Personal Representatives - Powers and Duties Flashcards
Executors
- takes authority from Will. Proof may be required by Ct by those holding assets of estate or purchasing assets from execs.
- only need to provide proof is when required by Court and in order to prove title to land.
- execs could issue proceedings or exchange contracts for sale before grant, provided grant produced before action concluded or sale completed.
- in practice, most institutions holding assets will insist on seeing grant before money released.
- prop of deceased vests in execs when deceased dies - s1(3) AEA 1925 in relation to real property and Woolley v Clark 1822 for personal property.
- s1(1) provides that dec’d estate shall devolve on PRs for time being, which means if PRs change, assets devolve automatically on new PRs.
Administrators
- derive authority from grant, whether or not Will, so have no authority to act until grant issued.
- on death, estate vests in Public Trustee - s9(1) AEA 1925 as amended by s14 Law of Property (Miscellaneous Provisions) Act 1994.
- until grant issued, administrators have power to do only what is necessary to obtain grant.
- once grant issued, doctrine of relation back may apply to protect lawful acts of administrators. Permits administrators to due for trespass to land, or sue for recovery of the assets which have been misappropriated by 3rd party. Limited to action taken to protect the estate.
>Ingall v Moran 1944 - prospective administrator issued proceedings to recover damages under Fatal Accidents Acts in respect of death in motor accident. Held that later issue of grant didn’t validate issue of proceedings as were not issued for protection of estate so action struck out. Action could have been validly commence under limited grant taken out before proceedings.
>Milburn-Snell and Others v Evans 2011 - Ct of A upheld principle by striking out action started before grant taken out by daughters who claimed as his administrators acting on behalf of estate. As proceedings were nullity from outset, Ct refused to allow proceedings to be amended using provision in Civil Procedure Rules 1998.
Duties of personal representatives
- Duties of PRs set out in s25 AEA 1925, as amended by s9 AEA 1971 and TA 2000
- duties must be performed with due diligence, and s1 TA 2000 imposes duty to exercise such care and skill as is reasonable in the circumstances.
- Duties of PR are;
1. to collect and safeguard assets
2. to pay debts of dec’d
3. to distribute the estate to the beneficiary correctly entitled
Collection of assets
- s25(1) AEA 1925 imposes duty to collect and get in real and personal assets of deceased and administer it according to the law. Must be collected by taking legal action if needed, including suing for recovery of debts owed.
- must collect assets asap although secured debts need not be collected immediately if security adequate, unless money needed for payment of debts.
>Re Clough-Taylor, Coutts & Co v Banks 2003 - someone removed screen claiming it was theirs as had been given to him during lifetime. Ct held exec entitled not to commence action as was real risk would be unsuccessful and incur significant cost. Instead, exec could assign screen and claim to ben instead who could make claim and bear costs. - s1(1) AEA 1925 provides that land owned will devolve on PRs unless interest came to an end on death. Means certain property that had interest or connection at death will not devolve on PRs, if doesn’t then don’t have duty to collect it.
-Property that doesn’t devolve includes:
- Property held by dec’d as beneficial joint tenant - provided no severance, prop will pass to survivor under right of survivorship. If held as tenants in common in equity, on death severable share passes to PRs.
- Prop held or enjoyed under life tenancy - where life tenant, prop will devolve according to terms of trust and not their PRs.
- Prop was subject matter of donatio mortis causa - held on trust by donee until donor dies.
- Money arising under insurance policies on life of deceased but written in favour of others, either by implied trust under s11 Married Women’s Property Act 1882 or express trust that passes to ben named without need for grant.
- Lump sum payments under pension scheme - such schemes generally discretionary and pension money paid directly to those nominated by dec’d
- Foreign property
- by Law Reform (Miscellaneous Provisions) Act 1934 - all causes of action vested in dec’d at death survive for benefit of estate. Exemplary damages (as punishment for bad conduct) wont be awarded to estate and if action relates to cause of death, damages calculated without ref to loss or gain to estate caused by death except reasonable sum allowed for funeral expenses.
- actions in contract and tort survive apart from defamation or contract of person services (such as jockey’s contract of employment that ended on death of racehorse owner who employed him in Graves v Cohen 1930)
- PRs can bring action under Fatal Accidents Act 1976 on behalf of dependents of dec’d where death cause by event they could have sued for is they had lived. Any damages under claim belong to dependents and don’t form part of estate.
- If PRs delay, can be personally liable for failing to collect if loss suffered by estate.
> Caney v Bond 1843 - test leant friend £500 on promissory note. Didn’t call loan in, £100 paid but wasn’t asked to pay rest then died insolvent. Exec held personally liable for loss, as could have acted sooner. - if security inadequate, PRs have to consider favourable time for realisation, provided they acted honestly and prudently won’t be personally liable for loss.
> Re Chapman 1896 - estate had several mortgages, but owing to depression value of land fell and at death was insufficient to cover mortgages. Execs not personally liable for decision to wait for more favourable time for realisation.
- s15 TA 1925, PRs have wide powers to compound liabilities or compromise claims. Powers include:
. accept property, real or personal, before time it is transferable or payable.
. pay or allow debt or claim on any evidence they think sufficient.
. accept composition (agreement with debtor) or security, real or personal, for any property, real or personal, claimed
. allow time for payment of any debt
. compromise, compound, abandon, submit to arbitration, or otherwise settle debt, account, claim or thing whatsoever relating to estate
- exercise of s15 TA 1925 must be active, PR who has failed to collect debt owing to negligence or carelessness can’t rely on s15 for protection.
- once collected, owe a duty to take reasonable care to preserve them, so should consider exercising power to insure.
Payment of debts
- responsibility of PRs to pay funeral expenses, testamentary administration expenses, debts and liabilities incurred.
- PRs must be aware of assets available to them for payment of debts, defined in s32(1) AEA 1925 and include:
. property in which deceased had beneficial interest
. property subject to general power of appointment exercisable by the Will
. income and assets arising after death
- property not available for payment of debts include:
.property that dec’d was a beneficial joint tenant
. Property not passing into hands of PRs, for ex perished, stolen and no blame attached to PRs.
. trust property, such as life property in favour of named ben
. foreign property
- liabilities arise out of obligations entered into by dec’d and not as a result of obligations incurred by PRs - Homer’s Devisees Case 1852
- inheritance tax due on free estate must be paid to HMRC before applying grant unless instalment option. Creates short term cashflow problem as until grant obtained, PRs cannot have balance in accounts transferred into estate account.
-PRs can be personally liable for inheritance tax due - IRC v Stannard 1984. - bank or building society where dec’d may be prepared (subject to acc balance being sufficient and against indemnity from PRs) make funds available to pay inheritance tax
- debts must be paid promptly - Re Tankard 1942
- PRs should give priority to payment of debts that carry interest to minimise loss to estate and shouldn’t unnecessarily defend actions for debt brought against the estate.
- actions in tort and contract survive by and against the estate.
-PRs liable if they paid debts that were unenforceable or claim that was statute barred - limitation for actions in contract and tort was 6 years and 12 years for land and covenants. - no rule that debts should be paid within exec’s year. Due diligence means they should be paid as soon as assets available to pay them and full extent of liabilities has been ascertained. After end of exec’s year, PRs may still be justified in not making payment, but onus is on PRs to justify the delay.
Ascertainment of debts
- PRs must ensure they have taken all reasonable steps to ensure the debts payable - failure to do so can render them personally liable.
- to get protection from claims of creditors or bens, PRs must advertise in matter laid out in s27 TA 1925, which is:
. advertisement in the London Gazette
. advertisement in newspaper in the area where any land that belonged to dec’d is situated.
. such other advertisements that Court would have directed in administration action. If, for ex. dec’d carried on business, would be usual to advertise in newspaper circulating in area where business situation as well.
- time limit of not less than 2 months must be in notice for claims to be made. Only when time limit expired can PRs distribute without being personally liable for claims they were unaware of. Must also make searches that purchaser of land would make. Even then, creditor or ben can recover assets by tracing then into hands of ben who wrongly received them (s27(2))
- s27 protects PRs against claims by unknown bens, but not where ben is known but cannot be found.
> Aon Pension Trustees v MCP Pension Trustees 2010 - extent to which trustees of pension scheme that was being wound up were protected by s27 adverts. Trustees had forgotten existence of 32 members of scheme, but Ct of A held not protected even though members hadn’t responded to them, treated as having notice they existed, so cannot be protected.
Distribution of estate
- s44 AEA 1925 says that PRs dont have duty to distribute before end of exec’s year. Any direction to make earlier payment in Will can be ignored
Ascertainment of beneficiaries
- PRs must correctly identify and find those entitled to benefit. if existence of ben unknown to PRs, PRs will be protected if advertise and search under s27 TA 1925.
- distribution may be delayed if PRs can’t be sure who entitled, for example if know of existence of ben but cant find them - can apply for Benjamin orders.
> Re Benjamin 1902 - test left residuary gift to X, but X disappeared 9 months before died. Despite advertisements, X didn’t come forward to claim share. Ct permitted distribution on footing that ben had predeceased test. Can be extended to creditors as well as bens.
- Ct may order distribution where child predeceased on basis that child didn’t leave issue who survived testator.
> Re Gess 1942 - administrators for Polish national unable to advertise for Polish claimants as Poland was occupied by Germans in WWII. Knew of some debts and applied to distribute remainder, Ct allowed distribution subject to contingency fund to meet known Polish liabilities without further adverts.
- Ct will direct what enquiries are to be made by PRs involving placing s27 adverts in case ben can response. Once completed, will direct to distribute on footing set out.
- PRs then authorised to distribute estate to existing bens and are protected from liability. If missing ben later appears, may recover their share from any overpaid ben.
- 2 alternatives to Benjamin order:
- Take out insurance policy against possibility of missing ben appearing, premium being paid from estate. Would indemnify them against liability if were to be sued by missing ben - cheapest option.
- Take out indemnity from bens who may be being overpaid, so will reimburse PRs if missing ben appears. Risk that indemnity difficult to enforce and one signed by child ben wouldn’t be valid.
> Evans v Westcombe 1999 - Ct recommend that PRs shouldn’t be discouraged from obtaining missing ben insurance as offers fund to meet claim of missing ben.
- can be more effective than Benjamin order, and in small estates insurance premium can be cheaper than costs incurred to get Benjamin order.
-s27 TA 1925 gives no protection against claims under I(PFD)A 1975
- Presumption of Death Act 2013 sets out procedure that enables those left behind when someone goes missing to get declaration from High Court that missing person deemed to have died. High Court can make declaration if satisfied that missing person has died or not known to be alive for at least 7 years. Ct can say when person is deemed to have died. Procedures set out in CPR PD 57B.
> Greathead v Greathead 2017 - High Court identified factors supporting determination that missing person could be presumed to have died on day they disappeared including:
. they were suffering from clinical mental illness
. there were not able to look after themselves properly
. they were in a very low mood having previously suffered suicidal ideation
. they may not have been taking any necessary medication
. they disappeared without warm clothes, access to money, passport or mobile phone.
. they had no where else to go
. there were severe frosts and heavy snow shortly after they disappeared.
. they had a sore knee and limp, meaning they couldn’t have travelled far on foot
. their money remained untouched.
. they had not been seen or heard of since 2005, despite extensive searches.
- where declaration made, copy will appear in new register for presumed deaths. Certificate will be conclusive as to presumed death and effective for all purposes and against all persons. PRs trying to find missing ben could apply for this by 3rd party in other proceedings instead of getting Benjamin order
Powers of personal representatives
- powers of trustees also apply to PRs, whether or not also trustees as trustee in s35(1) TA 2000 includes PR.
AEA 1925
*Alienation of property - s39 - PRs have powers to sell, mortgage or charge personal property; for land functions of trustees are given to PRs by Part 1 Tolata 1996
*Appropriation - s41 - PRs may appropriate any part of estate in or towards satisfaction of any gift, provided no specific ben is prejudiced. Trust law rule against self dealing - Kane v Radley-Kane and Others 1998
*Appointment of trustees and infant’s property - s42 - PRs may appoint trust corporation or 2-4 persons as trustees of infant’s property but only if infant is absolutely and not contingently entitled.
*Postponement of distribution - s44 - PRs not bound to distribute the estate before end of exec’s year, so bens can’t insist on earlier payment.
TA 1925
*maintenance - s31 (as amended by s8 ITPA 2014) - where prop held for infant ben and gift carries right of immediate income, PRs can apply income for maintenance, education or benefit of infant and must accumulate income not so applied.
*Advancement - s32 (as amended by s9 ITPA 2014) - PRs have discretion to apply up to whole of capital for advancement or benefit of ben who has vested or contingent interest in capital.
TA 2000
*investment - s3 - gives authority to PRs to make any kind of investment that could be made of they were absolutely entitled to property.
*Delegation - ss11-13 - provide for delegation of certain powers to an agent, at such remuneration as PRs think fit
*Insurance - s34 - gives same power to insure as that of beneficial owner.
*duty of care - s1 - imposes duty to exercise such care and skill as is reasonable in the circumstances.
General Powers of Administration
- s39 AEA 1925 provides that PRs have all powers of trustees of land when administering land or proceeds of sale of land.
- s6 Tolata 1996 gives trustees of land all powers of absolute owner, including power to purchase land as income-producing investment, as residence for beneficiary or any other reason.
- must consider interests of all bens before doing so.
- have power under s6 to convey land to adult bens who are absolutely entitled with or without consent and power under s7 to partition land among bens entitled as joint tenants or tenants in common. May be amended or excluded in Will or made subject to obtaining consent of any person.
- consent provision most important when making prop available for residence by ben. Still can include power as can’t purchase using personalty in estate which didnt represent proceeds of sale of land.
-TA 2000 confirms and extends power to allow PRs to purchase land anywhere in UK. - by virtue of s5 Tolata 1996, if Will imposes trust for sale of land, power to postpone sale always implied and no longer permissible to direct that assets sold as soon as possible after death.
Investment
- s3 TA 2000 - trustees empowered to undertake wider range of investments. Can invest in investments they might chose if they were absolutely entitled to assets, but must have regard to duty of care imposed in s1 and take into account of standard investment criteria set out in s4 which directs PRs to consider suitability and diversification of investments. S5 requires them to take appropriate advice before investing unless reasonably conclude that not necessary.
- s8 gives PRs power to buy freehold or leasehold land in UK either as investment or for occupation by ben.
> Daniel and Another v Tee and Another 2016 - sols relied on advice of IFAs and invested in shares prior to collapse in value. Ct held that claimants breached duty of care by not adopting realistic investment strategy and investing in wider range of investments, but not possible to show that losses incurred by breach of duty. Importance of periodic reviews of investment emphasised, as well as recording results of decisions.
Appropriation
- s41 AEA 1925 gives PRs power to appropriate any asset of estate in full and part satisfaction of a legacy, provided it doesn’t prejudice a specific legacy.
- asset valued at date of appropriation, but if exceeds legacy, power not readily available - Re Phelps 1980 - but asset may be transferred for full value, then treated as sale. PRs have to employ qualified valuer. Saves PRs trouble and expense of realising assets they dont want to do and ben agrees to accept asset in lieu of cash legacy left to them.
- doesnt have power to appropriate asset that is already bequeathed to another ben.
- PR must contain consent of ben in whose favour appropriation made. If ben infant or mentally incapable, consent and receipt of parent, guardian or receiver needed. if held on trust, consent of trustee or person entitled to income is needed. PRs must take into account interest of all bens, including those whose consent not needed and unborn bens (s41(5))
Insurance
- previously power to insure assets was given by s19 TA 195. Was limited to fire cover up to 2/3 of market value of the property.
- now, s34 TA 2000 - trustees have same authority to insure as would a beneficial owner - limits have been removed.
Appointment of trustees of an infant’s legacy
- s42 AEA 1925 allows PRs to appoint 2 trustees or trust corporation to receive legacy on behalf of infant who is absolutely entitled.
- otherwise, PRs must continue to hold legacy until infant reaches 18 and can give valid receipt.
- if Will includes legacies to infants, substantial legacy should be dealt with in Will by setting up trust, modest legacy dealt with by providing receipt of parent or guardian will be valid discharge to PRs.
Maintenance
- where estate includes trusts for minor bens, s31 TA 1925 gives power to PRs to make payments from income of estate to parent or guardian, or to apply income or any part of it for maintenance, education or benefit of minor. Must be no prior life interest.
- Even if life tenant willing to consent to payment of income, trustees have no power to do so.
- if PRs dont distribute income for benefit of child, it must be accumulated then available for maintenance in later years.
-s31(2) provides that adult or married minor ben who has contingent gift is entitled to income including accumulations.
