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When a loved one passes away, they will usually own a number of assets such as a property, cash in their bank accounts and their personal effects (such as jewellery or a car). All these form part of that person’s estate, and they must be managed and distributed properly, otherwise there can be significant legal consequences.
A Personal Representative is someone who is appointed to manage and settle the Deceased’s estate. They have a fiduciary duty to act in the best interest of the estate and its beneficiaries, and a statutory duty to exercise reasonable skill and care in this role. When there is a valid will, the Personal Representative is usually referred to as an ‘executor’, however the Deceased may die without a valid will, which is known as intestate estate. In these circumstances, there are then rules (known as the rules of intestacy) which govern which family member is entitled to act in this role as an ‘administrator’.
The role of the Personal Representative is one with many duties and responsibilities which, depending on the size of the estate and its complexity, may require the appointment of someone with legal knowledge and experience. The Personal Representative’s duties begin immediately upon the Deceased’s death (where there is a will) or their appointment.
The Personal Representative needs to secure the estate by knowing what is in the estate and taking proactive steps to make sure that estate assets are not damaged or have their value depreciated. In some circumstances, the Personal Representative requires the approval from the beneficiaries before taking certain action to deal with an estate asset. A Personal Representative acting inappropriately in the role by self-dealing, making a personal profit, or not consulting the beneficiaries, can result in a claim being brought against them by the beneficiaries.
Once the assets and liabilities of the estate are identified, the Personal Representative must promptly apply for a Grant of Probate (or letters of administration if the estate is intestate). Upon receiving the Grant, the Personal Representative has the necessary authority to collect in and ultimately distribute all of the assets, after settling any estate expenses or liabilities.
One of the most challenging duties that the Personal Representative has, is dealing with Inheritance Tax. They must calculate whether Inheritance Tax is due and complete the relevant forms for submission to HM Revenue and Customs. The Personal Representative is responsible for making sure that there are sufficient funds in the estate to make payment of the tax owed. Failure to pay tax correctly or on time will result in penalties and can cause interest to accrue. It is often wise for a Personal Representative to seek advice from a professional in circumstances where there is tax to pay, such as a solicitor or an accountant.
There are payments that must be paid from the estate before it can be distributed, these are usually the outstanding liabilities, debts and the funeral costs of the deceased. Once the estate’s liabilities, expenses and taxes are settled, the Personal Representative is now under a duty to distribute the remaining assets to the beneficiaries. Distribution takes places in accordance with the Will, if there is one. If not, distribution will be governed by rules of intestacy within the Administration of Estates Act 1925, which set out which family members will benefit and in what shares. The Personal Representative must ensure that the distributions are accurate and correct, or they can be exposed to claims being brought against them by beneficiaries, which could result in them having to pay back the estate from their own personal assets.
The role of the Personal Representative continues for the length of time it takes to administer the estate – albeit sometimes a Personal Representative will then continue as a trustee (a similar but distinct role) and have duties and responsibilities which can last for many years.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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