate all the beneficiaries. The beneficiaries promise to reimburse the trustees if they are successfully sued by other beneficiaries later. It is cheaper and quicker than some other options but does not protect trustees from claims by beneficiaries who come forward later.

Question 122

What are the implications for a beneficiary who comes forward later after the trust fund has been distributed?

Answer 122

If a beneficiary comes forward later, they can make a proprietary or personal claim against the recipient of the property. However, if the property has not been fully distributed, the beneficiary can still claim any undistributed property from the trustee. The options chosen by the trustees will determine the rights and options available to the beneficiary.

Question 123

What is the purpose of a sCENARIOS notice?

Answer 123

A sCENARIOS notice is used by trustees when they want to retire and have searched extensively for the contact details of missing beneficiaries but have been unable to find them. It informs known beneficiaries of the intention to distribute the trust property and allows the trustees to pay money into court.

Question 124

What is the purpose of a Benjamin Order in the distribution of an estate?

Answer 124

A Benjamin Order is a court order that allows trustees to distribute an estate on the basis that a missing beneficiary is presumed dead. It relieves trustees from personal liability if they distribute the estate based on this assumption, even if it turns out to be incorrect. However, a disappointed beneficiary or creditor can make a claim against other beneficiaries who received the estate.

Question 125

What is the role of the grant of probate in closing a deceased’s bank account?

Answer 125

The grant of probate confirms the authority of the executors to administer the deceased’s assets. To close a deceased’s bank account, the executors should provide the bank with the grant of probate and request a cheque for the closing balance.

Question 126

How is rental income taxed in relation to a deceased’s estate?

Answer 126

Rental income received before the testator’s death is considered the testator’s income for the tax year of their death. The income tax (IT) due on this rental income is a liability owed by the testator at the date of their death and will reduce the value of their inheritance tax (IHT) estate.

Question 127

What determines whether an estate is solvent?

Answer 127

An estate is considered solvent if the total value of the deceased’s assets is greater than their debts and administration expenses. In this case, the estate is solvent because the total value of the estate exceeds the debts and administration expenses.

Question 128

What should the executors do before arranging for the deceased’s bank account to be closed?

Answer 128

Before arranging for the deceased’s bank account to be closed, the executors should provide the bank with the grant of probate, which confirms their appointment as executors. They should also request a cheque for the closing balance

Question 129

What is the role of the grant of representation in confirming the authority of executors?

Answer 129

The grant of representation is the official document that confirms the executors’ authority to administer the deceased’s assets. It serves as proof that they have the legal right to act on behalf of the deceased.