| The Duties of a Personal Representative |
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7 August 2009 By Mark Jones, Partner, Private Client Law When clients ask us to deal with estates for which they are Personal Representatives (PRs) they often have little or no experience of what is involved. Sometimes, they do not know what is expected of them. This article is intended to ease some of the common concerns by explaining what the job of a PR involves. What is a PR?
A PR is a person who has the legal right and responsibility to deal with the estate of someone who has died. This responsibility can come about in two ways. If there is a will it will appoint someone to take on the role, known as an ‘executor’. There are commonly two executors who will act together, but there may only be one and can be as many as four.
If there is no will, the law specifies who is entitled to deal with the estate and that person, often a family member, is known as an ‘administrator’. The phrase ‘Personal Representative’ refers to both executors and administrators. You might also hear the terms ‘executrix’ and ‘administratix’. These are simply the female equivalents of executor and administrator.
Basic Duties
PRs are responsible for the affairs of the deceased after his or her death. They must administer and wind up the deceased’s estate. Broadly, this involves:
In order to carry out these duties it will usually be necessary to obtain a document known as a ‘Grant of Representation’, which is referred to below.
Initial Actions
Even before considering these basic duties, there are certain practical matters for the personal representatives to deal with in the days following the death. For example:
Beginning to deal with the Assets
One of most important initial duties for PRs is to sort carefully through the papers of the deceased in order to identify the deceased’s assets and liabilities. Alternatively, PRs can decide to instruct solicitors to deal with the estate and take on the responsibility of carrying out this often difficult and time consuming task. An experienced solicitor will be able to use his or her experience to recognise what is important and what is not. Once the assets and liabilities are clear, it will normally be necessary to contact the relevant institutions to obtain valuations of the assets and liabilities up to the date of death in order to calculate the value of the deceased’s assets. Depending on the size of the estate, this may take some time.
The personal representatives should also carefully check the will to identify who the beneficiaries are, and it is courteous, at this stage to contact them to notify them of their potential inheritance.
Applying for the Grant of Representation
In all but the most straightforward estates it will then be necessary for the personal representatives to apply to the Probate Registry for a Grant of Representation (‘the Grant’). Where there is a will this is also usually known as the ‘Grant of Probate’ and where there is no will it is a ‘Grant of Letters of Administration’. (There are other types of Grant which are very occasionally required depending on the circumstances). The Grant serves two main purposes. First, it confirms that the Probate Registry consider the will to be valid (where there is one). Secondly, it confirms that the PRs are the correct persons to deal with the assets in the estate and provides a legal guarantee to institutions such as banks, building societies and company registrars that they are dealing with the right people.
Inheritance Tax
At present, inheritance tax is payable at 40% on the taxable assets in an estate over and above the first £325,000 after allowing for any liabilities of the deceased that were outstanding at the date of death, and the funeral expenses.
Some assets can be free of tax or taxed at a reduced rate (e.g. business or agricultural assets) and no tax is payable on assets passing to certain beneficiaries, such as charities and spouses or civil partners.
Because of the complex nature of inheritance tax, personal representatives in estates above the threshold should, in our opinion, consider obtaining appropriate legal advice.
In all cases details of the estate must be given to HM Revenue & Customs and where tax is payable a full account must be submitted to the Capital Taxes Office and most of the tax must be paid (the tax on some assets may be deferred) before the Grant can be applied for. This sometimes poses a practical problem, as the deceased’s assets will generally be frozen until the Grant is received which can occasionally make it necessary for the PRs to arrange a short term bank loan to pay the tax until funds can be released from the estate when the Grant comes through.
Once the tax has been paid, or if no tax is payable, a separate form known as the Oath for Executors or Oath for Administrators must be submitted with the will to the Probate Registry to apply for the Grant.
Time Scales
The time it takes to apply for the Grant depends on a number of factors, such as the size of the estate, the number and complexity of the assets and, of course, how quickly the PRs start to deal with matters after the death. As a rough guide, however, in most of the average sized estates that we deal with we expect to be in a position to apply for the Grant within two months of being instructed if no tax is payable and between three to four months if tax is payable.
After the Grant is received
Once the Grant is received, the PRs will be in a position to deal with the assets. This might involve selling assets or transferring assets directly to various of the named beneficiaries. This can be done by providing the appropriate forms and official copies of the Grant (known as office copies) to the asset holders. Again, the length of time that this takes will depend on the nature of the assets themselves. Bank accounts might be closed quickly, but if there is a house to sell the time scale might depend on how quickly a buyer can be found.
The PRs can also then pay any outstanding liabilities of the estate, pay any cash legacies and finalise the inheritance tax, income tax and capital gains tax affairs of the estate and the deceased. The inheritance tax position in particular can take some time to deal with. The Capital Taxes Office is entitled to raise such queries as it sees fit to satisfy its officers that the assets and liabilities have been correctly valued and that any reliefs that are claimed are properly due. In complex estates this can take many months.
Estate Accounts
Once the PRs are sure that all aspects of the estate have been dealt with, estate accounts will usually be prepared to summarise the financial position and show what is left over to be distributed to the beneficiaries who are entitled to the residue of the estate (‘the Residuary Beneficiaries’). Although these accounts strictly only need to be approved by the PRs it is often wise to have them approved by the Residuary Beneficiaries too. The Residuary Beneficiaries will naturally want to know how the balance paid to them has been calculated, and if they approve the accounts before the estate is distributed the personal representatives can be sure they will not raise questions later.
Distributing the Estate
When the estate accounts have been approved, the final task of the PRs will be to distribute the balance of the estate to the Residuary Beneficiaries. The beneficiaries are usually asked to sign a receipt and to release the PRs from any further obligations.
Again, there are timing issues. First, the estate should generally not be distributed until at least six months have elapsed after the Grant is issued (for technical reasons to do with the time limit for claims against estates).
Secondly, PRs are often well advised to place notices, known as ‘statutory advertisements’ in a local newspaper and the London Gazette which can protect them from claims by any unknown creditors of the estate and the estate should not be distributed for at least two months after they are published. The notices are often submitted in the early part of the estate, however, to ensure that the two months will expire long before the PRs need to make a distribution.
This is intended as an initial guide to the usual stages in the administration of an estate and the precise requirements will differ from case to case depending on the circumstances. If you choose to instruct Barber Titleys to act for you we will deal with most of these steps for you and your involvement can be as much or as little as you wish.
Contact our team for more information.
Disclaimer: Please note that the information in this article was correct at the time of writing and we encourage people to always contact an expert for the most up to date advice for their specific situation.
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