Administration: Post Grant Practice

Question 1

What should money collected be paid into?

Answer 1

a PR’s bank account (opened specifically to hold estate money and to prevent this being mixed with their personal funds)
a law firm client account

Question 2

What is the duty regarding debts?

Answer 2

duty to pay debts with ‘due diligence’ –not defined but creditors should normally be paid before the end of the ‘executor’s year’

Question 3

What is the first expense consideration?

Answer 3

ensure that any pre-grant loan the PRs took out to pay IHT is repaid as soon as possible to minimise the expense of interest payments

Question 4

How are secured debts paid?

Answer 4

Loan < asset secured, no other assets can be used to repay.
Loan > asset, creditor ranked as unsecured creditor.

Question 5

What is the order of paying unsecured debts?

Answer 5

1. Property not disposed of by a will
2. Residue
3. Property Will sets aside
4. £ in pecuniary legacy fund
5. Property specifically given

Question 6

What is the doctrine of marshalling?

Answer 6

PRs take assets out of order, doctrine of marshalling.
Creditors not bound by rules and no obligation to return money.
Allows disappointed beneficiaries to compensate himself against property which ought to have been used to pay debt. Can claim against assets inherited by other benificiaries.

Question 7

What are the CGT considerations when choosing assets to sell?

Answer 7

• PRs acquire estate assets at their market value on the date of death
• PRs should consider selling assets which have not risen in value
• Assets falling rapidly in value should usually be sold in any event
• sell an asset increased in value after death the ‘profit’ they make may be subject to CGT if the gain is greater than any tax-free allowance.
• Assets that have risen in value may be transferred directly to a beneficiary without triggering a CGT charge

Question 8

What are the ease of sale considerations when choosing assets to sell?

Answer 8

• Quoted shares and other financial investment products can usually be sold fairly quickly and easily.
• Unquoted shares, business interests and land will usually take longer to sell.
• Cars and household possessions can usually be sold fairly easily but may not produce the amount needed

Question 9

What is PR’s responsibility regarding income tax and CGT?

Answer 9

• Finalise income tax and CGT position for the tax year of death. Outstanding tax or refund.
• Pay income tax and CGT that becomes due during the administration period. CGT on taxable gains made following a disposal of estate assets and pay income tax on any income received during the administration period

Question 10

Can PRs pay residuary legacy before making all other outstanding payments?

Answer 10

They may make an interim distribution if sufficient assets in their control to meet other oustanding

Question 11

To ensure the PRs fulfil their duty to accurately distribute the estate what must they consider?

Answer 11

1. Identity of the beneficiaries
2. Nature of the interest
3. Property to which they are entitled

Question 12

What steps are taken to identify the Identity of the beneficiaries?

Answer 12

• Review will to identify those entitled to legacies & apply rules of construction
• Apply intestacy rules if full or partial intestacy occurs.

Question 13

What steps are taken to Identify the Nature of the interest?

Answer 13

• Establish if a vested or contingent interest, or, an interest under an express trust in the will.
• Assess what ‘share’ each beneficiary is entitled to.

Question 14

What steps are taken to identify the Property to which they are entitled?

Answer 14

• Establish which items fall within a general gift of chattels or collection of items.
• Apply the effect of s 21 / 24 Wills Act.
• Provided an asset is not required for the payment of debts, or a legacy has not failed, the PRs can make a transfer to the beneficiary

Question 15

What is the method of transfer for chattels?

Answer 15

delivery to the beneficiary

Question 16

What is the method of transfer for £ legacies?

Answer 16

cheque or bank transfer

Question 17

What is the method of transfer for shares?

Answer 17

stock transfer form

Question 18

What is the method of transfer for land?

Answer 18

Assent for a legal estate in land (land registry form AS1)

Question 19

What should you be aware of regarding relieving provisions?

Answer 19

Unless the will specifically provides otherwise, the beneficiary must bear the cost of the transfer of the asset (but inherits the item free of IHT)

Question 20

What are the timing considerations for distributing to beneficiaries?

Answer 20

• Claims against the estate: under IPFDA – ten months after the grant issued
• S 27 TA notice: Shouldn’t make distributions until after 2 month deadline

Question 21

What is the order of payment of legacies?

Answer 21

1. specific
2. general
3. residuary

Question 22

What happens if it is not possible to pay all the legacies?

Answer 22

they abate (reduce) in reverse order.

Question 23

What happens if it is not possible to pay all the legacies of one category?

Answer 23

they abate proportionately

Question 24

What is necessary when calculating the final residue?

Answer 24

final accurate figures for tax liabilities (including IHT) and other expenses such as interest payable on loans and professional legal fees.

Question 25

What should PRs obtain when making a distribution?

Answer 25

Receipt

Question 26

What are the options for obtaining receipt where there is a minor beneficiary with a vested interest?

Answer 26

* Express clause in Will giving PRs power to accept receipt from a minor (16 or 17) is enforceable * S3 Children Act 1989 – parents/guardians can give receipt * PRs can hold property until child turns 18 * Appoint trustees (s42 AEA) and make payment to them * Pay legacy to court (s63 TA 1925)

Question 27

What is the estate accounts duty?

Answer 27

duty to produce an account of the estate administration if required by the court.

Question 28

What symbolises the end of the administration?

Answer 28

Date estate accounts signed

Question 29

Who signs estate accounts?

Answer 29

all PRs and residuary beneficiaries

Question 30

What does signing estate accounts indicate?

Answer 30

residuary beneficiaries agreement with how the estate administered

Question 31

What is the usual effect of signing estate accounts?

Answer 31

releases the PRs from further liability to account.

Question 32

What are the usual three main sections of estate accounts?

Answer 32

Capital Account Income Account Distribution Account