Wills & Administration of Estates

LPC Exam Revision

Administration: Post Grant Practice

Duties of a Personal Representative

The key duty of a PR is to ‘collect and get the real and personal estate of the deceased and administer it according to the law’ (i.e. collect assets the deceased was entitled to at death, pay debts and distribute the residue).

These duties must be performed with due diligence and PRs have a duty to take reasonable steps to preserve the value of the estate and to carry out the process with 12 months from the date of the death.

Breach of Duties

A breach of duty means the PR is personally liable for any loss. The PRs must exercise reasonable care and skill, having regard to special knowledge and experience, professions and the reasonable expectations of the PR.

Action can be taken by a creditor or beneficiary who has suffered loss as result of the breach of duty.

Powers of a Personal Representative

The PRs have certain powers to carry out their duties, the source of their powers can come from statute and/or the deceased’s will (if there is one).

PRs are in a fiduciary position and must act in the utmost good faith and must not profit from their position.

Statutory Powers

Power to Invest	This allows PRs to invest and hold assets for the foreseeable future rather than distribute them. This general power is found in s.3 TA 2000 and states that the trustees have the power to extend as if they were absolutely entitled to the assets. This includes acquiring freehold and leasehold land (s.8) PRs must have regard to ‘standard investment criteria’ (s.4) in relation to suitability and diversity. And unless they think it unnecessary, they must obtain proper advice.
Power to Appropriate	PRs can appropriate an asset - i.e. choose which assets in an estate to meet the beneficiary’s entitlement. This power can only be used if it does not involve prejudice, the beneficiary must consent and the value of the asset must be taken at the date of transfer rather than death.
Power of Maintenance	PRs can deal with income generated by assets held on trust. For deaths after October 2014 trustees have complete discretionary power to apply income generated by trusts for minor beneficiaries’ maintenance, education or benefit. Trustees must accumulate the balance of income not applied. If the beneficiary is entitled to the capital at an age after 18, the trustees must pay the income to the minor. For deaths before October 2014 the trustees only had the power to apply income which was reasonable in line with statutory requirements.
Power to Advance Capital	After October 2014 trustees can advance capital to a beneficiary before they reach the age they are entitled to the trust, this is treated as an advancement of the overall value of the trust. Before October 2014, trustees were limited to advancements only up to of the beneficiary’s share
Power to Insure	s.34 TA 2000 allows PRs to insure assets and pay the premiums out of the income or capital
Power to Appoint a Trustee	When a legacy is given to a minor, the PRs cannot distribute it until they reach the age of 18. To prevent any delay of the administration, the PRs can appoint a trustee under s.42 AEA.
Power to Postpone Distribution	Reasonable steps must be taken to preserve the value of the estate, PRs can delay distribution to realise investments.
Power to Delegate	PRs can delegate to agents - e.g. investing trust assets
Power of Sale and Management	TOLATA 1996 allows for PRs to sell assets to raise cash to meet estate obligations.
Implied Indemnity for Expenses	s.31 TA 2000 permits PRs to reimburse themselves for expenses incurred in acting on behalf of the estate.
Remuneration for Services	s.29 TA 2000 allows professional PRs (e.g. solicitors) to claim reasonable remuneration for their services provided they are not acting alone and those co- PRs give their written consent. This payment is not considered a gift (s.28)

Non-Statutory Duties

The will may give the PRs other powers and any restrictions on these additional powers. Common additional powers include the power to run a business (i.e. sell the business as a going concern).

Safeguards for PRs During Administration

PRs are personally liable for any loss arising from their failure to carry out their duties.

Court Guidance

If the PRs foresee difficulty and are concerned they may incur personal liability they can request guidance from the court. The court can either administer the estate itself or give guidance on a particular matter.

Unknown Beneficiaries/Creditors

PRs are liable for unpaid beneficiaries and creditors even if the PR is not aware of their claim. s.27 TA 1927 protects PRs against unknown creditors or beneficiaries if the PR gives notice in the London Gazette or trade paper to all interested in relation to the distribution of the estate.

Known but Missing Beneficiary/Creditor

If PRs distributed the estate but missed a creditor or beneficiary then the PR can avoid liability by one of the following methods:

Obtain a Benjamin Order which allows the PRs to distribute the estate on an assumption (i.e. that a particular beneficiary has died if they are presumed dead) as long as the PR has made full enquires to attempt to locate the missing person.
Indemnity from the beneficiaries - i.e. a promise to reimburse the PR for any loss suffered as a result of a missing beneficiary.
Obtain insurance to cover the risk.
Pay the legacy into court and distribute the balance to the estate.

Collecting Assets

Once the PRs have obtained the grant they can begin to collect assets, the method of collecting assets depends on the asset being collected.

Once money is collected it should be paid into the PRs separate bank account or client account. Actual property should be stored and safeguarded.

Payment of Debts

As soon as money and assets are collected, the PRs should begin to pay the outstanding debts and administration expenses (including funeral costs) with due diligence.

PRs should ensure that any pre-grant loan taken out to pay IT is repaid as soon as possible to minimise interest payments.

Selling Assets

Assets may need to be sold if there is insufficient cash to pay the debts. The PRs should note whether there is any charge on the asset, the statutory order or provisions of the will determining the order in which the property should be taken to pay the debts. PRs should also consider the wishes of the beneficiaries to take certain assets and any changes in the value of the assets - i.e. those rapidly falling in value should be sold as soon as possible.

Secured Debts

A debt is secured if it has been charged on the deceased’s property - e.g. a mortgage on a house. If the house is to be transferred to a beneficiary then unless stated in the...

#15501 - Post Grant Practice - Private Client

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