Wills 12

Question 1

What are the 10 powers of PRs?

Answer 1

• Power to sell, mortgage or lease* Power to appropriate* Power to accept receipts for a minor’s property* Power to insure* Power to delegate* Power to indemnify for expenses* Power to run the deceased’s business (depending on will)* Power to invest* Power to maintain a minor* Power to advance capitalPRs’ powers are fiduciary and must therefore be exercised in good faith in the interest of the estate as a whole.

Question 2

What is the power of ‘appropriation’?

Answer 2

Appropriation is the use of an asset to satisfy a legacy or interest in the estate, provided:* the beneficiary consents (unless the will provides otherwise, which is common) and * no specific beneficiary is affected.

Question 3

Can a PR make an appropriation in their own favour?

Answer 3

It is not permissible for a PR to make an appropriation in their own favour to satisfy a pecuniary legacy, unless the asset used to do so is cash or the equivalent of cash (e.g. government stocks or quoted share) - unless permitted by the will.

Question 4

A will leaves £5,000 to a beneficiary. The estate is low on cash but has other assets, including a valuable jewellery collection that the testator did not leave to any specific beneficiaries. One item in the collection is an emerald necklace worth £5,000. Can the emerald necklace be used to satisfy the gift?

Answer 4

The PR can use the power of appropriation to give the necklace to the beneficiary instead of the £5,000 in cash. Unless the will provides otherwise, the beneficiary must consent to the appropriation.

Question 5

What is the power to accept receipts for a minor’s property used for?

Answer 5

• A minor is unable to give a valid receipt for monies or assets transferred to them. * PRs can appoint trustees for a minor if the minor has a vested interest in the property. * Note that there is a view that anyone with parental responsibility for the minor can give a valid receipt. The simplest way to deal with any uncertainty is to have an express clause in the will providing for parental receipts and/or minors giving receipts from age 16.* Contingent gifts cannot be paid out early. The PR must hold the property until the minor reaches 18 or the property is transferred into court.

Question 6

A will leaves £5,000 to M, who is 14 years old. Can a trustee be appointed to give valid receipt of the gift?

Answer 6

Yes. M has a vested interest because no other condition has to be met for him to receive the property. The PRs can appoint a trustee who then holds the £5,000 on trust for M, and who can give a valid receipt to the PRs.

Question 7

A will leaves £5,000 to M on his attaining the age of 18. Can a trustee be appointed to give valid receipt of the gift?

Answer 7

No. M is not absolutely entitled to the property because he has to wait until he’s 18. The PRs are unable to appoint a trustee, so they either have to hold the money until M reaches 18 or transfer the money to the court to hold.

Question 8

What happens to any insurance money received in relation to trust property?

Answer 8

It is held as capital and used to reinstate lost or damaged property

Question 9

Can a PR delegate their function?

Answer 9

• PRs can delegate functions to agents on such terms as they determine. * Unless covered in the will, PRs must review arrangements with agents. * They are liable for the act or default of an agent only if they failed to adhere to their statutory duty of care in appointing or reviewing the agent.

Question 10

When will a PR be liable for the actions of an agent to whom they have delegated function?

Answer 10

If they failed to adhere to their statutory duty of care in appointing or reviewing the agent.

Question 11

Can a PR reimburse themselves for properly incurred expenses?

Answer 11

Yes, under the power to indemnify for expenses

Question 12

Can a PR run a deceased’s business?

Answer 12

Generally no unless they do so to sell it as a going concern. The will may include express provisions allowing the PRs to run the deceased’s business as a going concern. * For partnerships, the partnership agreement must be consulted. * If the deceased was a shareholder, the company’s articles of association should be reviewed.

Question 13

What type of investments may a PR make under the power to invest?

Answer 13

Any kind of investment that they could make if they were absolutely entitled to assets of the trust except:* purchase of land abroad and* purchase of an interest in land with someone else (e.g. a beneficiary). subject to the duty to make the trust productive, and the ‘standard investment criteria‘Note that a testator is permitted to restrict investment powers in the will, e.g. by prohibiting unethical investments.

Question 14

What are the standard investment criteria?

Answer 14

• The suitability to the trust of the investment; and * The need for diversification of the trust’s investments. If PRs invest in something not suitable for the trust or if they fail to diversify, they could be found liable to a beneficiary who is harmed by the failure.

Question 15

In the absence of express power in the will, when can PRs exercise the power to maintain a minor?

Answer 15

• When property is held for a minor beneficiary (vested or contingent) and the gift carries the right to intermediate income, the trustees may apply the income for the maintenance, education, or benefit of the minor. * Otherwise, the trustees must accumulate the income until the beneficiary is 18 when the accumulated income is normally added to capital| Section 31 Trustee Act 1925

Question 16

When a minor reaches 18, assuming the will doesn’t say otherwise, what happens to any income that has been accumulated for them in relation to an interest they have under a will?

Answer 16

• If the beneficiary has a vested life interest at age 18: accumulated income will be paid to them* If the minor reaches 18 and they have a contingent interest, ongoing income thereafter must be paid to them until their contingent interest is satisfied (when they will receive the capital plus accumulated income).

Question 17

A 13-year-old boy will receive an interest in property when he attains the age of 25. What powers have the trustees in relation to this property:* before he reaches 18* when he is 18* when he is 25

Answer 17

• The trustees hold the property for him and until he reaches 18 may apply the income for his maintenance, education, or benefit, accumulating the rest. * When the boy turns 18, any accumulated income is added to capital, and the ongoing income is then paid to him. * When he turns 25, he will receive the property plus any accumulated income.

Question 18

In the absence of an express provision in the will, can trustees advance capital to beneficiaries?

Answer 18

Yes, the have discretion to advance capital to a beneficiary (minor or not) who has a vested or contingent interest in capital. * The entire vested or presumptive share may be advanced although any prior life interest beneficiary must give their consent. * If an advance is made before a beneficiary satisfies a contingency, the amount so advanced is not recoverable.| Section 32 Trustee Act 1925

Question 19

Can an interest in capital under a will be advanced to a minor beneficiary?

Answer 19

Yes at the discretion of trustees

Question 20

Can a contingent interest in capital under a will be advanced?

Answer 20

Yes at the discretion of trustees as long as they have consent of any prior interest beneficiary

Question 21

If an advance of capital is made to a beneficiary with a contingent interest before it is satisfied, is the amount recoverable if they do not satisfy the contingency?

Answer 21

No

Question 22

The trustees of a multi-million pound trust are to pay the income to L for life and then the capital to C. C wants to start a business, but he’s low on cash. L is still young, so C doesn’t think he’ll be receiving the trust capital any time soon. Can the trustees advance capital to C?

Answer 22

C can ask the trustees to advance some or all of the capital to him, and the trustees are permitted to do so in their discretion. However, L must consent to the advance because she has a prior life interest.

Question 23

Can a sole PR give receipt for the proceeds of sale of land?

Answer 23

Yes. A sole PR has the same powers as two or more and thus can give a valid receipt for the proceeds of sale of land.

Question 24

What is the liability of PRs where there are more than one?

Answer 24

Joint PRs have joint and several authority, so the act of one binds all others and the estate.

Question 25

Can a PR transfer land and shares without the consent of other PRs?

Answer 25

No, all PRs must join for the transfer of land and shares.