Duties of Personal Representatives
The position of personal representatives is potentially onerous. Personal representatives have significant legal duties. They have many of the same duties as trustees. The succession legislation deems the personal representative to be trustee in respect of assets vested in him. He must exercise his powers with due diligence, care and attention. He must not allow assets to be wasted.
The duties of a personal representative may be enforced against him personally. If he has acted properly, he will be entitled to be reimbursed or indemnified from the estate. Generally, he will only be liable for the estate’s debts to extent of assets received by him. However, he may be made personally liable for failure to discharge duties or in some cases, where he improperly distributes the estate.
The personal representative must ascertain the deceased’s assets (the estate) and collect them in. This may require sale. He must pay the debts and distribute the net assets to the persons entitled. They must be distributed in accordance with the terms of the Will or the intestacy rules. Beneficiaries, creditors and other interested parties may take an administration action to compel the proper administration of the estate.
The personal representative may be required to invest assets, while holding them pending distribution. He must not mix the estate’s funds with his own. He must keep accounts. He must not profit from his office unless specifically authorised by the Will. He must not delegate his duties. He must maintain equality between beneficiaries.
Personal representatives will be liable for contracts and transactions made in the course of administration of the estate. He will generally be entitled to an indemnity out of an estate’s assets, provided he does not act in breach of his duties. If the personal representative converts or uses any estate assets as his own, they may be recovered against him. Misappropriation of assets would potentially constitute fraudulent appropriation under criminal law
Tax and Social Welfare
In addition to obligations under the law of trusts personal representatives have significant obligations under social welfare and taxation legislation. The personal representative can be assessed on behalf of the estate, in respect of the deceased’s business, rental and other income. This includes pre-death income and income arising in the course of administering the estate. See generally our sections on taxation.
There is an obligation on a personal representative to notify the Department of Social Welfare at least three months before commencing distribution of assets, if the deceased was in receipt of any means tested social welfare payment, at any time during his life. The Department may require such information as is necessary for the purpose of verifying entitlement to payments claimed.
The personal representative must facilitate the Department of Social Welfare in inspecting accounts, taking copies of documents and must answer questions. Failure to co-operate, may constitute is an offence prosecutable summarily or on indictment. The Department has a period of [ ] months from receipt of the notice, in which to make a claim.
Claims may be made on the basis that the deceased’s assets exceed those declared.
Where the personal representatives distribute assets without having undertaken the necessary obligation, they may be personally liable. The Department may recover sums due by way of a debt within three years of the date of delivery of the return.
Protection afforded by Grant
The grant of representation may be dispensed with, in some limited cases. Financial institutions, mutual societies, trade unions, credit unions and other such bodies may permit the transfer of small accounts below certain thresholds, with proof of death by a Death Certificate, evidence of relationship and / or copy Will. However, a grant of representation will usually be required to prove the authority of the personal representatives to deal with the assets.
Apart from the authority conferred by a grant of representation, a person representative is protected by the grant. If he makes a payment in good faith under a grant, he is protected, notwithstanding that it may later emerge, that the grant was invalid because, for example, that another later will exists. Similarly , a payment of monies due to the deceased, to a person to whom a grant has issued, is protected notwithstanding that the grant later turns out to be invalid.
The general principle is that a personal representative is personally liable for the deceased’s debts, if he distributes the estate to beneficiaries without taking account of them. Because of the harshness of this rule, the Succession Act provides a procedure by which the personal representative may obtain protection. The personal representatives must issue notice to creditors and anyone else with a claim. If having made such notices they receive no notification of the claim they may proceed to distribute the estate and be protected against the risk of personal liability.
It is not specified in the legislation what constitutes appropriate notice. Generally an advertisement is placed in a national newspaper for two weeks consecutively and an advertisement is places in a regional newspaper where the deceased lived. The notice will specify the name of the deceased and notify the public that the personal representative proposes to distribute the estate. It requires persons with a claim against the estate to contact the personal representatives or their legal advisers within a period.
If assets are distributed following notice, the personal representatives are protected against creditors. However the creditors may be able to “trace” the monies into the hands of the recipients. They may be able to recover sums paid to the beneficiaries extent under the equitable remedy of tracing. See our section on equitable remedies.
Sale and Appropriation of Assets
Generally, a beneficiary’s entitlement to the deceased’s assets is a chose in action rather than a right to a particular asset (unless specifically left). A chose in action, is the right to enforce a claim by litigation (here an administration action). Once the assets are sold, the rights of the beneficiaries apply to the proceeds of sale.
The personal representatives have a power to sell the deceased’s assets for the purpose of paying debts or liquidating the estate for the purpose of paying benefits under the Will or intestacy. The personal representatives are obliged to consult with beneficiaries over full age, who have an interest in a property concerned. They must not necessarily follow their wishes, but must take account of them.
Personal representatives have power to appropriate any part of the estate of the deceased in its actual condition or state of investment towards or in satisfaction of any share. This is not equivalent to an actual bequest of the thing concerned, but is something given in satisfaction. An appropriation may only be made with the consent of the beneficiary. If the person is of unsound mind or underage his guardian or committee may consent.
The personal representative must serve notice of intention to exercise the power of appropriation on all persons entitled to a share. The persons concerned may challenge the proposal within six weeks of receipt of notice. Application may be made to Court, which may prohibit the appropriation if the formalities have not been complied with or if it would operate unjustly or inequitably as between beneficiaries.
The requirement for notices does not apply to an appropriation of the family home and its contents to the deceased’s spouse. The family home and its contents may not themselves be appropriated towards other benefits. Indeed, the family home and contents may be appropriated to the surviving spouse, notwithstanding that it affects or even reduces other benefits.
Where a benefit passes under a Will or intestacy to a person under the age of 18, the personal representatives may appoint trustees to hold the share concerned. If they do so, they may hold the share as trustee for the minor. In this case, the personal representative or other trustee has the powers of a trustee to advance capital and income for the education, maintenance and benefit of the minor. See our separate section in relation to trustee powers in respect of minors’ assets.
The personal representatives’ powers may be spelled out in the Will. In the absence of being set out, the law implies certain powers, which are necessary for the purpose of administering the assets. These are relatively few at present, but are likely to be expanded in forthcoming trustee legislation.
Personal representatives have various implied statutory powers in relation to the following:
- Power of sale (see above)
- Power of appropriation
- Power to grant of leases
- Power to charge or mortgage assets
- Power to pay debts or discharge legal right share;
- Powers of trustee of land under Conveyancing Act;
- Powers to compromise debts due.
The powers provided for personal representatives by law are minimal and will often not be sufficient for ongoing complex requirements are involved. Notoriously, there is no power to trade a business so that the personal representatives may be obliged to sell and realise it. It is desirable to ensure where any business is comprised in the estate, that the trustees have appropriate powers to carry on business.
Types of Grants of Representation
There are provisions for various types of unusual grant to cover particular scenarios. They include the following:
- A grant to an attorney of an executor in his absence;
- A grant to enable the deceased’s estate to be represented in legal proceedings;
- A grant where the original Will is lost which is limited by the possibility of to the production of the original Will;
- Grants to assist the commencement of litigation;
- Grants to permit collection of assets but not distribution;
- Grants to part of an estate.
Where the personal representative dies without having administered the estate, a second or subsequent grant may be made. The grant applies to the unadministered part of the estate.
Creditors and Insolvency
An executor who has reserved his rights, may extract a grant of probate, known as a double grant. Where an estate is insolvent, it must be administered in accordance with the bankruptcy rules. The personal representatives must pay the claims in the following order:
- Payment of funeral, testamentary and administration costs;
- Payment of secured creditors;
- Payment of preferential creditors (see our bankruptcy section);
- All other debts pari passu.
If there are insufficient funds to pay any of the above categories, they abate proportionately. If assets are not correctly administered, a person receiving a benefit may require that these assets be reapplied in the correct order.
Secured creditors have priority, in that they have direct recourse to a particular asset. See our section on insolvency and the rights of mortgage in relation to claim for any shortfall not covered by the security. Preferential debts are only preferential in respect of certain time periods, prior to death.
A personal representative has a right to pay debts due to himself in priority to other equal ranking debts. This only applies if the estate is solvent. A personal representative who pays a creditor who ranks equally with another is protected, provided that he acts in good faith.
The funeral, testamentary and administration expenses must be paid first. Next follow the debts and liabilities. The legal right share of a spouse has next claim in order. Provided there are sufficient assets to pay all the specific benefits and legacies, then the remaining assets, will go to the “residue” however large or small that may be.
If, there is insufficient assets to pay the specific gifts and legacies, each class is to abate proportionately i.e. the rank pari passu or equally. If assets are not correctly administered, a person receiving a benefit may require that these assets be reapplied in the correct order.
In paying the above expenses, debts and legal right share, the personal representative, the first assets to which has dealt with by the Will or disposed of. Monies to meet monetary benefits must be retained. The next class of assets are those not specifically devised but included in the benefit of the residue / remainder part subject to retention of funds to meet monetary gifts if not already provided.
- Property specifically appropriated or transferred for payment of debts;
- Property charged or given subject to a charge for payment of the relevant debts;
- Fund if any to meet pecuniary monetary gifts;
- Properties specifically given proportionately according to value;
- Property appointed under a general power of appointment.
If benefits paid to a particular group must be used for payment of debts, expenses or the legal right share, they are to reduce proportionately.
Completion of Administration
A personal representative must complete administration as soon as reasonably practicable. What this requires, depends on the entire circumstances. Personal representatives cannot be sued for failure to distribute assets within a period of the year without consent of Court. Creditors can make an immediate claim.
Property is vested in the beneficiaries by means of a written document called an assent. An assent may be registered in the Registry of Deeds of Land Registry. There is a specific form prescribed by Land Registry rules comprising an application form of assent.
Generally purchasers and third parties dealing with personal representatives in good faith obtain good title to assets transferred. Provided they are not aware of any irregularity they are not bound by it.
Claims that existed against the deceased before his death must be made within two years. The Civil Liability Act prescribes this period.