Wills and Administration of Estates Flashcards
What the the 3 ways a persons estate can be dealt with after death?
- A will
- Laws of intestacy
- Sometimes both
Who is a testator?
The person making a will
What are the 3 things a testator must have to create a valid will?
- Capacity at the time the will was made
- Intention of making a will
- Execute the will in accordance with the certain formalities
What happens if any of the requirements for the creation of a valid will are missing?
As a general rule, the will cannot be offered into probate
What are the requirements for capacity?
Must be at least 18 and have mental capacity
What is the presumption regarding capacity of a testator?
They are presumed to have capacity at the time of writing unless someone challenges the validity of the will by proving the testator lacked capacity
What does statute confirm are the situations whereby a person lacks capacity?
At the time of making the will the person is not able to make a decision for themselves because of an impairment or disturbance to the functioning of their mind or brain
What must the testator have understood at the time of making the will for them to have valid capacity?
- The nature of the act
- The extent of their property
- The claim to which they ought to give effect
What must be present for a testator to have intention?
A general intention to make a will or a specific intention to make the particular will
What is the general rebuttable presumption of knowledge and approval for the intention to create a will?
If the testator had the required mental capacity, they acted with the requisite knowledge and approval.
What has the burden of proof for showing the testator did not have the required mental capacity?
The challenger, by proving lack of proper intention usually by showing the testator made the will as a result of fear, fraud, undue influence or mistake.
In what situations does the general rebuttable presumption of knowledge and approval not apply?
When the testator is blind or illiterate or the will is signed on the testators behalf
If there are suspicious circumstances
How are gifts to solicitors treated when left in a will?
The SRA requires solicitors to act with integrity and honesty and therefore it is sensible to have a policy of refusing to act when a client proposes to make a gift of significant value to a fee earner in a firm unless the client seeks independent legal advice
What are the 2 grounds for will challenge?
- Duress
2. Undue influence
What are the 3 subsections gf duress?
Fear, force and fraud
What is the effect of a will made under duress?
The will is not admitted to probate
What must occur for duress to be present?
When the testator has been injured or threatened with injury
When will a will made under duress be admitted to probate?
If a court pronounces that it is valid and issues a grant in solemn form and the court will determine the validity of the will
What is undue influence?
When something overpowers the volition of the testator (can persuade however cannot overpower)
What will a claimant need to prove for undue influence?
Prove that there was coercion or pressure that overpowered the freedom of action of the testator
When would courts be more willing to find undue influence?
When the testator is physically or mentally weak
What is the process of propounding a will?
Take legal action to have the will authenticated as part of the probate process
What formalities must be present for a will to be valid?
- In writing
- Signed by the testator
- Witnessed by 2 or more witnesses
How can it be confirmed that the formalities of a will have been complied with?
An attestation clause is inserted confirming the requirements were complied with.
How can it be confirmed the right formalities have been complied with when drafting a will if there is no attestation clause?
Usually one of the witnesses will testify confirming so
When would a special attestation clause be used?
When the testator is blind or illiterate to evidence it was read to them, they understood and approved its contents
What are the requirements of a signature on a will?
Usually this is an actual signature however can be a mark (thumbprint)
What are examples as to what will be accepted for a signature on a will?
Initials Stamped signature Mark such as a cross Signature in pencil The words 'your loving mother'
Where must the testators signature on a will be shown?
Usually at the end however can be anywhere
Can someone sign on the testators behalf?
Yes as along as they sign in the presence and at the direction of the testator. They must also indicate in some way to the witness that the signature has been put there at the testators request
What are the requirements regarding the capacity of a witness?
No formal requirements but they must understand the significance of being a witness to a signature
Must a witness see the contents of a will?
No
Can a blind person be a witness?
No as their blindness prevents them from witnessing the visible act
Can a mentally unsound person witness a will?
No
If a person witness a will and subsequently loses mental capacity, does this affect the validity of a will?
No
Can an illiterate person be a witness?
Yes as long as they are aware it is the testator signing the document
Can a beneficiary or a spouse be a witness?
No
What are the requirements when a will refers to another document?
It effectively becomes part of the will as long as the document exists at the date of the will
Can a future intention to make a document to be incorporated into a will be incorporated?
No.
Can a testator change their mind as to what gifts to make in their will?
Yes - anytime before execution.
After execution, will need a codicil, or the will to be revoked
If a word is crossed out of the will, how should this be read?
If you can make out the words, these should be read in their natural means. If the words are apparent then they can be submitted to probate rather than the amendment however if the original words are not apparent, the court will admit the will with a blank space where the words are obliterated
When will an alteration to a will be valid?
When it was made before the execution of the will and there is evidence to show this fact. The will must read naturally after the amendment.
What evidence must be shown to ensure the alteration was made before execution of the will?
Any amendments must be initialled by the testator and both witnesses
When would an unwitnessed (unattested) alteration be valid?
Where it is filling a blank space
In what situations would an alterations be ineffective?
- If it is unattested and made by the testator after execution and does not amount to obliteration
- It is made by someone other than the testator and without their knowledge or approval
What is a codicil?
A brief document that adds to, amends or partially revokes an existing wall
What are the requirements for a codicil?
- Must make reference to the will
- Same requirements as a will
- Clause should be included into the codicil confirming the unamended part of the will
Can a codicil make an invalid will valid?
Sometimes, where a witness is also a beneficiary. If another witness witnesses the codicil, this would mean the original will / gift is now unvoid
At what point can a will be revoked?
At any time, provided they retained testamentary capacity
What are the 2 ways a will can be revoked?
- Automatically by law
2. Deliberate Act of the testator
Under what circumstances would a will be revoked automatically though law?
When a testator gets married or divorced
When would a will still be valid after marriage?
Where it appears from the will that, when it was made, the testator was expecting to marry a particular person and they intended all or part of the will should not be revoked by the marriage. An express statement should be included in the will.
Will a will be fully revoked upon divorce?
No, it is partly revoked. It is seen as though the former partner died on the date of divorce
What happens when a former spouse is appointed as executor or trustee in a will and there is a subsequent divorce?
The appointment in the will be ineffective and any gifts to the former spouse are revoked.
When will a divorce not revoke a will?
When a contrary intention is stated
What deliberate acts can be seen to revoke a will?
Execute a later will or codicil
Destroy the will
What effect will a later will or codicil have on the past will?
Will partially or wholly revoke a will. It is usual for an express revocation clause to be inserted into the new will
How can a will be destroyed and result in revocation?
Burning, tearing or other deliberate act
What are the 2 requirements for destruction revoking a will?
The act of destruction and an intention to revoke
Would writing cancelled or revoked through the will be enough to revoke the will?
No.
Would putting a line through the will be enough to revoke it?
No
If part of a will is destroyed, how would the court deal with this?
Only the destroyed part will be revoked
Can the destruction of the will be carried out by someone other than the testator?
Yes however the testator must be present and it must be at the testator’s direction
What are the requirements regarding a testators intention to revoke the will?
This must be at the same time as the wills destruction
If a testator accidentally throws their will in the fire and thinks ‘I’m glad I want to destroy that’. Will this be validly revoked?
No the intention must be at the time they destroyed the will
Does a client need mental capacity for an intention to revoke a will?
Yes, it is the same as required to make a will
If a will is found mutilated at the date of death, how will the courts deal with this?
It is presumed done by the testator with the intention of revoking the will unless it can be proved otherwise
If a will cannot be located after the testators death, how is this treated?
It is presumed it has been destroyed by the testator with the intention of revoking it
What is the doctrine of dependent relative revocation?
When the testator’s intention to revoke their will was conditional on a future event. If that event did not take place, the original will may be valid (even if it was destroyed) if it can be reconstructed from copy of draft
What are mutual wills?
Wills made by 2 or more persons, usually with the same clauses and referring to reciprocal benefits, where the parties contract with each other that the wills are irrevocable and remain unaltered. This is a constructive trust in favour of the beneficiaries
At what date does the will speak?
The will is read as though it had been executed immediately before death
How can the presumption that the will is read immediately prior to death be rebutted?
By the use of words such as ‘now’ or ‘at present’
At what date are the beneficiaries of a will determined?
At the date of execution of the will
What is a legacy?
A gift of personalty (personal property)
What is devise?
A gift of realty (real estate)
What are the 5 types of legacy gifts?
Specific Legacy General Legacy Pecuniary Legacy Demonstrative Legacy Residuary Legacy
What is a specific legacy?
A gift of a specified part of the estate that is clearly identified at the time of the will’s execution
What is the doctrine of ademption?
If the testator no longer owns that particular item at the date of death then the gift fails
What is a general legacy?
Does not identify a particular item but notes a general item,
Does the doctrine of ademption apply to a specific legacy?
Yes - a gift will fail
Does the doctrine of ademption apply to general legacies?
No, if there is no such item in the estate at the time of death then the executors might be required to purchase such item if they have sufficient funds
What is a pecuniary legacy?
A gift of cash can be specific, general or demonstrative
Provide an example of a general pecuniary legacy?
£1,000 to the NSPCC
Provide an example of a specific pecuniary legacy?
£1,000 to the NSPCC payable from the £5,000 owed to me by John Doe
What is a demonstrative legacy?
A general legacy which identifies the source from which the gift is to be made.
What happens if the account noted in the demonstrative legacy is closed at the death of death?
The charity can look to the executors to meet any shortfall from other cash or assets in the estate
What happens if the account noted in the demonstrative legacy no longer has sufficient funds at the date of death?
The charity can look to the executors to meet any shortfall from other cash or assets in the estate
What is a residuary legacy?
Everything that is left of the deceased’s estate, not otherwise disposed of by other gifts or taken up by the payment of liabilities and the costs of administration
What are the 2 reasons a gift would fail?
Ademption and lapse
What is ademption?
A specific gift will fail if it is no longer part of the testator’s estate, subject to a binding contract for sale or no longer meets the description of the will
Would a change in the subject matter cause a specific gift to adeem?
Yes
Would a change to the name or form of a specific gift cause it to adeem?
No
If a beneficiary dies before the testator, what will happen to the gift?
The gift will fail.
What is a substitutional gift?
You can appoint a substitute beneficiary should the first beneficiary not be able to accept the same (due to death)
What happens to a gift where the gift has lapsed?
The gift falls into the residue
What happens if a residual gift lapses?
It will be passed under the rules of intestacy
If a gift is left to the eldest son of Jacob and the eldest son dies before the testator and Jacob has other sons. Who then inherits the gift? Why?
The gift will fall into residue unless stated otherwise in the will. The gift does not pass to the oldest surviving some of Jacob and the will is read as at the date of execution and not death.
If a gift is made to A and B jointly and A dies before the testator, how will the gift be dealt with?
The whole gift passes to B
If a gift is made to A and B in equal shares and A dies before the testator, what happens to the gift?
A’s share lapses and B takes only one share. The lapsed share will pass under intestacy rules
How are gifts dealt with where it is impossible to determine whether a beneficiary or testator died first (simultaneous death)?
The law of commorientes provides that for succession purposes the younger person survived the elder.
If a gift is made to a testator’s child who died before the testator and leave a living child, who will receive the gift?
The original beneficiaries living child will inherit
When will a gift to a witness not fail?
When there are 2 more other witnesses in addition
What is a class gift?
A gift of property to be divided between the beneficiaries who fulfil a general description
Who would be covered under a gift to children?
Includes legitimate, illegitimate and adopted children but not step children
What is a vested gift?
One where no condition needs to be satisfied
What is a contingent gift?
Where there is a condition (e.g. to reach a certain age)
What happens when a class closes?
It excludes any potential beneficiary not then living.
When will a class close?
Normally when at least one beneficiary has a vested interest
Can the class closing rules be excluded?
Yes however there must be a specific provision in the will confirming
What is intestate succession?
The statutory method of distributing assets that are not disposed of by will
When do the rules of intestacy apply?
When:
- The deceased died having made no will, or no valid will
- The deceased’s will does not dispose of all of their property because the gift of all or part of the residue fails
What is the role of personal representatives on the death of an intestate?
They hold the estate on trust with power to sell. They must pay funeral, testamentary and administrative expenses, debts and other liabilities from cash and the proceeds of sale of assets. They then must share the residuary estate according to the statutory rules.
Where are the rules for distribution of an intestate’s estate set out?
Section 46 Administration of Estates Act
What is beneficial entitlement dependant upon in an intestate estate?
Whether the deceased was survived by a spouse or civil partner by at least 28 days
If the surviving spouse of an intestate who has no children, who is entitled to the estate?
The surviving spouse will inherit the entire estate
Where an intestate dies with a surviving spouse and children, what is the spouse entitled to?
Personal Chattels
£270,000
One half of the residue absolutely
What would a surviving spouse do should they wish to keep the matrimonial home in an intestate estate?
They can require the personal representatives to assign them the marital home in partial or total satisfaction of their interest.
What happens if the marital home is worth more than the surviving spouses share in an intestate estate?
The spouse would have to pay the difference to the estate.
What is the order on entitlement in an intestate estate where there is no surviving spouse
Issues of the intestate (on statutory trusts) Parents Brother and sisters of whole blood Brothers and sisters of half blood Grandparents Uncles and Aunts of whole blood Uncles and Aunts of half blood The Crown as 'bona vacantia'
How will the estate be shared between the classes of entitlement in an intestate estate?
The estate will be shared equally between all members of that class if they reach 18 or marry before that age. Once you find a relative that fits into a class, you go no further.
If a potential beneficiary is living at intestate’s death but subsequently dies before attaining a vested interest, to whom will the benefit pass?
To their issue on statutory trust
If a potential beneficiary is living at the intestate’s death but subsequently dies before attaining a vested interest with no issue, to whom will the benefit pass?
The estate of the intestate will be administered as though that beneficiary never existed
How are adopted children treated in intestate law?
As the children of their adoptive parents and not their natural parents
If an adopted individual dies intestate without spouse or issue, to whom will their estate be adminisitered?
Between the close relatives of their adopted family
What property cannot pass via the testator’s will or rules of intestacy?
- Property owned as beneficial joint tenants
- Life assurance policies
- Pension Scheme Death Benefits
- Nominated Property
- Life Interests in Trust Property
To whom does property owned as beneficial interests pass too upon a person’s death?
Passes to the surviving owner of the property.
To whom do life assurance policies pass to?
They are held on trust for or assigned to a beneficiary. The policy will then belong and be payable to the beneficiaries on proof of death
Do you pay inheritance tax on life assurance policies?
No
To whom to pension scheme death benefits pass to?
The scheme member normally makes a non-binding recommendation of the preferred recipient
If a deceased has gifted property however retained a benefit in that property, what effect does this have on tax purposes?
Even though the property is no longer part of the estate this is still classed as part of the estate for inheritance tax
What is nominated property?
Friendly societies such as National Savings bank, National Savings Certificates directly chosen beneficiaries by way of statutory nomination
What are personal representatives?
A collective noun encompassing both executors and administrators
How is an executor appointed?
By the will or codicil
What is the role of an executor?
To administer the estate and stand in the shoes of the testator
How should an executor be declared in a will?
They should be named and not referred to by description otherwise the appointment would be void for uncertainty
Can you appoint a sole executor?
Yes however it is not advisable in case they are not able or willing to act
Who can be named as an executor?
Can be anyone except a minor or someone without the mental capacity
What is a special executor and when would one be appointed?
A specialised person who is an expert in a certain area e.g. where the estate includes a business or literary works
If named as an executor, do you have to act?
No you can renounce the rights to be granted probate providing you have not accepted office
Can an executor renounce once they have accepted office?
No
What is intermeddling?
When an executor does something which shows an intention to accept office
What is an example of intermeddling?
Notifying the deceased’s bank of the death
How must the renunciation of the executorship be communicated?
In writing, signed by the executor and contain a statement that a person has not intermeddled.
Can an executor renounce part of the office?
No, it is all or nothing
Must the renunciation be recorded anywhere?
At the probate registry - usually by the PRs who are applying for the grant
After renouncing, can an executor reclaim the title to probate?
Not unless the court allows them to do so
If an executor renounces their title and is also listed as a trustee, will they renounce both titles?
No. They would have to disclaim the trusteeship if they wanted to act as such
What is the alternative to renouncing?
Reserving power
What does it mean when an executor ‘reserves power’?
They will not be involved in the estate for now, but if the circumstances change they can apply for a grant of probate at a later stage
What is a grant of representation?
A court document authorising the deceased’s PRs to deal with the deceased’s estate and to transfer the assets to the beneficiaries
Where is most probate business conducted?
Family Division of the High Court
Where will probate business be held if the matter is contentious?
Chancery Division of the High Court or County Court if the estate is below £350,000
What is non-contentious probate business regulated by?
Non-Contentious Probate Rules (NCPR)
Do all assets require the grant of probate to be reassigned?
No - amounts up to £5,000 in a Nationals Savings Account, Premium Savings Bonds or building societies can be obtained by just producing a death certificate.
Payment can be made to the beneficiary
How can PRs sell the chattels of the deceased? What documentation is needed to be produced?
Just by producing the death certificate
Who must apply for the grant of probate
Who can apply for the grant of probate?
PRs personally
Probate practitioner
Solicitors
What are the 4 types of probate that can be issued?
- Grant of Probate
- Letters of Administration with will annexed
- Letters of Administration
- Grants de Bonis Non
What type of grant of probate is issued if there is a valid will that deals with the the entirety of the estate?
Probate
To whom can a grant of probate be made to?
Any executors who are usually expressly appointed in the will
If a firm of solicitors is appointed in the grant of probate, who will be entitled to act?
The partners of the firm
What is the minimum and maximum number of executors that can be appointed in a grant of probate?
A minimum of 1 and a maximum of 4
Do the same executors deal with the entire estate for a grant of probate?
They can or different parties can deal with different parts of the estate
What power does the grant of probate give the executors?
Gives them legal authority to deal with the estate
The testators property vests in the executors on death
When would letters of administration with a will annexed be granted?
When there is a problem concerning the appointment of the executors in the will
e.g. will not properly drafted, will is valid but will did not appoint executor or executor died before the deceased, renounced or is unable or unwilling to act
What is the maximum number of administrators that can be appointed for letters of administration with will annexed?
4
What is the order of entitlement for letters of administration with a will annexed?
- Executor
- Trustee of residuary estate
- Any other residuary beneficiary or anyone entitled to a share in the undisposed residue
- PRs of anyone in 4 other than a life tenant of the residue
- Any other beneficiary or a creditor
- PRs of anyone in 5 other than a life creditor
What happens if there is more than one person of equal rank in the order of entitlement for letters of administration with a will annexed?
If one has a vested interest and other other has a contingent interest the court will grant to the vested interest beneficiary
Otherwise they can both be granted
What is the minimum number of administrators required when one of the beneficiary’s is a minor or has a life interest?
2
What is the process of clearing off?
The person applying for the grant must ‘clear off’ those having a better right to the grant.
How is clearing off achieved?
Through completing the relevant information in the application for the grant
What happens when there is more than one person in the same category of entitlement for letters of administration with will annexed - who applies for the grant? Who needs to be cleared off?
People in the same category as the person applying do not need to be cleared off so if there is more than one person in the same class entitled, then any one person in that class may apply without giving notice to the others in that class
If there is only one person in a category however the grant requires 2 people to apply, what happens?
They can seek an additional person from a lower class of priority.
When would letters of administration be required?
When the deceased dies intestate or when there is a will but all the gifts have failed
When would the PRs have the right to deal with the deceased estate under intestacy rules?
Once the letters of administration have been issued, the authority is not from the date of death as before
What is the order of entitlement for letters of administration?
- Surviving spouse
- Children of the deceased and the issues with any predeceased child
- Deceased parents
- Deceased’s brothers and sisters of whole blood
- Deceased’s brothers and sisters of half blood
- Grandparents
- Uncles and aunts of the whole blood
- Uncles and aunts of half blood
- The Crown
- A creditor of the deceased
What is a Grant de Bonis Non?
A second grant made to allow the completion of the administration of the deceased’s estate following the death of the sole or last surviving PR
When would a Grant de Bonis Non not be required?
When one or several of the PRs have died however a chain of representation exists
Can a minor take a grant?
No
If a minor is the only or last surviving PR, what will be granted?
A limited grant of letters of administration is made to the minor’s parent or guardian for use and benefit of the minor until they are 18
What powers does the court have regarding the appointment of executors?
Can remove and appoints PRs and can make a grant to someone other than the person who is entitled under the NCPR
What is the required information for the grant application?
- Full personal details of the deceased, family, dependants, PRs and beneficiaries
- Details of assets and liabilities
- Lifetime gifts in the 7 years prior to the death
- Death certificate
- Original will and any codicils
- Identifying the nature and extent of the beneficiaries’ interests
- Asset and liability paperwork
- Details of any insurances
- Immediate financial needs of any family members
- Details of funds that can be assessed without a grant (building societies, pension lump sum, life assurance policies etc)
When does inheritance tax need to be paid?
Before the grant can be issued
How can IHT be funded?
- Banks and building societies might release funds directly to HMRC
- Bank loan
- Loan by one of the beneficiaries
- Sale of assets if no grant required
- Insurance policy payments
What timescale does the IHT have to be paid?
Can be paid in instalments - none of the tax on the property is due until the expiry of 6 months from the end of the month the deceased died. After this interest will be charged
What documents must be sent alongside the application to the Probate Registry?
The will - plus 2 copies An official copy of the death certificate Further supporting documents Relevant inheritance tax form Payment of probate fees
What must be sent to the Probate Registry instead of the original will and copies if the will is lost or destroyed?
A reconstruction of the will if available or alternative an affidavit to support the application
What are the 2 types of forms used for probate applications?
PA1P and PA1A
When would a PA1P form be used?
For a probate application when the deceased left a will
What are the different sections of the PA1P form?
- Checklist
- Section A - Details of the Grant Applicants
- Section B
- Legal Statement
What is the checklist contained within the PA1P form?
A checklist of the documents required to accompany the application and records the number of official copies of the grant that are required along with the appropriate fee
What is contained is Section A - Details of the Grant Applicants contained within the PA1P form?
Provides details regarding the applicants for the grant and any solicitor or legal practitioner acting for them.
A practitioner must verify the identity of the applicant against a driving licence or passport and the name on the document must be the same as the document
What is contained in Section B of the PA1P form?
Details of the deceased (names, addresses, date of death and birth)
Wills and Codicils - details of executors not applying for grant and why
Details of relatives of deceased - e.g. children who have predeceased
Applying as attorney - attorney applying on behalf of someone else must give their details
Foreign Domicile - where the deceased has assets both in England and Wales and above
IHT Summary
What is contained in the legal statement of the PA1P form?
Signed and dated by the applications. The statement confirms the applications will:
- Deal with the estate in accordance with the law
- Keep account of the estate and distributions
- If requested, provide the Probate Registry with estate accounts and return the grant
- Confirm they understand their legal obligations for making truthful and honest returns
When would a form PA1A be used?
When the deceased did not leave a will
How does a form PA1P differ from a form PA1A?
Very similar however does not contain the section on wills and more information must be given regarding the deceased’s relatives
What further evidence might be required by the court before issuing a grant?
Evidence of due execution of the will
Affadivit confirming the deceased’s full name and explaining that they signed the will in a shorter name
Evidence of knowledge and approval of the will’s contents
Affadivit to confirm any amendments to the will existed at the date of execution
Documents referred to in the will
Affadivit from a witness if there is uncertainty about the date the will was executed
What effect does lodging a caveat at the Land Registry have?
Prevents the issue of a grant of representation.
When would someone lodge a caveat with the Probate Registry?
If they are a beneficiary and they believe the executor named lacks mental capacity or that the will is valid
How long is a caveat valid for?
6 months
If the issue cannot be resolved within the timeframe for a caveat, what will happen?
The court may end up with a judge determining the issue
When would a citation be used?
When an executor has lost their right to renounce probate by intermeddling in the estate but has not applied for a grant and does not tend to do so
What is the effect of a citation?
The executor must proceed with an application for a grant of probate. If they still refuse to act, the citatory can apply for a court order allowing the executor to be passed over
What are HMRC requirements?
PRs must deliver account to HMRC within 12 months from the end of the month of the deceased’s death
Solicitor should calculate the IHT due
What is an excepted estate?
One that owes no IHT and does not have to file a formal IHT account
What would qualify as an excepted estate?
- Deceased died in the UK
- Estate compromises only property passed under the will, by intestacy or by survivorship or is settled property in which the deceased had an interest in possession
- Maximum £10,000 gross value of such property situated outside of the UK
- The only chargeable transfer in the last 7 years before death are ‘specified transfers’ that do not exceed |£150,000
- The total gross value of the estate (plus specified transfers) does not exceed £350,000 or £1 mil
Can the IHT threshold be increased?
Yes if a spouse died on or after 6 April 2010 and the entire nil band rate was unused and therefore can be transferred
What is a specified transfer?
Chargeable transfers consisting of only cash, quoted shared and/or an interest in land made in the 7 years before death
What is a specified exempt transfer?
Transfers between spouses and gifts to charities and political parties made in the 7 years before death
What are the duties of a personal representative?
Duty to collect the deceased’s assets
Duty to administer the estate
Duty of care
What is the PRs duty to collect the deceased’s assets?
Must collect monies due and other assets of the deceased which vests in them within a reasonable time. They do not need to collect the deceased’s assets only relates to property which devolves on the PRs not to assets which pass directly to beneficiaries
What is the PRs duty to administer the estate?
Reasonable steps must be taken to preserve the deceased’s estate and release any investments which it is not property for them to retain. They must pay off debts and legacies and then distribute the residue per the will or intestacy rules
What is the duty of care expected by a PR?
They must act with reasonable care and skill, taking account of any specialist knowledge or experience, or what is reasonably expected of them if professional PRs
What is the liability for breach of duty of care by a PR?
PRs may be liable to the beneficiaries or creditors for losses arising from their breach of duty however a will usually excludes such liability
What is the PRs power to sell, mortgage or lease?
The PRS can sell, mortgage or lease the deceased property. This can help pay various administrative expenses
What is the PRs power to appropriate?
The use of an asset to satisfy a specific legacy or interest in the estate, provided the beneficiary consents and no specific beneficiary is affected
Can the PR make an appropriation to their own favour?
No, unless the asset used to do so is cash or equivalent - unless permitted by the will
What is the PRs power to accept receipts for the minor’s property?
A minor cannot give receipt for money or assets transferred to them and therefore the PRs can do this or appoint trustees on their behalf
Parents can also give a valid receipt
What is the PRs power to insure?
Trust property can be insured against any risks to the full value of the property. Any insurance money is held as capital and used to reinstate the damaged or lost property
What is the PRs power to delegate?
PRs can delegate functions to agents in such terms as they determine. Unless covered in the will, PRs must review arrangements with the arrangements with agents.
Will a PR be responsible for an act of default of an agent?
Not as long as they adhered to their statutory duty of care in appointing and reviewing the agent
What is the PRs power to indemnify for expenses?
PRs may reimburse themselves for all property incurred expenses
What is the PRs power to run the deceased’s business?
PRs have no authority to carry on the deceased’s sole trade unless they do so to sell it as a going concern.
What the PRs power to invest?
Trustees can make any type of investment they could make as if they were absolutely entitled to the assets of the trust however excludes investments in land other than by way of loan
What type of land does a PR have the power to invest in?
Freehold or leasehold land in he UK
What is the standard investment criteria?
The PRs must;
- have regard to the suitability of the trust of the investment
- have regard to the suitability of the need for diversification of the trust’s investments
What is the PRs power to maintain a minor?
The trustees can apply any income for maintenance, education or benefit of the minor. Otherwise, the trustees accumulate the income.
What is the PRs power to advance capital?
Trustees have discretion to advance capital to a beneficiary who has a vested and contingent interest. in capital. Any beneficiary must give their prior consent.
How will the income be paid to a minor beneficiary after they turn 18?
Accumulated income is normally added to the capital and then paid.
What happens to ongoing income after the minor has turned 18 and they have already received the initial payments?
Must be paid to them directly until the contingent interest is satisfied
What is a PRs power to advance capital?
The trustees are allowed discretion to advance capital to a beneficiary who has a capital or contingent interest. The entire amount can be advanced as long as any prior life interest beneficiary gives their consent
Can trustees act solely or must they all act together?
The trustees can act alone or together
The PRs powers are fiduciary. What does this mean?
They must be exercised in good faith and in the interest of the estate as a whole
What legislation provides a PR protection from an unpaid beneficiary from an estate?
s27 Trustees Act 1925
What protection does s27 Trustees Act provide PRs from claims of unknown beneficiaries?
They can protect themselves by placing adverts in the London Gazette, a local newspaper and any other appropriate newspaper, requesting the beneficiaries contact the PRs solicitor within 2 months
PRs should also conduct searches for land held for creditors and for bankruptcy declarations against the deceased and beneficiaries
What options does a PR have if they cannot find a known beneficiary or creditor?
- Make payment owed to the beneficiary or creditor into the court and distribute the rest of the estate
- Distribute everything with an indemnity from the beneficiaries
- Seek a Benjamin Order
- Purchase insurance against the risk of a missing claimant appearing
What is a Benjamin Order?
A court order giving PRs leave the distribute the estate based on an assumption set out in the order. Full enquiries are required first for this and this will provide full protection to the PRs for any future liability
If the PRs fail to protect themselves from future liability, what happens?
They remain potentially liable to a later claim by a missing beneficiary or creditor however they may be protected from claims made by unknown creditors
What protection is given to PRs under the Inheritance (Provision for Family and Dependants) Act 1975?
PRs should wait 6 months to distribute the estate have passed from issue to the grant to protect them against a person applying to the court to set aside the terms of the will or vary an intestacy on the grounds that reasonable financial provision has not been made for them
What options do PRs have to protect them from future and contingent liabilities?
- Estimate and set aside an approximate amount
- Seek indemnity from the beneficiaries
- Arrange insurance and distribute the entire estate
- Apply to the court for directions as to what to do
What should the PRs priority be when beginning to deal with the estate?
Release sufficient funds to pay off any loan taken out by the PRs to cover the estate inheritance tax liability
When should unsecured debts owed to the deceased be collected and how?
These should be collected as soon as possible taking legal action if required
Can a PR settle claims made by or on behalf of the estate?
Yes, they have wide powers as the action vested in the deceased survive for the benefit of the estate
Can PRs make an action to recover damages on behalf of dependants of the deceased if they were killed for a wrongful act?
Yes
Can PRs deal with assets passing outside of the will of intestacy?
No they have no obligation or power
What is a solvent estate?
One where the reasonable funeral, testamentary and administration expenses, debts and other liabilities can be paid in full
In what order should unsecured debts be paid?
- Property undisposed of by the will
- Residue
What would the PRs options be if there is not enough in the residue to cover the debts of the estate?
- Property specifically given for the payments of debts
- Property specifically charged with the payments of debts
- The pecuniary legacy fund
- Property specifically devised or bequeathed
What is marshalling?
Can be invoked by a disappointed beneficiary who can be compensated from the residue for their loss
What is an insolvent estate?
One that has insufficient funds to pay expenses, debts and liabilities in full.
What do the beneficiaries receive in an insolvent estate?
Beneficiaries will receive nothing
Who enjoys priority - secured or unsecured creditors?
Secured
What is the prescribed order for dealing with debts in an insolvent estate?
- Reasonable funeral and administration expenses
- Preferred debts - wages and salaries of the deceased’s employees in the 4 months prior to death (maximum of £800 each)
- Ordinary debts = including money owed to HMRC and the balance of preferred debts
- Interest on preferred and ordinary debts
- Deferred debts
What will be presumed if PRs pay a category of debt if there are higher ranking debts?
That there are sufficient assets to meet all the higher level debts of which they have notice
What are the 2 ways to make a post-death change to a will or codicil?
- Disclaimer
2. Variation
How would a disclaimer be used and who would make such disclaimer?
Usually the beneficiary to disclaim an inheritance orally or in writing - they must be accepted unless any benefit has already been received
What will happen to a disclaimed gift by a beneficiary?
Falls into the residue
How must a disclaimer be executed?
In writing
What is the disadvantage of a disclaimer?
The original beneficiary has no control over the ultimate destination of the gift
What is a variation?
Allows a beneficiary to change who receives their inheritance
What are the formalities required for a variation?
Mist be made in writing and made within 2 years of death and not made for monetary consideration
How must chattels be transferred?
By delivery, in return for a receipt
How must company shares be transferred?
A stock transfer form should be completed and sent with an office copy of the grant and the share certificate
How must land be transferred?
Requires an assent in writing and the beneficiary need to register their interest at HM Land Registry
What is the doctrine of abatement and when is it used?
Used when the deceased estate is not sufficient to fully satisfy their creditors and this requires their debts to abate proportionately and a creditor must accept a lower value in satisfaction of the debt
What is the doctrine of appropriation?
A beneficiary can ask the PRs to use a particular asset to satisfy a pecuniary legacy
When would a corrective amount be filed?
When the incorrect amount of IHT was initially paid. If there is a change in IHT due, the residue will be affected
What is a certificate of discharge?
Issued by HMRC to the PRs which avoids future IHT liability. The certificate is an effective discharge except where there is fraud, failure to disclose material facts. subsequent discovery of further assets or changes in IHT due to variations
What is a limited certificate of discharge?
Will be issued by HMRC when there are future instalments due as the PRs have opted for the instalment option on qualifying property
What a certificate of discharge be required on an excepted estate?
No
When will an automatic discharge for IHT be made?
35 days after a grant of representation unless circumstances change
Who must pay the funeral expenses?
The estate
How is it determined what are reasonable funeral expenses?
A question of fact taking into account various factors concerning the deceased
What are the requirements for solicitors fees in a non-contentious probate matter?
Must be fair and reasonable in the circumstances, taking into account factors such as complexity, time spent, the value of the estate and the number and importance of documents involved
In what circumstances would a PR be entitled to charge for services?
- Legacy to proving executors
- Express charging clauses
- Agreement with beneficiaries
- The court can authorise PRs for past, present or future services
What are the 3 types of estate accounts?
- Income Account
- Capital Account
- Distribution Account
What should the income account do?
Provide details of income receipts, itemise details of expenditure from income and show the net amount to be distributed
What should the capital account do?
Itemise all assets at probate value, show any sales by the PRs, provide details of all liabilities discharged, pecuniary and specific legacies and show expenses paid, including all taxes, show the balance available for distribution
What should the distribution account do?
Show how the beneficiary’s entitlement is to be met and include interim distributions
What is the commentary document that is submitted with the accounts?
A document that accompanies the estate accounts. They:
- assist the beneficiaries
- identify the gross and net values of the estate
- indicate the estate’s disposition
- deals with any other relevant matters, such as interim distributions and distributions in specie
What are the requirements of an assent?
Must be in writing, signed by the PRs and name the person in whose favour it is given,
