Wills and Estate Administration - Duties, Administrative Powers and Protection of PRs

Question 1

Duties

Answer 1

• Collect monies due and other assets of deceased which vest in them
• Administer estate (can involve realising assets)
• Distributing residue

Trustee Act 2000 applies to PRs: requires PRs to act with reasonable care and skill, taking account of specialist knowledge or experience (e.g. if PR is a solicitor or accountant)

Liability of PRs

• PRs not generally liable for another PR’s breach of duty unless negligence is an issue
• Court can relieve PR from liability if PR acted “honestly and reasonably and ought fairly to be excused”
• Testator may include a clause in their will excluding PR’s liability for breach

Question 2

Powers of PRs

Answer 2

Given by statute but often added to/modified by provisions in will

• Power to sell, mortgage or lease assets
• Appropriation: using asset to satisfy legacy or share of estate provided beneficiary consents (unless the will provides otherwise) and no specific beneficiary is affected
• Legacies to minors: PRs can appoint trustees of property for minor if minor has vested interest. If interest is not vested, PRs must hold property until minor turns 18 or transfer it to court (there is a view that anyone with parental responsibility for minor can give a valid receipt). Contingent gifts cannot be paid out early
• Power to delegate: PRs can delegate functions to agents
• Power to run deceased’s business: only if will includes express provisions
• Power to invest: can invest estate property in anything they would invest in personally with the exceptions of the purchase of land abroad and purchase of an interest in land wiht someone else (testator can restrict investment powers)
• Power to maintain minor (section 31 of Trustee Act 1925): trustees may apply income for minor’s maintenance, education or benefit. Otherwise the income must be accumulated and added to capital once the beneficiary is 18. Provision applies whether interest is vested or contingent. If a beneficiary reaches 18 and has a contingent interest ongoing income must be paid to them until their interest is satisfied and they receive the capital plus accumulated income.
• Power to advance capital: trustees may advance capital to beneficiary with vested or contingent interest in capital. Beneficiary with prior life interest must consent

If more than one PR they have joint and several authority, act of one binds them all. However, all the PRs must join together to transfer land or shares

PRs powers are fiduciary - must be exercised in good faith in the interest of the estate as a whole

Question 3

Protection of PRs

Answer 3

PRs personally liable to unknown unpaid beneficiaries and creditors

Section 27 Trustee Act 1925

• Requires PR to place adverts in London Gazette, newspapers local to where deceased owned land, trade publications (if deceased owned a business for example) to give notice to beneficiaries and creditors
• Creditors and beneficiaries must have at least two months to respond
• If PR meets these requirements they are protected from claims by unknown creditors and beneficiaries

Known creditor or beneficiary cannot be located or contacted?

• Make payment into court and distribute rest of estate
• Distribute everything with an indemnity from the beneficiaries (risky)
• Take out insurance against later claim
• Apply to court for Benjamin Order: gives PRs leave to distribute estate based on assumption set out in order (e.g. missing beneficiary should be treated as having died before the deceased)

Potential for claim against estate by someone who believes that the will or rules of intestacy fail to make reasonable financial provision for them:

• PRs should wait at least six months from date of grant before distributing estate

PRs may be liable for IHT on lifetime transfers made by deceased

• Obtain a certificate of discharge from HMRC

Question 4

Standard Investment Criteria

Answer 4

Any investments of PRs can be reviewed under the SIC which are:

• The suitability to the trust of the investment
• The need for diversification of the trust’s investments

If investment does not meet the above criteria a PR may be found liable to a beneficiary harmed by the failure

Question 5

Future and Contingent Liabilities

Answer 5

E.g. deceased acted as a guarantor on a loan or possibility of legal proceedings being brought against the estate

PRs have the following options:

• Estimate and set aside an appropriate amount
• Seek indemnity from the beneficiaries
• Arrange insurance and distribute entire estate
• Apply to the court for directions

Question 6

Failed PETs and CLTs

Answer 6

• Liability can arise if IHT unpaid after 12 months
• PRs will not be pursued by HMRC if fullest enquiries have been carried out and they have obtained a certificate of discharge