There is often a lot of uncertainty over the duties of personal representatives administering a deceased’s estate and also how much information beneficiaries are entitled to regarding the value and administration of the deceased’s estate. This blog provides a general summary for personal representatives and beneficiaries but should not be a substitute for specific legal advice.
Generally speaking, in order to administer a deceased’s estate and distribute assets, the personal representatives need first to apply for a grant of probate or letters of administration. The application for the grant requires disclosure of the assets and liabilities of the estate, completion of an inheritance tax account where required and the completion of a statement of truth. Where tax is due on the estate, this must usually be paid before the grant is issued.
The content of the statement of truth signed by personal representatives reflects the statutory duties of the personal representatives (Section 25, AEA 1925):
- Collect and get in the real and personal estate of the deceased and administer it according to law.
- When required to do so by the court, exhibit on oath in the court a full inventory of the estate and when so required render an account of the administration of the estate to the court.
- When required to do so by the High Court, deliver up the grant of probate or administration to that court.
The personal representatives have a duty to pay the deceased’s debts. Where the estate is solvent there is a statutory order in which assets should be applied to meet the deceased’s debts as set out in Schedule 1 Administration of Estates Act 1925. Where the estate is insolvent the creditors rank in the order set out in the Administration of Insolvent Estates of Deceased Persons Order 1986 and the Insolvency Act 1986.
As well as paying debts, the personal representatives have a duty to safeguard assets and where the assets are unlikely to be distributed for some time, there may be a duty to invest the assets. The personal representatives should review the statutory duty to invest as well as any duties included in the deceased’s will in order to ascertain the scope of their powers in relation to investing the deceased’s assets. It may also be prudent to obtain professional advice from an investment adviser or appoint an investment manager.
In terms of a time limit for distributing the deceased’s assets in accordance with the will or the intestacy rules, the Administration of Estates Act 1925 provides that a personal representative is not bound to distribute the estate of the deceased before the expiration of one year from the death (known as the rule of the ‘executor’s year’). Despite its wording, this rule applies to both executors and administrators. Of course, many estates will take far longer than a year to administer, for example where the inheritance tax position is under negotiation with HMRC or real property is proving difficult to sell. Provided there are good reasons for the delay and the personal representatives are acting honestly and reasonably, there should be no repercussions for administration taking longer than a year. Nevertheless, if an interim distribution can be made whilst sufficient assets are retained to cover any unascertained debts, assets should not be unnecessarily retained by the personal representatives. Personal representatives should also ideally provide an explanation to creditors and beneficiaries if the administration is delayed beyond the executor’s year.
Personal representatives have a duty to prepare and keep estate accounts. Beneficiaries and creditors can request sight of the estate accounts and if this is refused they can apply under the Administration of Estates Act 1925 for an inventory and account to be provided. Nevertheless, it is good practice for personal representatives to provide full estate accounts to residuary beneficiaries of an estate as a matter of course, which should demonstrate the final residual figure after the payment of liabilities, expenses and legacies, and the receipt of income.
In terms of the disclosure of other documents to beneficiaries, there is no automatic entitlement to disclosure but the personal representatives can exercise their discretion to disclose. If an application is made for disclosure, the court will review the reasonableness of the personal representatives’ conduct and may order additional disclosure or determine that there is no reasonable entitlement in the circumstances. It is likely that documents reflecting the circumstances surrounding decisions made by the personal representatives will be disclosable but it is unlikely that the court will order documents that show the personal representatives’ deliberations or the reasoning behind their decisions. Conversely, professional advice about the administration of the estate which is paid for from the estate funds is likely to be disclosable to a beneficiary.
If you require advice in relation to estate administration or a potential or actual estate dispute, please contact Alison Broadberry – Head of Private Client, Nick Giles – Consultant, Michael Reynolds – Senior Associate, Brendan O’shea – Senior Associate, or any member of the Edwin Coe Private Client team.
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