13.7 Estate Administration Flashcards
(9 cards)
How should the PRs collect in the assets?
Proof of grant = to convince someone to hand over the assets (like a bank)
Any money collected should be paid in a separate account owned by the PR and assets should be safely stored;
PRs must also make sure they have possession of any assets related to bank accounts that the deceased owned - chequebook, cards, cashbooks etc.
Once the PRs have obtained the grant, they can begin to collect the assets. If debts are owed to the deceased, the PRs must call in those debts.
What obligations do the PRs have re managing the deceased’s assets?
PRs have a general duty to preserve and realise the value of the estate. That means using investment powers in respect of any investment fund or for a minor’s entitlement, managing land under trust, or running the deceased’s business.
The PRs should check the will for any specific instructions.
Under the Trustee Acts, PRs are given the same powers with respect to the estate’s assets as trustees are with respect to trust assets.
For all the assets above and in relation to the PRs maintenance duties, they are all underlined by the common law duty not to commit waste. The PRs must preserve the value of the assets (and increase them if possible), so must actively engage in their management before any sale or distribution.
What must the PRs ensure are paid before distribution?
Debts and fees
- As soon as the assets are collected in, PRs must pay off any outstanding debts except on secured property (i.e mortgages for a solvent estate) unless the will says otherwise.
- PR must make sure that any fees are paid off before distribution.
- PRs must ‘ascertain the debts’ - check who the creditors are. Use a s27 notice for this.
- If a property is mortgaged, the mortgage goes with the property when handed to the beneficiary - beneficiary will take the property with the mortgage.
- It does not matter in which order debts are paid for a solvent estate
What if PRs need to sell assets in a solvent estate to pay debts and expenses?
If there is insufficient cash in the estate, the PRs will need to:
- Check the provisions of the will;
- Sell assets according to the statutory order (lapsed assets → residue assets → use money set aside to pay debts → pecuniary / general legacies → specific legacies)
- Check the asset is not secured by mortgage
- Check the wishes of beneficiaries
- Check whether any assets are due to increase in value
What is the difference between a solvent and insolvent estate?
Solvent estate = assets are sufficient to pay off the debts.
Insolvent estate = assets are insufficient to pay off the debts. There will be no legacies to give to beneficiaries.
What if the estate is insolvent?
Debts are paid by selling off the estate’s assets and applying the proceeds to pay creditors in the statutory order.
Secured special bankruptcy funeral for P.O.I.D
Statutory order:
1. Secured creditors - balance ranked as ordinary debt;
2. Specially preferred debts
3. Bankruptcy expenses
4. Funeral, testamentary and administration expenses
5. Preferential debts
6. Ordinary debts
7. Interest on preferential and ordinary debts
8. Deferred debts
Preferential debts = wages of employees if the deceased employed people
Deferred debts = debts owed on credit or to a partnership of the deceased
How can a general or pecuniary legacy be distributed to a beneficiary?
This is done after the distribution of a specific legacy.
Check the will - are there specific provisions on how the legacy is to be distributed or paid?
Otherwise, PRs have the power to sell assets to raise the cash to distribute pecuniary legacies, or appropriate assets (including in the residue) to fulfil a beneficiary’s entitlement, as long as it does not exceed the entitlement and the beneficiary receiving the asset consents
NOTE: Common to pay pecuniary / general legacies out of the residue - so once all the specific legacies have been paid and after payment of debts / expenses.
Unless the will specifies, there are no general rules on how a PR is to deal with general, pecuniary or residue entitlement, as long as the beneficiary gets their due!
What estate accounts need to be prepared by the PRs?
There are 3 estate accounts:
- Income account: The income received from the estate’s assets during the administration period;
- Capital account: Sets out the estate’s assets at death and what happened to them (i.e. sold or given to beneficiary)
- Distribution account: Shows what the residuary beneficiaries will receive
Estate accounts are used to value the residue. On sign-off, the accounts discharge the PRs once the residue has been distributed. The beneficiaries can ask to inspect the accounts, and the court can order inspection if the PRs refuse.
What is the final step PRs should take with respect to the estate’s assets?
Ascertain and distribute the RESIDUE
The residue can now be distributed to the beneficiary (ies).
Once distribution is done, the PRs should obtain confirmation or receipts (e.g. an email) from the beneficiaries of the residue discharging them of their duties.
