Administration: Dealing with the Estate

Vocabulary flashcards covering the key legal principles, statutory authorities, and tax rules involved in the administration of an estate under English law for SQE1 revision.

Administration period

The timeframe commencing immediately following the death and ending when the Personal Representatives (PRs) are in a position to vest the residue of the estate in the beneficiaries or trustees.

$s\,25$ Administration of Estates Act 1925 (AEA 1925)

The statutory provision imposing a primary duty on PRs to collect and get in the real and personal estate of the deceased and administer it according to the law.

Devastavit

Meaning 'he wasted,' this refers to a breach of duty by a Personal Representative that results in a loss to the estate, for which the PR is personally liable.

$s\,61$ Trustee Act 1925

Gives the court discretionary power to relieve a PR from liability for breach of duty if they have acted honestly and reasonably and ought fairly to be excused.

$s\,27$ Trustee Act 1925

Allows PRs to protect themselves against unknown claimants by advertising for at least $2\,\text{months}$ in the London Gazette and a local newspaper before distributing the estate.

Benjamin order

A court order authorising PRs to distribute the estate on the basis that a missing beneficiary is dead, protecting the PRs from personal liability if they later appear.

Inheritance (Provision for Family and Dependants) Act 1975 protection

To avoid personal liability for successful claims under this Act, PRs should wait at least $6\,\text{months}$ following the date of the grant of representation before distributing assets.

Devolution

The process by which ownership of assets that pass under the will or intestacy rules automatically passes to the PRs for the purpose of administration.

Testamentary expenses

Expenses incidental to the proper performance of PR duties, including costs of obtaining the grant, collecting and valuing assets, and inheritance tax on death for UK property vesting in the PRs.

Solvent estate

An estate in which there are sufficient assets to pay all expenses, debts, and liabilities in full, regardless of whether anything remains for legacies.

$s\,35$ AEA 1925

The rule establishing that a beneficiary taking property subject to a secured debt (like a mortgage) is responsible for paying that debt unless the will shows a contrary intention.

$s\,34(3)$ AEA 1925 (Statutory Order)

The order in which assets of a solvent estate are used to pay funeral, testamentary expenses, and unsecured debts, starting with property undisposed of by will.

Assent

The formal document in writing, signed by the PRs, used to vest the legal estate of freehold or leasehold land in a beneficiary or trustee.

Executor's year

The general rule under $s\,44$ AEA 1925 that PRs are not bound to distribute the estate to beneficiaries before the expiration of one year from the death.

Inheritance tax loss relief

A claim where the sale price of 'qualifying investments' (quoted shares or unit trusts) sold within $12\,\text{months}$ of death for less than probate value is substituted for the market value at death.

Corrective account

The report made by PRs to HMRC to quantify variations in assets and liabilities or known reliefs after the initial IHT account was submitted.

IHT30 (Clearance certificate)

A form applied for by PRs to HMRC which, once issued, discharges the PRs from further liability to inheritance tax (subject to fraud or non-disclosure).

PR Income Tax rates

Personal Representatives pay income tax at a rate of $8.75\%$ on dividends and $20\%$ on other income, with no tax due if total estate income does not exceed $£500$.

PR Capital Gains Tax (CGT) rate

For the tax year 2025/26, PRs pay a flat rate of $24\%$ on chargeable gains made when disposing of assets to raise cash during administration.

Probate value

The market value of assets at the date of death, which serves as the 'base cost' for PRs and beneficiaries for future Capital Gains Tax calculations.

Complex estate

An estate requiring a formal tax return because its value exceeds $£2.5\,\text{million}$, tax due exceeds $£10,000$, or assets sold in a tax year exceed $£500,000$.

Estate accounts

A documentation of all assets, debts, expenses, and legacies showing the final balance for residuary beneficiaries, who sign them to release PRs from further liability.