PR powers

Question 1

Where do PRs derive their powers from?

Answer 1

• Statute:
  
  • if deceased died intestate, statutory powers will apply
  • if deceased left a will, statutory powers apply to extent these do not conflict with express provisions (partial intestacy)
• Will/Codicil:
  
  • if deceased left a will - may contain express administrative provisions.
  • express clauses may confer additional powers that go beyond statutory provisions or may exclude/modity statutory powers

Question 2

What are the statutory powers of PRs?

Answer 2

• sell, charge or lease
• appropriate
• insure
• invest
• charge for PR services
• delegate powers
• appoint trustees

Conferred by AEA confer powers specifically on PRs and Trustee Acts include powers of trustees which also apply to PRs

Question 3

What is the statutory power to sell, charge or lease?

Answer 3

• PRs have wide power to sell estate assets - may be done after grant is issued so to repay the deceased’s debt and any loan taken out to meet IHT liability

Question 4

What is the statutory power to appropriate?

Answer 4

PRs have power to appropriate (transfer) any part of estate towards the statisfaction of beneficiary’s entitlement, whether a legacy or share of residue. This power is subject to:
* consent from recipient beneficary is required, unless deceased’s will contains an express clause removing need for consent (parent & guardian consents for minors)
* appropraite would not prejudice another beneficiary
* value of asset is determined at date of appropriation not death: if value is more than benefiicary entitlement then PR cannot appropriate but can sell it to them BUT if value is less, PRs would need to make up shortfall by paying a cash sum.

Question 5

What is the statutory power to appropriate & self-dealing?

Answer 5

Nothing that prohibits PR from appropriating assets to themselves as beneficiary BUT as their role is fiduciary they are subject to rule against self-dealing which applies where PR wishes to buy an asset from estate or if PR exercises their power to have asset appropriated to them.

What does not classify as self-dealing:
- if PR is entitled to monetary sum and they appropriate cash equivalent assets (e.g, quoted shares) - not unquoted shares as this is a breach of self-dealing rule and need authorisation from other beneficiaries or court
- if person dies intestate and their share in family home is included in succession, deceased surviving spouse is entitled to have property interest appropriated to them in full or partial satisfaction of their entitlement under intestacy - not a breach provided suriving spouse is not sole administrator

Question 6

What is the statutory power to insure?

Answer 6

• PRs have power to take out insurance to insure estate assets comprehensively and for full value
• PRs are authorised to pay insurance premiums out of estate income or capital

Question 7

What is the statutory power to invest?

Answer 7

• PRs have duty to preserves estate and actively invest
• general power of investment applies to PR just as it does to trustees
• PRs must carry out regular reviews of investment (annually)
• PRs must have regard to standard of investment criteria when excerising power of investment or reviewing investment
• PRs also have duty to obtain advise unless PR concludes it unnecessary

Question 8

What is the statutory power for service?

Answer 8

• Professional PRs must claim reasonable remuneration for their services provided:
  
  • they aren’t acting alone and
  • co-PRs give their written consent
• lay PRs or professional PR who are acting alone, need express power in will to charge for their services
• payments of remuneration for services is not to be treated as a gift
• All PRs may reimburse themselves for expenses incurred when acting on behalf of estate (e.g., travel cost) - not a power to charge estate spent on administration process

Question 9

What is the statutory power to delegate?

Answer 9

PRs are permitted to employ agents and delegate powers, except for:
* how and whether assets should be distributed
* whether fees or costs are payable from income or capital
* *appointment of trustees *

If delegation is required, it must be in writing to the agent and provide them with a written policy statement which agent must agree to comply with - this must be kept under review.

PRs may not appoint a beneficiaries as agent but may appoint of the PRs if they are sufficiently qualified

Question 10

What is the statutory power to appoint trustees (gifts to minors)?

Answer 10

When legacy is given absolutely to minor, there is no general power to pay legacy to beneficiary until they reach 18 because a minor cannot give valid receipt
* so PRs need to hold relevant assets on trust for minor, investing these assets in accordance with statutory powers and utilising statutory powers of maintenance and advancement where appropriate, until minor attains 18
* PRs could appoint trustees (usually minor’s parent/guardian) of legacy and give legacy to trustee rather than retaining it.

So PR does not have to delay administration until minor beneficiary reaches 18

Question 11

What is the statutory power to run a business?

Answer 11

• If testator was a shareholder or partner, the agreements or companies articles will oftne contain provisions that apply after death
• If testator was a sole trader, limited common law power to enable PRs to sell business as a going concern within a year of death - PRs may only access assets in business at date of death (not other estate funds) and are personally liable to business creditors (but may indemnify themselves).

Question 12

Express powers?

Answer 12

• STEP provisions are incorporated into wills by firm which are set of express powers drafted by Society of Trusts and Estate Practitioners and are recognised by Law Society

Question 13

Can a joint PR act alone?

Answer 13

NO! similar to trustees, if there are more than one PR, they are requires to make decisions together and should exercise discretionary powers unanimously (unless will says otherwise)
* when exercising power to sell or trsnafer an estate asset during administration, jointly appointed PR will usually have authority to act alone - though a sole PR may not deal with stocks or shares which are regisetered in joint names of PR