Chapter 6: Post grant

Question 1

What is the primary duty of Personal Representatives (PRs) after obtaining the grant of representation?

Answer 1

To collect in and administer the estate.

Question 2

What must PRs consider regarding their powers and duties?

Answer 2

Protections necessary for beneficiaries and estate creditors.

Question 3

What is required to collect the balance of bank accounts?

Answer 3

Withdrawal forms must be completed.

Question 4

What should be done with personal possessions collected from the estate?

Answer 4

They should be stored and safeguarded.

Question 5

Where should money collected in from the estate be paid?

Answer 5

• A PR’s bank account * Law firm client account.

Question 6

What duty do PRs have concerning the payment of the deceased’s debts?

Answer 6

To pay debts with ‘due diligence’.

Question 7

What is the consequence if a PR fails to pay debts when assets are available?

Answer 7

They will be liable to the creditor and any beneficiary for consequent loss.

Question 8

What protection can PRs obtain against personal liability to unknown creditors?

Answer 8

Compliance with the s.27 TA 1925 notice procedure.

Question 9

What should PRs ensure regarding any pre-grant loans taken to pay IHT?

Answer 9

That they are repaid as soon as possible.

Question 10

What constitutes a solvent estate?

Answer 10

Assets are sufficient to pay all debts and liabilities.

Question 11

What is the statutory order for paying debts in an insolvent estate?

Answer 11

Determined by the Administration of Insolvent Estates of Deceased Persons Order 1986.

Question 12

What defines a secured debt?

Answer 12

A debt charged on part of the deceased’s property.

Question 13

What happens if the amount of the outstanding loan exceeds the value of the secured asset?

Answer 13

The creditor ranks as an unsecured creditor.

Question 14

In a solvent estate, how are unsecured debts typically met?

Answer 14

They will be paid regardless of the choice of assets.

Question 15

What is the first category of assets used to repay unsecured debts?

Answer 15

Property not disposed of by a will.

Question 16

What happens to pecuniary legacies if the legacy fund is insufficient?

Answer 16

They abate proportionately according to value.

Question 17

What is marshalling in the context of estate administration?

Answer 17

A principle allowing a disappointed beneficiary to claim against other assets.

Question 18

What factors should PRs consider when choosing assets to sell?

Answer 18

• CGT implications * Ease of sale * Wishes of beneficiaries.

Question 19

What happens to estate assets when PRs sell them after the date of death?

Answer 19

They acquire them at their market value on that date.

Question 20

What is the impact of a transfer from a PR to a beneficiary for CGT purposes?

Answer 20

It is not treated as a ‘disposal’.

Question 21

What should PRs do if they need to raise cash quickly?

Answer 21

Sell non-cash assets that are easier to liquidate.

Question 22

What is one of the PRs’ responsibilities regarding Income Tax and Capital Gains Tax?

Answer 22

Finalise the deceased’s IT and CGT position for the tax year of death.

Question 23

What must PRs pay during the administration period?

Answer 23

CGT on taxable gains and IT on income received.

Question 24

What is the primary responsibility of PRs regarding the deceased’s tax position?

Answer 24

Finalise the deceased’s IT and CGT position for the tax year of death

PRs must determine any outstanding tax owed or refunds due.

Question 25

What taxes must PRs pay during the administration period?

Answer 25

CGT on taxable gains and IT on any income received ## Footnote This applies to gains made from disposal of estate assets.

Question 26

What must PRs do to account for the deceased's income tax liability?

Answer 26

Access financial records and utilize tax-free allowances ## Footnote PRs should pay tax at rates applicable to the deceased.

Question 27

What type of income should PRs consider when calculating the deceased's IT?

Answer 27

* Untaxed income due and paid before death * Income paid after death relating to a period before death ## Footnote Examples include unpaid rent and final dividends.

Question 28

Is bank interest paid before death taxed as the deceased's or PRs' income?

Answer 28

Deceased's for interest paid before death; PRs' for interest paid after death ## Footnote CIR v Hendersons Executors clarifies this.

Question 29

How do PRs determine if the deceased had any outstanding CGT liability?

Answer 29

Consider disposals made by the deceased before death ## Footnote Death is not a disposal for CGT purposes.

Question 30

What happens to the base cost of assets in the estate upon the deceased's death?

Answer 30

It is ‘up-lifted’ to the date of death value ## Footnote This wipes out gains accrued during the deceased’s lifetime.

Question 31

What income might the estate generate during the administration period?

Answer 31

* Interest from bank accounts * Dividends from shares * Rent from let properties ## Footnote This income is taxed as estate income in the hands of the PRs.

Question 32

At what rate do PRs pay IT on estate income?

Answer 32

At the basic rate ## Footnote The starting and higher rates do not apply to PRs.

Question 33

What is Form R185 used for?

Answer 33

Records income tax paid by PRs for the income a beneficiary receives ## Footnote Beneficiaries can use it to claim tax refunds.

Question 34

What is the income tax reporting requirement for PRs?

Answer 34

Report only if total income exceeds £500 per tax year ## Footnote If below this limit, no tax liability arises.

Question 35

What happens if estate income distributed to beneficiaries is within the £500 limit?

Answer 35

No tax liability for PRs or taxable income for the beneficiary ## Footnote This income is not recorded in the R185.

Question 36

What is the potential CGT liability for PRs during administration?

Answer 36

If they make a disposal/sale of estate assets ## Footnote Gains are taxed if they exceed the tax-free allowance.

Question 37

What are the implications of selling an asset that has increased in value since the date of death?

Answer 37

There will be a gain taxable to PRs if sold ## Footnote Losses can offset other gains during administration.

Question 38

What is chattel exemption concerning CGT?

Answer 38

Gains on tangible movable assets sold for £6,000 or less are exempt ## Footnote Refer to s.262 TCGA.

Question 39

How does the sale of an asset impact CGT for PRs?

Answer 39

Gains made on sales are subject to CGT in the hands of PRs ## Footnote Post-death gains are chargeable.

Question 40

What should PRs consider before selling or transferring assets?

Answer 40

Tax efficiency for PRs and beneficiaries ## Footnote Decisions should factor in tax-free allowances.

Question 41

What is the order of payment for legacies under general law?

Answer 41

* Specific legacies * General legacies * Residuary legacies ## Footnote If insufficient funds, they abate in reverse order.

Question 42

What is the nature of a specific legacy?

Answer 42

An exact item within the estate to transfer ## Footnote Example: “my gold ring” indicates a specific item.

Question 43

How do PRs ascertain the value of the residue?

Answer 43

By calculating total debts, expenses, and tax liabilities ## Footnote Residue is what's left after all legacies and debts are settled.

Question 44

What power do PRs have regarding the appropriation of assets?

Answer 44

They can choose which assets to appropriate to beneficiaries ## Footnote This is governed by s.41 Administration of Estates Act 1925.

Question 45

What is the total value of the estate after deducting debts and expenses?

Answer 45

£443,000 ## Footnote The total estate is worth £453,000, with debts/expenses totaling £10,000.

Question 46

What is the power of appropriation in estate administration?

Answer 46

PRs can choose which assets to appropriate to beneficiaries in settlement of their entitlement ## Footnote This is governed by s.41 Administration of Estates Act 1925 ('AEA').

Question 47

True or False: PRs can appropriate an asset whose value exceeds the entitlement of the beneficiary.

Answer 47

False ## Footnote The power of appropriation does not allow for exceeding the beneficiary's entitlement.

Question 48

In the example, what cash transfer should the PRs make if the flute is valued at £70?

Answer 48

£430 ## Footnote This ensures the total value received by the beneficiary equals £500.

Question 49

What are the three component parts of estate accounts?

Answer 49

* Capital Account * Income Account * Distribution Account

Question 50

What does the Capital Account record?

Answer 50

Estate assets and liabilities at death, and what has happened to each item during administration ## Footnote It includes details on sales, transfers, and liabilities.

Question 51

What is included in the Income Account?

Answer 51

Income received from estate assets and how it was spent ## Footnote Income expenses are deducted as liabilities.

Question 52

What is the purpose of the Distribution Account?

Answer 52

It sets out the residuary beneficiaries’ entitlement and includes interim distributions ## Footnote It shows both interim payments and the final balance due.

Question 53

What should PRs do when making distributions to beneficiaries?

Answer 53

Obtain confirmation of receipt from the beneficiary ## Footnote This is crucial for proper record-keeping.

Question 54

What happens if minor beneficiaries have a vested interest?

Answer 54

They cannot give good receipt ## Footnote PRs have options like holding the property until the child is 18 or appointing trustees.

Question 55

Fill in the blank: PRs must work out who should inherit the deceased's assets by reference to the deceased’s _______.

Answer 55

[will and/or intestacy rules]

Question 56

What is the order of priority for abatement of legacies when funds are insufficient?

Answer 56

* Residue * General legacies * Specific legacies

Question 57

How should estate accounts be prepared?

Answer 57

By PRs or their legal advisors ## Footnote They should be clear and comprehensible to beneficiaries.

Question 58

What does signing the estate accounts signify?

Answer 58

The end of the administration ## Footnote It indicates the agreement of PRs and residuary beneficiaries.

Question 59

What is an example of a specific legacy in the text?

Answer 59

A £5,000 legacy to B ## Footnote This is a specific amount left to a particular beneficiary.

Question 60

What is the total residue after paying debts and legacy to B?

Answer 60

£435,000 ## Footnote This consists of the house and remaining cash after all payments.

Question 61

What should PRs do if they receive rent from estate property?

Answer 61

Record it in the income account ## Footnote Any income tax payable on the income would be shown as a liability.