SQE - WILLS AND THE ADMINISTRATION OF ESTATES (FLK2) - DECK 2 (copy)

What is administration in the context of someone's death?

When a person dies the legal process for managing the distribution of their estate, paying debts, taxes and other estate expenses, and making payments to beneficiaries

Who are the individuals authorized by law to administer a deceased person's estate?

Personal Representatives are the individuals permitted by law to administer a deceased person's estate.

What is the role of an executor in estate administration?

An executor is a personal representative appointed by a will to manage the distribution of a deceased person's estate.

Who is an administrator, executrix, or administratix in the context of estate administration?

They are personal representatives appointed by statute to administer a deceased person's estate.

What does the term "Grant of Representation" or "the grant" refer to in estate administration?

The Grant of Representation is a court order confirming the authority of personal representatives to act, specifically granting them the right to collect the deceased's assets and distribute the estate.

What role does the Grant of Representation play in the collection of assets in an estate?

The PRs usually cannot collect or realize assets without producing the appropriate grant, as it confirms their legal authority to do so.

What is the scope of power conferred by the Grant of Representation?

The power granted is limited to assets passing under the will or intestacy (succession estate). PRs have no legal authority over assets passing outside the succession estate, like joint tenant property.

How do Executors and Administrators derive authority, and how does the grant confirm their authority?

Executors (PRs appointed by will) derive authority from the will, while Administrators (PRs appointed by statute) derive authority from the grant. The grant confirms the authority granted to both

Why is obtaining the Grant of Representation considered a priority for all PRs?

Even though executors have a legal right to administer an estate without a grant, it's not usually practical. Most asset holders require the grant before releasing funds to executors. Obtaining the grant is crucial and should be done as quickly as practical.

According to s.25 Administration of Estates Act 1925 (AEA), what is the primary responsibility of a Personal Representative (PR)?

As per s.25 AEA 1925, a PR must 'collect and get in the real and personal estate of the deceased and administer it according to law.'

What are the main duties of a PR in administering the estate of a deceased person?

The duties include collecting the deceased's assets, settling debts, addressing tax liabilities and other estate expenses, and distributing assets to entitled beneficiaries under a will or intestacy.

Describe the nature of the role of a PR in legal terms.

The role of a PR is fiduciary, requiring all duties to be performed in accordance with their duty of care. 'Due diligence' varies based on estate circumstances and complexity.

How is a PR appointed, and what distinguishes an executor from an administrator?

A person must be appointed by the deceased's will or statutory rules (NCPR) to act as a PR. An executor is appointed by will, and an administrator is appointed under NCPR when there's no willing or able executor or in cases of intestacy.

Who holds legal title to the estate in the context of PRs, and can they transfer assets into their own name?

PRs hold legal title by virtue of their appointment. They may choose to transfer the deceased's assets into their name before distribution. The land registry requires a grant before transferring legal title to land into the PRs' name.

Are Personal Representatives (PRs) automatically considered trustees of the estate they administer?

No, PRs are not automatically 'trustees' of the estate, although their roles are similar and both are fiduciary in nature. The role of a PR concludes when estate administration is complete, even though duties may persist

What happens when continuing trusts are created after estate administration, and how is the transition managed?

If continuing trusts are established, the trust fund's property should be transferred to the trustees as part of the administration process. The date of transfer should be recorded, even if the executors and trustees are the same individuals.

Under what circumstances will a PR also be a trustee of the estate property?

A PR becomes a trustee when expressly appointed as such by the will, in cases of intestacy where PRs hold the estate "on trust with a power to sell" (s.33 AEA), or when a statutory trust arises under intestacy, with PRs acting as trustees for minor beneficiaries (s.46 AEA).

Do the statutory powers and duties of trustees apply to PRs, even if they are not formally acting as trustees?

Yes, many statutory powers and duties of trustees, including the duty of care, apply to PRs. s.68 Trustee Act 1925 and s.35(1) Trustee Act 2000 explicitly extend trustee expressions and duties to the office of a personal representative.

In the context of PRs, how is a 'will' considered, and who are the beneficiaries?

In this context, the 'will' functions as a trust instrument, and those entitled under the will or intestacy are the beneficiaries, aligning with s.35(1) Trustee Act 2000.

In what ways can a solicitor become involved in the administration of an estate?

There are three broad ways in which a solicitor may become involved in the administration of an estate:

1.     The solicitor has been instructed by the PRs for advice on the administration.

2.     The solicitor has been appointed as executor under the deceased’s will.

3.     The solicitor has been instructed to act on behalf of a party to a contentious probate matter.

The solicitor’s duties, and level of involvement in the administration, depend on the capacity in which they are acting.

Why might a solicitor be instructed by lay PRs?

A solicitor may be instructed by lay PRs if the PRs are unable to carry out the administration due to e.g. time constraints or a lack of technical knowledge or confidence to administer the estate without professional help. Ideally, a solicitor would be involved from the start but it is not unusual to be instructed part way through the administration where PRs have met with unexpected difficulties and sought assistance at this point. In this case the solicitor should check the earlier steps have been completed correctly.

In cases where a firm is instructed by PRs, who is considered the client, and whose instructions should the solicitor follow?

When a firm is instructed by PRs, the PR is the client, not the beneficiaries. The solicitor must act on the instructions of the PRs and not those of the beneficiaries.

How are legal fees for providing advice to PRs typically covered in estate administration?

The cost of providing legal advice is considered an administration expense, and legal fees may be paid using estate assets rather than the personal funds of the PRs.

In cases where a solicitor is advising PRs, who typically signs the formal documentation required for administration, even if prepared by the solicitor?

When advising PRs, most formal documentation required for administration is signed by the clients (PRs), even if it is prepared or drafted by the solicitor.

How can a solicitor become an executor in the administration of an estate?

A solicitor can be appointed as an executor through the terms of a will.

What are the duties of a solicitor when acting as an executor, and to whom are these duties owed?

When acting as an executor, a solicitor's duties are owed to the estate creditors and beneficiaries, as they function as a professional Personal Representative (PR).

In what ways can a solicitor be appointed as an executor, considering the structure of a firm?

A solicitor may be appointed either as an individual or as part of a firm (LLP or trust corporation). The testator can appoint the entire firm or specific partners.

Can a solicitor acting as an executor collaborate with others, and who might these collaborators be?

Yes, a solicitor may act alone or in conjunction with another executor, often a family member.

How is a solicitor compensated when acting as an executor, and who bears the costs?

The solicitor acting as an executor charges the estate for their services, and the costs are typically borne by the estate.

What information should a testator be given if considering appointing a professional executor, and under what circumstances might this be advisable?

A testator planning to appoint a professional executor should receive sufficient information to make an informed decision about the appointment and associated costs. This may be advisable in complex estates or cases with family disputes.

In what situations might a solicitor find themselves involved in contentious probate work?

A solicitor may be involved in contentious probate work when the terms or validity of a will are challenged, or when a disappointed beneficiary seeks to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975.

Whom might a solicitor represent in contentious probate matters, and what duty do they owe to their clients?

A solicitor may represent estate PRs or beneficiaries in bringing or defending a claim. The solicitor owes a duty to their client in the usual way.

While not directly involved in administration, a solicitor dealing with contentious probate matters needs knowledge of the administration process and PRs' obligations to effectively advise their client.

What is the nature of the role of a PR, and what duties do they owe in this fiduciary capacity?

The role of a PR is fiduciary, and PRs are subject to fiduciary duties in the execution of their responsibilities.

What consequence does a PR face in case of a breach of duty?

A PR is personally liable for any loss caused by a breach of duty, emphasizing the importance of fulfilling obligations diligently.

What duties do PRs have before the issuance of a grant in the estate administration process?

Before the grant is issued, PRs have common law duties like the disposal of the deceased's body and statutory duties such as providing information to HMRC and paying any inheritance tax due. Compliance with these duties is essential for grant issuance.

What are the key responsibilities of PRs concerning HMRC and Inheritance Tax (IHT) in the estate administration process?

PRs have a duty to inform HMRC about estate assets and liabilities, fulfilled by completing form IHT 400. They must also pay any IHT due on estate assets within their control, using estate funds, and these duties must be fulfilled before obtaining the grant of representation.

What is the legal requirement for PRs regarding notifying HMRC about the estate's assets and liabilities?

PRs must comply with s 216 IHTA, which mandates the notification of HMRC about the assets and liabilities of the estate.

How do PRs fulfill their duty to notify HMRC, and are there any exceptions?

PRs complete form IHT 400 for any estate that is not excepted. This is the means by which they fulfill their duty to inform HMRC.

What is the responsibility of PRs concerning the payment of Inheritance Tax (IHT), and what assets are covered?

PRs must pay any IHT due on estate assets within their control, specifically the succession estate, as outlined by s 226 IHTA. They can use estate funds for this purpose and are not obligated to use personal assets.

When should PRs fulfill their duties regarding HMRC notification and IHT payment?

These duties must be complied with before obtaining the grant of representation, emphasizing their significance in the early stages of the estate administration process.

What are the primary duties of a Personal Representative (PR) under the grant, and who are these duties owed to?

Under the grant (S 25 Administration of Estate Act 1925), PRs must collect and administer the deceased's real and personal estate according to the law. These duties are owed to the estate beneficiaries and creditors (Tankard v Midland Bank 1942).

What does the duty to "collect in" entail, and what steps must PRs take to comply?

To fulfill the duty to "collect in," PRs must identify and locate the deceased's assets, including amounts owed, identify liabilities and creditors, and obtain control, possession, or legal ownership of the assets.

What actions must PRs take after collecting in the assets to fulfill the duty to "administer estate"?

Post-collection, PRs must keep assets secure, pay the deceased's debts and liabilities, cover administration expenses, pay legacies, and distribute the residue to those legally entitled, focusing on assets within the succession estate.

Which assets do the duty to "administer estate" relate to, and are there exceptions?

The duty pertains only to assets devolving on the PRs, i.e., the succession estate. Assets passing outside the succession estate, such as joint tenant property, do not vest in the PRs.

What is the obligation of PRs concerning an inventory and account, and where is this information typically recorded?

PRs must maintain a list of assets and values (inventory) and record administration steps (account), often documented in the 'Estate Accounts.'

Who may request access to estate accounts, and what legal recourse is available if denied or if records are inadequate?

Beneficiaries or creditors may ask to see estate accounts. If refused or if records are insufficient, an application to court, following the Non-Contentious Probate Rules (NCPR), can be made for an order to produce an inventory and account.

What freedom do PRs have in making decisions during estate administration, and what is the constraint on their actions?

PRs have the freedom to make decisions but must operate within the scope of powers conferred by the will and/or statute.

Besides operating within their powers, what is the general duty of PRs in carrying out the administration, and what are the consequences of a breach?

PRs have a duty to carry out the administration with due diligence and within a reasonable time. Breach of this duty may lead to a court declaration and an inquiry into damages.

What is the concept of the 'executor's year,' and what happens if administration takes longer than 12 months?

PRs should ideally complete the administration within 12 months (executor's year). While exceeding this period doesn't necessarily indicate a breach, PRs are required to justify any delay.

Does a PR's obligation end once the administration is complete, and what are their responsibilities in case of additional assets or newly identified creditors or beneficiaries?

The PR's appointment is for life. They must administer additional assets discovered after completion and address claims from unknown creditors or beneficiaries, even after the administration is finalized.

From where do PRs derive their powers to deal with estate assets?

PR powers come from two sources: statute and the will/codicil. PRs must determine their powers at the start of administration.

What is the requirement regarding PRs' actions in relation to their powers, and what happens if they act beyond their powers?

PRs must always act within their powers, and any act beyond these powers (ultra vires) constitutes a breach of duty.

Besides the general duty of due diligence, what additional duty of care do PRs have by virtue of s 35 TA 2000?

PRs are subject to the statutory duty of care under s 35 TA 2000 when exercising powers under the TA 2000 to which the duty applies.

Is the standard of care for professional PRs the same as that for lay trustees, and how does it differ?

The standard of care is higher for professional PRs, such as solicitors, compared to lay trustees, as per the s1 duty of care.

What are the key fiduciary duties of PRs, and what actions are prohibited without court authorization or informed beneficiaries?

PRs must avoid conflicts of interest, such as purchasing assets from the estate, and refrain from profiting from their position, unless authorized by the court or fully informed beneficiaries.

Does payment for services constitute a breach of the 'no profit' rule, and are there exceptions?

Payment for services does not breach the 'no profit' rule if a PR acts in a professional capacity or if payments are authorized under the will.

When do statutory powers apply in the context of a deceased's estate?

Statutory powers apply if the deceased died intestate. If there is a will, statutory powers apply to the extent they do not conflict with express provisions in the will.

What role do wills or codicils play in conferring powers to PRs, and how do express provisions in a will interact with statutory powers?

Wills or codicils may contain express administrative provisions granting PR powers. Express clauses in a will take priority over statutory powers, either by conferring additional powers or excluding/modifying statutory powers.

What is the source of specific powers conferred on PRs, and which legislation grants these powers?

PRs derive specific powers from the Administration of Estates Act 1925 (AEA 1925).

Which acts extend the powers available to PRs, and what types of powers are included in these acts?

The Trustee Acts 1925 and 2000 (TA 1925 & TA 2000) and the Trusts of Land Appointment of Trustees Act 1996 (TOLATA) extend powers for 'trustees,' and these powers also apply to PRs.

In what scenario might PRs also function as trustees, and what is the additional responsibility associated with this dual role?

PRs are often appointed as trustees of will trusts, leading to a dual role. In this capacity, they have additional responsibilities as trustees.

What powers do Personal Representatives (PRs) possess in relation to estate assets, and which sections of the Administration of Estates Act 1925 (AEA) grant these powers?

PRs have expansive powers to sell, charge, or lease estate assets, granted under sections 33 and 39 of the Administration of Estates Act 1925 (AEA). These powers may be exercised promptly after the grant is issued to settle the deceased's debts and repay any loans used for inheritance tax liability.

What power do Personal Representatives (PRs) have concerning the distribution of assets to beneficiaries, and where is this power granted?

PRs have the power to appropriate assets in satisfaction of a beneficiary's entitlement, granted under section 41 of the Administration of Estates Act 1925 (AEA).

What rules govern the exercise of the power to appropriate, and what considerations must PRs keep in mind?

The rules for the power to appropriate include ensuring no specific beneficiary is prejudiced, obtaining the consent of the recipient beneficiary, and considering the asset's value at the date of transfer/appropriation rather than the date of death.

How does the value of an asset impact PRs' ability to appropriate, and what actions can be taken if the asset value exceeds or falls short of the beneficiary's entitlement?

If the value exceeds the entitlement, PRs may not appropriate. If the value is less, PRs can appropriate and make a balancing cash transfer to meet the entitlement.

What role can an express clause play in the power to appropriate, and can you provide an example illustrating the application of this power?

An express clause in a will may remove the need for certain consents. Example: If a testator leaves an antique desk to a friend, the PRs can appropriate it, given the absence of a specific gift in the will, F's consent, and a balancing cash transfer to meet the entitlement.

What power do Personal Representatives (PRs) have regarding insurance for estate assets, and under which section of the Trustee Acts 1925 (TA 1925) is this power granted?

PRs have the power to take out comprehensive insurance for estate assets at full value, authorized under section 19 of the Trustee Acts 1925 (TA 1925). Insurance premiums can be paid from estate income or capital.

What duty do PRs have regarding the retention and investment of estate assets for a certain period, and which sections of the Trustee Act 2000 (TA 2000) apply?

PRs, when retaining assets, have a duty to preserve and actively invest the estate, governed by the general power of investment in sections 3-8 of the Trustee Act 2000 (TA 2000)

What obligations do PRs have regarding the review and acquisition of investments, and what type of land acquisition is permitted?

PRs must conduct regular reviews of investments, typically annually, and are allowed to acquire freehold or leasehold land in the UK, in accordance with section 8 of the Trustee Act 2000 (TA 2000).

What considerations must PRs take into account when exercising the power of investment, and when does the duty to obtain advice apply?

PRs, when investing or reviewing investments, must consider the standard investment criteria outlined in section 4 of the Trustee Act 2000 (TA 2000). The duty to obtain advice, as per section 5 of TA 2000, applies unless PRs reasonably conclude it's unnecessary or inappropriate.

Under which section of the Trustee Act 2000 (TA 2000) are Professional Personal Representatives (PRs), like solicitors, granted the power to claim remuneration for their services?

Professional PRs, such as solicitors, have the power to claim reasonable remuneration for their services under section 29 of the Trustee Act 2000 (TA 2000), provided they are not acting alone, and co-PRs give their written consent.

What conditions must be met for lay PRs or professional PRs acting alone to charge for their services, and where must express power be granted?

Lay PRs or professional PRs acting alone need express power in the will to charge for services. Professional PRs need co-PRs' written consent.

How is remuneration for services, as per section 28 of TA 2000, treated under the Wills Act 1837?

Section 28 of TA 2000 clarifies that remuneration for services is not treated as a gift under section 15 of the Wills Act 1837.

Under which section of the Trustee Act 2000 (TA 2000) can all PRs, regardless of professional capacity, reimburse themselves for expenses incurred during estate administration?

Section 31 of the Trustee Act 2000 (TA 2000) allows all PRs to reimburse themselves for expenses properly incurred during estate administration, such as travel costs.

Under which section of the Trustee Act 2000 (TA 2000) are PRs granted the power to delegate their powers, and what are the limitations on this delegation?

PRs are granted the power to delegate under section 11 of the Trustee Act 2000 (TA 2000). However, certain powers, such as decisions on asset distribution, fees payment source, and appointments of trustees/nominees/custodians, cannot be delegated.

Can a beneficiary be appointed as an agent by PRs, and under what conditions can one of the PRs be appointed as an agent?

PRs may not appoint a beneficiary as an agent, but they may appoint one of the PRs as an agent if they are sufficiently qualified.

What requirements must PRs fulfill when delegating their powers, and what are the key steps involved?

When delegation is required, PRs must do so in writing to the agent and provide them with a written policy statement, which the agent must agree to comply with, as per section 15 of TA 2000. The use of an agent and the terms of the policy document need to be kept under review (section 22).

In estate administration, what power is commonly delegated, and what professional relationships may facilitate this delegation?

Investment powers are commonly delegated, and law firms often have connections with financial advisers to whom they refer work.

In cases where a legacy is given absolutely to a minor, how can PRs manage the legacy until the minor reaches 18, and under what section of the Administration of Estates Act 1925 (AEA) do they have this power?

PRs, holding assets in trust for a minor, can use statutory powers for maintenance and advancement. Alternatively, under section 42 of the Administration of Estates Act 1925 (AEA), PRs can appoint trustees (often the minor's parent/guardian) to receive the legacy on behalf of the minor.

What authority do minors' parents or guardians have regarding the receipt of legacies on behalf of minors, and is there an alternative approach commonly included in wills?

Under section 3 of the Children Act 1989, a minor's parent or guardian can give a valid receipt on behalf of the minor. An express clause in a will may also permit PRs to accept receipt from a minor beneficiary aged 16 or older.

How can a testator ensure specific handling of a legacy for a minor beneficiary in a will, and what age threshold is relevant for an express clause?

A testator can draft the will to give the legacy to trustees until the child reaches majority. An express clause in the will permitting PRs to accept receipt from a minor beneficiary aged 16 or older is effective.

What authority does the Children Act 1989 provide to a minor's parent or guardian regarding the receipt of legacies on behalf of the minor, and why might an express clause be included in a will?

Under section 3 of the Children Act 1989, a minor's parent or guardian can give a valid receipt to PRs on behalf of the minor. However, an express clause in a will is often included for clarity, particularly if the testator does not want the parent or guardian to receive the legacy on behalf of the minor.

How can a testator ensure specific handling of a legacy for a minor beneficiary in a will, especially if they do not want the parent or guardian to receive it?

The will can be expressly drafted to give the legacy to trustees until the child reaches majority, offering an alternative to parental receipt.

What provisions should be considered if a testator was a shareholder or partner in a business at the time of death?

For shareholders, company articles and/or shareholders' agreements may contain provisions for the company's continuation after a key shareholder's death. Partnership agreements should include terms for the partnership to continue after the death of a partner.

What is the limited common law power available to PRs for managing a sole trader business after the testator's death, and why is it common to include an express power in such cases?

PRs have a limited common law power to sell the business as a going concern within a year of death. However, due to its limitations, it's common to include an express power in the will to allow PRs to run/manage a sole trader business according to the testator's wishes.

How do most law firms draft express PR powers in wills, and what is the significance of incorporating the STEP provisions?

Law firms typically use a will precedent containing express provisions, with amendments made case-by-case. Many firms incorporate or refer to the STEP provisions, drafted by the Society of Trusts and Estate Practitioners, recognized by the Law Society for their usefulness in various estates.

In decision-making, what is the general requirement for joint PRs, and when can a jointly appointed PR act alone?

Joint PRs, like trustees, are generally required to make decisions together and exercise discretionary powers unanimously. However, when selling or transferring an estate asset, a jointly appointed PR usually has the authority to act alone during administration.

What is the exception regarding a sole PR's authority to deal with stocks and shares in joint names?

As an exception, a sole PR may not deal with stocks and shares registered in the joint names of the PRs.

Why might a PR be concerned about personal liability, and what obligations contribute to this concern?

PRs are concerned about personal liability due to statutory and common law duties in estate administration, limitations on powers, and fiduciary duties. A breach of duty results in personal liability, and PRs may be liable for co-PRs' breaches if they did not reasonably monitor their conduct.

To whom do PRs owe duties, and what is the legal action called when there is a breach of PR duties resulting in loss to the estate?

PRs owe duties to estate beneficiaries and creditors. A legal action for breach of PR duties resulting in loss is called a devastavit, seeking a court order for the PR to make good the loss from personal assets.

What are the grounds on which a claim against a PR may be based, and provide examples for each?

Claims against PRs may be based on maladministration, misuse of assets, negligence, and breach of fiduciary duty. Examples include incorrect distributions, using the wrong estate funds, unreasonable delays, and self-dealing.

What are some examples of maladministration that could lead to a claim against a PR?

Maladministration includes incorrectly distributing to wrong beneficiaries, using the wrong estate funds for liabilities, and paying legacies before debts without sufficient funds for creditors.

How can a PR be accused of misuse of assets, and provide an example?

Misuse of assets involves making personal use of estate assets. An example is a PR using estate funds for personal expenses.

What constitutes negligence on the part of a PR, and provide examples?

Negligence includes unreasonable delay in administration and poor investment decisions. Examples are delays in estate administration or failing to invest properly, breaching the duty of care.

In what ways can a PR breach fiduciary duty, and provide examples?

Breach of fiduciary duty includes acting as both buyer and seller of estate assets, unauthorized remuneration, and self-dealing. Examples are transactions without authorization and receiving unearned profits.

How can a PR be effectively removed from their position, and what are the potential consequences of failing to fulfill PR duties properly?

A PR failing to fulfill duties may be removed by court order under s.50 Administration of Justice Act 1950 or through an administration action. This removal can be in addition to personal liability.

In what ways can PRs protect themselves from personal liability for breach of duties?

PRs can seek protection by obtaining court directions, using S 48 AJA 1985 application, issuing S.27 Trustee Act 1925 notice, obtaining a Benjamin Order, utilizing the Presumption of Death Act, securing insurance, making payments into court, obtaining indemnity from beneficiaries, and applying S.61 Trustee Act 1925.

When PRs foresee difficulties in estate administration, what action can they take to avoid personal liability, and what are the two possible forms this action could take?

PRs can seek court guidance through administration proceedings, which may involve an administration action for the court to administer the estate or an application for specific relief to seek guidance on a particular matter.

In cases where there is a question over the construction of the will, what alternative action can PRs take instead of seeking court directions, and under what provision?

PRs can make an application under s 48 Administration of Justice Act 1985 to distribute in accordance with a written legal opinion, provided it meets the criteria in s 48, avoiding the expense and time associated with seeking court directions.

How does S27 Trustee Act 1925 protect PRs from liability, and what specific actions can PRs take to benefit from this protection?

What are the limitations of the protection offered by S27 Trustee Act 1925, and when might PRs still be personally liable?

S27 Trustee Act 1925 protects PRs from liability to unknown beneficiaries and creditors. To benefit from this protection, PRs may publish a notice of their intention to distribute to known beneficiaries, reducing the risk of claims from unidentified parties.

S27 only protects against claims by unknown beneficiaries and creditors. It does not shield PRs if they ignore the claim of a known but missing beneficiary or creditor, and it does not protect beneficiaries who receive more than their entitlement.