3. Procedure for Administration PDF

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Procedure for Administration...

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Probate Procedure 1. Who are PRs? When a person dies, his assets will be transferred into the names of his beneficiaries. To do this, it is necessary for the deceased's personal representatives to obtain a court document - called the grant of representation - to authorise them to transfer his asset.

Executors

How are they appointed ?

Appointed by will: (a) there must be a valid will, (b) which contains an effective appointment of executors, and (c) one or more of the persons named is willing and able to prove the deceased's will

Administrators

Appointed where: (a) there is a valid will, but the persons named as executors are not willing or able to act as executors  appointed in accordance with S20 Non Contentious Probate Rules 1987 (b) there is no will, or no valid will  appointed in accordance with S22 Non Contentious Probate Rules 1987)

When do they have authority to act?

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Authority to act stems from will and is immediate.

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Powers are limited until they obtain the grant.

The Grant

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Grant of Probate

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Grant of Administration (with or without will annexed)

Confirms the authority of the executors which stems from the will and arises from the time of the testator's death.

How many are required to distribute the estate?

Oath

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1 executor may obtain he grant and act alone. Maximum of 4 can be appointed.

Confers authority to administrator and vests deceased's property in administrator

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1 administrator will be sufficient (but 2 administrators are required where will creates a life or minority interest unless court allows only one (S114 Senior Courts Act 1981) Maximum of 4 can be appointed.

Person Requirements  Anyone over 18  Under 18s can have power reserved to them but cannot take the grant  Where spouse appointed and marriage subsequently ends, the appointment fails unless the testator showed a contrary intention (S18 WA 1837). Oaths for Executors (& other oaths generally)  Give details of deceased  Set out basis of applicant's claim to take grant  Applicant swears he will administer the estate correctly  Exhibit the will (for executors and administrators with will annexed)  Swear to value of the estate passing under the grant.  Include gross value of property (not including property passing outside of the grant) and net value of property (after deduction of debts) (a) If a Category 1 exempted 'small' estate, swear that an IHT account is not necessary  state that gross estate does not exceed nil rate threshold (don't need to give exact value of property).  round up net estate to nearest £1k and state the property doesn't exceed that figure. (b) If Category 2 'exempt' estate, swear IHT account not necessary but give exact figures for gross and net property passing under the grant.

Oath for administrators with will annexed 30.10

Oath for administrators 30.11

NCPR 1987, R20

NCPR 1987, R22

Order of priority: (a) the executor (b) any residuary legatee or devisee holding in trust for someone else  e.g. no executor; but left residue to A, to hold on trust for B (c) any other residuary legatee/devisee  i.e. those entitled to share in residue by virtue of intestacy rules. (d) PRs of any of the above (e) any other legatee or devisee (f) PRs of any legatee or devisee

Order of priority: (a) Surviving spouse or civil partner (b) Children of the deceased (and their issue) (c) Brothers and sisters of the whole blood (and their issue) (d) Brothers and sisters of half blood (and their issue) (e) Grandparents (f) Uncles and aunts of the whole blood (and their issue) (g) Uncles and aunts of the half blood (and their issue)

Clearing off Anyone applying for the grant (i.e. who isn't executor) must "clear off" other applicants by explaining on oath why they should take the grant because there is no one in a higher category available.

Must have a beneficial interest in the estate by virtue of the intestacy rules  work out who is entitled under the intestacy rules  work out who has priority

Example Oath

Clearing off & Example Oath  Surviving spouse - no need to clear off as has the highest priority.

(b) "no executor was appointed in the will and we are the residuary legatees holding on trust named in the will"

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(c) "the [executor and/or trustee] named in the will has [renounced probate] or [predeceased the deceased] and I am the residuary legatee and devisee named in the will." (d) "the executor predeceased the deceased and the sole residuary legatee and devisee named in the said will survived and deceased and has since died without having proved the said will and I am the executor of the deceased residuary legatee and devisee"

No surviving spouse "deceased died INTESTATE [a bachelor/spinster/widower/widow..."

Then add "...[without issue or parents or brothers and sisters of the whole blood or their issue]" As appropriate if clearing off categories higher than the applicant.

(e) "the [executor and/or trustee and/or residuary legatee and devisee] named in the will has [renounced probate] or predeceased the deceased [and the deceased died a bachelor without issue] and I am [the mother of the deceased]"

Swear / Affirm the Oath Before sending the Oath to the Registry, The PRs must swear or affirm the truth of its contents in the presence of a commissioner for oaths or solicitor (neither of whom must be connected with the firm of solicitors acting for the PRs).  Affirm - "I do solemnly sincerely and truly declare and affirm that..."  Oath - hold New Testament or Bible whilst saying "I swear by Almighty God that..."

2. Is a grant of representation necessary? The Grant of Representation enables the PRs to prove they have the authority to deal with the deceased's assets that pass under the will and intestacy rules. However, it is not always necessary to obtain a grant of representation to deal with assets: 1. Assets not passing through PR's hands (e.g. joint property, pension benefits etc) 2. Chattels and cash found in the deceased's property can also be dealt with by PRs without authority of grant 3. Assets not exceeding £5000 can pass to PRs before grant is issued, at discretion of the institutions who hold them (Administration of Estates (small Payments) Act 1965). Payments can be made in respect of: (i) money in National Savings Bank and Trustee Savings Banks (but not in other bank accounts) (ii) National Savings Certificates and Premium Bonds (iii) Money in building societies and friendly societies

3. Applying for the grant of representation Apply to Principal Registry of Family Division or to district probate registry by lodging the following documents (a) deceased's will plus two copies. must be signed by executors/administrators and the solicitor before whom the supporting oath is sworn/affirmed. ***Check that the will is valid in accordance with requirements of a valid will*** (b) the oath sworn or affirmed by executors/administrators ***Ensure the correct oath is sworn as noted above*** (c) any affidavit which may be required ***These may be required by the registrar, see (30.5.2)*** (d) receipted HMRC Form IHT421 (confirming payment of IHT) or Form IHT205 if estate is 'excepted' ***Work out whether IHT is payable on the estate and pay this first*** (e) probate court fees (admin fee based on value of net estate passing under grant)

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If the documents are in order the registrar will issue the original grant, sealed with court seal and signed by him (though the registrar may require additional evidence in some cases, e.g. an affidavit).

Inheritance Tax Calculating the Value of the Estate IHT 400   

List of all the assets deceased was beneficially entitled to, and the PRs sign it to declare it is true. Without it no grant of representation can be obtained - need receipted IHT421 to send to Probate Registry Must be submitted within 12 months from the end of the month in which death occurred (e.g. 10th January 2013 death, must be submitted by 31 January 2014). If submitted late, all tax due must be paid at the same time.

However:  

It only needs to be prepared if the estate is not an excepted one. NB: If estate is exempted and subsequently found not to be an exempt estate, IHT400 must be submitted within 6 months.

Excepted Estates   

No need for an IHT 400 account to be submitted. When submit application to Probate Registry, submit Form IHT205 (or Form IHT207 for non-domiciled estates) For deaths on or after 1 September 2006 ONLY

Category 1: Small Estates (30.7.1, pg375) (a) Deceased died, domiciled in UK (b) Where gross value of estate does not exceed £325,000  Gross estate includes: (a) survivorship (i.e. share in joint tenant property) (b) will (c) nominated property (d) interest in possession (e) PETs/LCTs made in previous 7 years now chargeable (f) NOT property held on trust, life insurance policies/pension schemes to a named person. (g) DON'T deduct debts for the purpose of establishing gross estate (c) Not more than £100,000 represents property outside the UK and not more than £150,000 represents settled property (i.e. property held in trust) (d) PETs/LCTs in the previous 7 years now chargeable must not exceed £150,000 (ignoring business/agricultural relief)

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Where death occurred after 6 April 2010, if a pre-deceasing spouse did not use ANY of their nil rate band then they can be aggregated - may be £650,000 or £325,000. For deaths before 6 April 2010, or where the pre-deceasing spouse did use any of their nil rate band, don't aggregate them.

Category 2: Exempt Estates (30.7.1, pg376) (a) Deceased died, domiciled in UK (b) Where gross value of estate plus specified transfers (PETs/LCTs) does not exceed £1,000,000 and the net value of the estate does not exceed £325,000. 

Gross estate includes property passing by: (a) will (b) survivorship (i.e. share in joint tenant property)

(c) nomination (d) interest in possession (e) PETs/LCTs made in previous 7 years now chargeable (f) NOT property held on trust, life insurance policies/pension schemes to a named person. (g) DON'T deduct debts for the purpose of establishing gross estate

(c) Not more than £100,000 represents property outside the UK and not more than £150,000 represents settled property (i.e. property held in trust) (d) PETs/LCTs in the previous 7 years now chargeable must not exceed £150,000 (ignoring business/agricultural relief) (e) The net value of the estate (after deducting the spouse/charity exemptions, and debts) must not exceed £325,000

Category 3: Non-Domiciled Estates Where deceased has only limited assets (below £150,000 in cash and shares) in the UK and was never treated as domiciled in the UK.

Miscellaneous

Finding Missing Beneficiaries Typical situations:  

Unknown whereabouts of a beneficiary who may have lost contact with deceased's family Unknown relatives or creditors

Legal Problem: PRs must administer the estate correctly by collecting the assets, paying all debts, and transferring the remainder the beneficiaries under the will. The PRs will be personally liable for any failure to pay a beneficiary who is entitled from the estate. Potential creditors/claims from beneficiaries you don't know about 1. Give notice of intended distribution of the estate, requiring any person interested to send in the particulars of his claim, whether as a creditor or beneficiary: (a) Advertisement in the London Gazette, (b) advertisement in local newspaper, and (c) Any other vehicle appropriate in the circumstances. NB: execs can advertise at any time after death, but administrations need to wait until after obtained grant 2. Wait a minimum of 2 months from the date of notice and in the meantime make searches at the Land Registry, Land Charges Register, Local Land Charges Registry as appropriate to reveal the existence of any liability in relation to the deceased's ownership of an interest in land (e.g. second mortgage) 3. On expiry of deadline, distribute the estate only to claims which they have actual knowledge, or discover as a result of the advertisements. 4. Under S27 TA 1925, PRs not personally liable for any other unknown claim but beneficiaries can still follow assets into hands of beneficiaries who have received them from PRs 5.

However, S27 won't offer protection where PRs do know of other claims but cannot find him. In this case: (i) Take an indemnity from other beneficiaries to meet the claim if he appears - dangerous as beneficiaries may have no assets when claimant appears (ii) Keep back the portion of the assets in question until the beneficiary appears - unpopular with other beneficiaries (iii) Take out insurance to cover any liability (might be expensive and difficult to estimate what sum to insure) (iv) Apply to court for a Benjamin Order (B is considered dead and if he does appear, he has the right to recover from the other beneficiaries but not the PRs) - expensive process but offers PR full protection

NB: Advertising under S27 does not protect beneficiaries from claims from unknown beneficiaries.

Chain of Representation 30.14 Where an executor who has taken out a grant of probate dies without completing the administration and appoints someone as his own executor, that person will automatically become the executor of both estates where they take out a grant of probate (S7 AEA). It is not possible for the executor to accept the office of executor to one estate and refuse to be executor of the other. Where there are no successive executors, the chain of representation will be broken and a grant de bonis non administratis must be obtained to the original estate which will issue to the person who would have been entitled had the original PR never taken the grant. The requirements are set out in 30.14.3.

Caveats 30.15.1

NCPR 1987, R44  

Prevent issue of grant of representation Where a person - 'caveator' - challenges the person named in the will as executor, e.g. where they lack mental capacity

Citations 30.15.2 

issued by the Probate Registry at the request of the beneficiary (citor)

Citation to take probate  where executor loses right to renounce (e.g. by impliedly accepting the role) but hasn't applied for grant within 6 months of death and shows no signs of doing so.  Once cited, executor must proceed with application for grant of probate  If he does not, citor can apply to court for an order allowing executor to be passed over and a grant of letters of administration with will annexed to issue to the persons entitled under NCPR 1987 R20. Citation to accept or refuse a grant  Standard method of clearing off a person with a prior right to any type of grant who has not applied and shows no intention of applying for a grant. Example: A appoints B as his executor and C as the residuary beneficiary. B takes no steps towards administering estate or proving the will. C can cite B, and if B does nothing, C may apply by virtue of NCPR 1987 R20 for a grant of letters of administration with will annexed.

Alternative to Citation  Apply to Probate Registry under Senior Courts Act 1981, s116 for an order passing over the person unwilling to act as executor in favour of someone else (Re Biggs)....