SQE2 PRs Duties and Powers Flashcards
Duties of PRs
- reasonable steps to preserve estate, realised investments which is not proper for them to retain
- pay off estate debts and distribute assets in accordance with will/intestacy
- Trustee Act 2000
- act with reasonable care and skill, taking into account any specialist knowledge or experience
- fundamental duty to act in best interest of beneficiaries
What is a PRs Liability for breaches of another?
Not liable unless they acted negligently
Powers of PRs
- Power to Sell, Mortgage or Lease
- Power of Appropriate
- Power to accept receipts for a minor’s property
- Power to Insure
- Power to Delegate
- Power to Indemnify for Expenses
- Power to run deceased’s business (if given in will)
- Power to invest (standard investment criteria applies)
- Power to Maintain a Minor
- Power to Advance Capital
When can a PR use appropriation? When can it be used in theri own favour?
- Consent of beneficiary
- unless contrary intention in will - for own benefit
- to satisfy pecuniary legacy only for moneys worth
- unless contrary in will
Options to get valid receipt from minor?
- Pay into court
- hold themselves as trustee
- Appint trustee
3 If will permits
- accept valid receipt if beneficiary is over 16
- accept valid receipt from parents
How can PRs delegate power?
- free to do so on terms they decide
- Must review with agent (unless will says otherwise)
Liability
- only if breached duty of care or failed to review
When can PR use power to run deceased’s business?
Sole Trader
- Can only carry on if they do so to sell it as going concern
- Or if will gives them power to run it
Partnership or Company
- PA or Articles to be consulted
What can PRs not invest in under power to invest?
Subject to will
Cannot invest in:
- land aboard
- land with someone else
- Standard Investment Criteria
- must be suitable and diversified
How is PRs power exercised if there are multiple?
General
- have joint and several authority to act of one binds the other
Land / shares
- if there are multiple PR’s all must join for transfer of land and shares
How can PRs protect themselves against unknown beneficiaries/creditor?
- Take out ads calling them to come forward in 2 months+
- London Gazette
- local newspapers
- relevant trade publications - Search for:
- creditors of land
- bankruptcy search
How can PRs protect themselves against future and contingent liabilities?
- Estimate and set aside appropriate amount,
- Seek indemnity from beneficiaries
- Arrange insurance and distribute estate
- Apply to court for directions
How can PRs protect themselves against claims of missing beneficiary’s or creditors?
- Pay amount into court
- Indemnity from beneficiaries
- Insurance (need full inquiry)
- Benjamin Order (full enquiry)
How can PRs protect themselves against claims unpaid inheritance tax after 12 months?
- HMRC will not pursue if it remains unpaid by recipients, if PRs have made full inquiries and obtained certificate of discharge
What happens to claims of/against deceased?
PR’s have power to bring, defend, settle claims
When is estate insolvent
Cannot pay:
- reasonable funeral expenses
- IHT
- Cost of obtaining grant
- cost of collecting, preserving and distributing assets
- pay other debts/liabilities
How are debts paid in solvent estate
- Secured Debts
- against security
- excess is unsecured debt
- subject to “free of mortgage” - Unsecured
- partial intestacy
- residue
- subject to rescue being free of debt
What if residue is not to be used to pay debts
- property given for purpose
- pecuniary legacy fund (proportionally)
- Property gifted (proportionally)
What can beneficiary do if PRs incorrectly use their assets to pay debts?
Doctrine of Marshalling
- paid our of residue
What can protect PR’s from Liability for incorrectly paying creditors in insolvent estate?
- Pay inferior debtor with no notice of superior creditor
- if did not act with undue haste - Pay 1 creditor in full before another in same class
- acted in good faith and no reason to believe estate was insolvent
Order of payment in insolvent estate?
- Costs
- Preferred creditors (£800 each(
- Ordinary Creditors (inc. HMRC and preferred for balance)
- Interest to ordinary creditors
- Deferred creditors (family)
How can beneficiary refuse gift?
- Disclaimer
- only if not accepted benefit
- must be all or nothing
- should be in writing for tax purposes
- falls to residue/intestacy
- may revert back to them in intestacy - Variation
- can appoint replacement
- for tax purposes should be in writing (Deed of Variation), not for monetary consideration and within 2 years of death
How are Pecuniary Legacies typically paid?
- Starting point is residue paid from residue (unless provided otherwise)
- if residue is insufficient beneficiaries are paid in proportion
- appropriation may be used (with beneficiaries consent)
How are specific legacies paid to beneficiaries (chattels, shares and land)?
Chattels
- Transfer achieved delivery, in return for receipt
- Insurance should be cancelled
Company Shares
- Stock transfer form completed and sent with office copy of grant and the share certificate
Land
- Transfer requires assent in writing
- Insurance should be cancelled
- Beneficiary must register interest at HMLR
When might a certificate of discharge not protect a PR?
Certificate not effective where:
- Fraud;
- Failure to disclose material facts;
- Subsequent discovery of further assets; or
- Changes in inheritance liability
