Wills (Post-Grant)

Question 1

What are the post-grant duties of a Personal Representative?

Answer 1

• Collecting and administering the estate,
• Paying IHT,
• Reporting to HMRC.

Question 2

What is the duty to collect the estate?

Answer 2

Identify and locate assets, debts, liabilities, and gain control of the assets.

Question 3

What is the duty to administer the estate?

Answer 3

PRs must secure assets, pay debts, meet expenses, and distribute legacies and residue to beneficiaries.

Question 4

What is the duty to provide an inventory and account?

Answer 4

PRs must list assets and values, keep records of administration, and share accounts with beneficiaries if requested.

Question 5

What is the duty of due diligence?

Answer 5

PRs must complete the administration within 12 months and act with due care as trustees under s.1 TA 2000.

If the administration takes longer than 12 months, the PR must justify any delay.

Question 6

What are the fiduciary duties of a PR?

Answer 6

PRs must…
* avoid conflicts of interest
* must not profit from their position unless authorized.

Question 7

What powers does a PR have when the deceased dies intestate?

Answer 7

Only statutory powers apply; no additional powers from a will.

Question 8

What is the PR’s power to sell, charge, or lease?

Answer 8

PRs have wide powers to sell estates and assets under s.33, 39 AEA.

Question 9

What is the power to invest under s.3-8 TA 2000?

Answer 9

PRs must preserve the estate and invest assets, reviewing regularly per s.4 TA 2000 and obtaining advice per s.5 TA 2000.

Question 10

What is the PR’s power to insure?

Answer 10

PRs can insure estate assets for their full value and pay premiums from the estate.

Question 11

What is the power to appropriate under s.41 AEA?

Answer 11

PRs can use an asset to satisfy a beneficiary’s entitlement with consent and proper valuation.

For example, T left £25,000 in a will to F. F wants the antique desk worth £18,000 (£20,000 at the time of death) rather than the cash. The PR can do this provided F consents, and F receives a further £7,000.

Question 12

What is the power to charge for services and reimbursement?

Answer 12

• Professional PRs can claim reasonable remuneration with consent, and all PRs can be reimbursed for expenses.
• A lay PR, needs to be given express power in the will to charge for services.

Question 13

What is the power to delegate under s.11 TA 2000?

Answer 13

PRs can delegate powers but cannot delegate decisions on asset distribution or appointment of trustees.

Question 14

What is the power to appoint trustees for minors?

Answer 14

PRs may appoint trustees to hold assets for minors under s.42 AEA.

Usually the parents

Question 15

What is the power to accept receipt from a parent under s.3 Children Act?

Answer 15

A parent can give a good receipt for a minor unless excluded in the will.

Question 16

What power does a PR have to run a business?

Answer 16

If a testator ran a business as a sole trader, there is a common law power to enable PRs to sell the business as a going concern within a year of the death.

Question 17

Can a joint PR act alone?

Answer 17

Joint PRs must make decisions together, but one PR may act alone in certain sales or transfers.

However, a sole PR may not deal with stocks and shares registered in joint names of the PR.

Question 18

What is PR liability?

Answer 18

PRs are personally liable for losses from breaches of duty, and claims for devastavit may be made for estate mismanagement.

Question 19

When can a PR be removed?

Answer 19

A court can remove a PR for failing duties under s.50 AJA or through administration action.

Question 20

How can a PR seek court direction?

Answer 20

Where there is question of construction of the will, a PR may make an application under s.48 for written legal opinion on the construction.

PRs can apply for court guidance on administration difficulties, but this can be expensive.

Question 21

What is a Benjamin Order?

Answer 21

Known but missing beneficiaries, the PR can seek a Benjamin Order permitting them to distribute the estate on the basis that the missing beneficiaries have died.

The order relives the PR from personal liability if they are incorrect.

The PR must first show there is no reasonable prospect of knowing the true position without disproportionate expense.

Question 22

What is the PR’s protection under s.27 TA 1925?

Answer 22

To prevent liability to unidentified beneficiaries and creditors, trustees can publish a notice of intention to distribute to known beneficiaries 2 months after the date of advertisement in

1. the London Gazette; and/or
2. a newspaper circulated in the area (needed in addition to the Gazette in the case of land or business owned); or (iii) any other appropriate newspaper.

Question 23

What if it is believed a beneficiary is dead?

Answer 23

The PR may apply for a court order under Presumption of Death ACt declaring that a person thought to have died or not known to have been alive for 7 years or more has died.

The order presumes the death and may be quicker than getting a Benjamin Order.

Question 24

Aside from court orders. what other methods can a PR take to protect themselves?

Answer 24

• Insurance (premiums expensive)
• Indemnity from beneficiaries they can trace to reimbure any loss
• Payment into court
• Exoneration by Court per s.61 TA

Question 25

When collecting assets, how is land transferred?

Answer 25

Land registered at Land Registry can be transferred into the name of the PR, if not directly to a beneficiary.

Question 26

When collecting assets, how is moeny paid?

Answer 26

Money should be paid into (i) a PRs bank account, opened specifically to hold estate money; or (ii) a law firm client account.

It should never be paid into a mixed bank account.

Question 27

When are debts paid?

Answer 27

As soon as assets are collected, the PR should pay the outstanding debt and funeral expenses.

There are rules which determine the order in which estate assets are used depending on whether (i) the estate is solvent or insolvent; and (ii) whether debts are secured or unsecured.

Question 28

What happens if an estate is solvent when paying debts?

Answer 28

The estate is solvent if assets are sufficient to pay all funeral, testementary and administration expenses, debts and liabilities.

It is immaterial whether legacies can be paid in full or not.

Question 29

What happens if an estate is insolvent?

Answer 29

If assets are insufficient, PRs must use the statutory order of repayment or the will’s express terms.

1. Secured Debts
2. Assets used to repay unsecured debts (e.g credit card debt, utility bills etc) are taken in statutory order unless varied by the will express:

• Property not disposed of by a will
• Residue
• Property the will sets aside
• £ in the pecuniary legacy fund
• Property specifically given (e.g. chattel)

Question 30

What if an estate is insolvent and the PRs take assets out of order to pay creditors?

Answer 30

The beneficiaries whose assets have been wrongly taken can use the doctrine of marshalling to compensate himself by going against the property which ought to have been used to pay the debts (eg. Claim against the assets inherited by another beneficiary if they were the assets that should have been used to repay the debts)

Question 31

What is the secured debt repayment rule?

Answer 31

A secured debt must be repaid using the secured asset unless the will shows contrary intention.

For example, if A owns a house and has a 30k mortgage outstanding and died, the beneficiary is not entitled to have the mortgage debt discharged with other assets - the house may need to be sold.

Question 32

What is the unsecured debt repayment rule?

Answer 32

Unsecured debts are repaid from estate assets in statutory order or will instructions.

Question 33

What is the doctrine of marshalling?

Answer 33

Beneficiaries whose assets are wrongly taken for debts may claim against other assets that should have been used.

Question 34

What must PRs consider when choosing an asset to sell?

Answer 34

Consider capital gains, ease of sale, and beneficiary wishes when selling estate assets.

Question 35

What must PRs do tax wise?

Answer 35

• Submit final Income Tax and CGT returns for the tax year after death
• Pay income tax at the basic rate for income generated by estate assets during administration.

Question 36

When are PRs liable for estate income tax?

Answer 36

PRs pay income tax at the basic rate for income generated by estate assets during administration.

Question 37

When are PRs liable for estate capital gains tax?

Answer 37

PRs pay CGT if estate assets are sold for a gain during the administration period.

Question 38

What are the key steps for distributing to beneficiaries?

Answer 38

Identify beneficiaries, establish shares, and distribute assets correctly.

Question 39

When should PRs distribute the estate?

Answer 39

PRs should complete administration within a year of death.

However…

Is there a claim against the estate? If so, PR may wish to delay distribution until 10 months of the grant being issued

Question 40

In what order are legacies paid?

Answer 40

Specific legacies first, followed by general and residuary legacies.

Question 41

Do beneficiaires need receipts post-distribution?

Answer 41

PRs must obtain confirmation of receipt from beneficiaries,

Question 42

What is the PR’s duty under s.25 AEA for estate accounts?

Answer 42

PRs must produce and sign estate accounts detailing the capital, income, and distribution of the estate.

Question 43

How to REPLACE trustees?

This is substituing trustee A for B.

Answer 43

This can be exercised by someone appointed in the trust instrument, or by the surviving or continuing trustees per s.36(1)…

1. On the death of a trustee;
2. If a trustee is abroad for over a year;
3. If an appointed trustee is a minor or lacks capacity; and
4. If a trustee wishes to retire, refuses to act or is unfit.

If all trustees have died, power exercisable by personal representative of last to die.

Question 44

How to appoint FURTHER trustees?

Answer 44

s.36(6) TA 1925 allows for either a person nominated by the trust deed, or the trustees themselves if none are named, to appoint further trustees in writing to act alongside the current trustees providing that the new appointment does not increase the number of trustees to more than four

Question 45

How to remove a trustee?

Answer 45

• Beneficiaries of a trust can agree and exercise their Saunders v vaulter rights to change the trustees of the trust (by collapsing the trust and declaring a new trust with new trustees) or simply collapsing the trust.
• The court can remove trustees where the trustee is bankrupt, lacks capacity or is a company which is in liquidation or dissolved under s.41.
• Court has inherent jurisdiction to remove trustees where it is not appropriate for them to remain.

Question 46

How should trustees deal with income for a Minor Beneficiaries with a Contingent Interest

Statutory power of maintenance (s.31 Trustee Act 1925)

Answer 46

Accumulate income until they turn 18.

Accumulated income is added to the capital and distributed same time as capital

Question 47

What should a trustee do if a minor beneficiary with a vested or contingent interest in capital want income prior to turning 18?

Answer 47

The trustees have a statutory power of maintenance under s.31 that allows trustees to pay trust income (including any previously accumulated income) for the maintenance, education or benefit of minor children

It must be paid to the minor’s parents or guardian, or applied directly to a provider of goods/services (e.g. the school that will provide the education)

Question 48

What if a beneficiary of a trust wants to recieve capital before it vests in possession or interest?

Answer 48

Section 32 TA 1925 gives trustees the power to use capital for the ‘advancement or benefit’ of a beneficiary before the beneficiary becomes absolutely entitled to the property.

• It can used by both adult and minor beneficiaries
• It can be used to pay to up to 100% of the beneficiary’s presumptive share of capital
• Payments can be made directly to adult beneficiaries. Payment can be made to parent, guardian or directly to the providers for minors
• The power can only be exercised with written consent of beneficiaries with prior interest.