Administration Of Estates Notes

• Once the PRs have obtained the grant, they have full power to undertake the administration of the estate.

• The administration of an estate may be divided as follows:

  1. considering the duties of and powers available to the PRs in carrying out their task;

  2. collecting the deceased’s assets;

  3. paying the deceased’s funeral and testamentary expenses and debts;

  4. distributing the legacies; and

  5. completing the administration and distributing the residuary estate.

• ‘Administration period’: starts at moment immediately following death and ends when PRs are in a position to vest the residue of the estate in the beneficiaries (or trustees).

Duties

• The Administration of Estates Act 1925 (AEA 1925), s 25 (as substituted by AEA 1971, s 9) states that the PRs of a deceased person shall be under a duty to ‘collect and get in the real and personal estate of the deceased and administer it according to law’.

• A PR who has accepted liability is personally liable for loss to the estate resulting from any breach of duty he commits as PR (not generally liable for breaches committed by co-PR)

Types of breach:

1. failing to protect the value of assets;

2. failing to pay the people entitled to assets.

• TA 1925, s 61 gives court power & discretion to relieve PR from liability for breach of duty if satisfied that the PR acted honestly and reasonably and ought fairly to be excused for the breach’.

• NB. Executor may also be able to rely on clause in will for mistakes made in good faith

Inheritance (Provision for Family and Dependants) Act 1975

• The PRs will be personally liable where an applicant under the I(PFD)A 1975 successfully obtains an order for ‘reasonable financial provision’ from the estate.

• Can protect themselves against such liability by waiting more than six months following the date of the grant of representation before distributing the assets. If earlier distribution is required, PRs should ensure they retain sufficient assets to satisfy an order should an applicant be successful within six months of the grant.

Power of maintenance

Statutory provisions:

• Where trustees are holding a fund for a minor beneficiary, the TA 1925, s 31 gives them power to use income they receive for the minor’s maintenance, education or benefit. The section provides that if the trustees continue to hold the trust funds after the beneficiary reaches 18 (for example, where the interest is contingent on reaching 21 or 25), they must pay the income to the beneficiary from 18 onwards.

• TA ’25 (as amended by TA ’00), s.31:

1. Applies to any property held in trust for any interest. Subject to prior interests or charges the trustees may;

1. At sole discretion pay any income to parent or guardian of infant beneficiary or apply money to maintenance, education, or any other benefit that is reasonable, whether or not there is:

   1. Another fund doing the same, or

   2. Any other person bound by law to do the same.

2. When the child reaches 18 and still doesn’t have a vested interest, the trustee must then pay the income of the property and any accretion to him.

2. While under 18 the trustee(s) shall accumulate residue of income (not used for maintenance) and invest it.

Extending s.31:

• May want to remove ‘reasonable’ limitation (giving trustees complete discretion).

• May want to remove right of contingent beneficiary to receive income on reaching 18.

Power to advance capital

Statutory provisions:

• The TA 1925, s 32 allows trustees in certain circumstances to permit a beneficiary with an interest in capital to have the benefit of up to half of his capital entitlement sooner than he would receive it under the basic provisions of the trust.

• s.32:

  1. Trustees may, at their discretion, apply capital money subject to a trust for the advancement or benefit of any person entitled to the capital, whether or not contingent on age, and whether in remainder or reversion, provided that;

     1. Benefit widely construed (education/living expenses)

     2. Money doesn’t exceed half of that person’s interest.

     3. The money is taken into account when that person becomes absolutely entitled.

     4. The advancement doesn’t prejudice someone else’s interest (unless they consent in writing).

Extending s.32:

• May want to extend limit of (1)(a).

• May want to supersede (1)(b) – i.e. remainder still split equally between beneficiaries regardless of advancement to one.

• May want to allow loans to people w/ interest only in income and not capital.

Duty of the PRs

• Some assets pass independently of will & intestacy rules – see earlier.

• Those that don’t, must be collected by the PRs.

• Generally, will have to produce their grant of representation to whoever is holding the asset.