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This article appears as part of a paid partnership with Burnetts

What are the problems and pitfalls of estate administration?

by CWH
23 August 2021
in Latest, Sponsored
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When someone passes away there is often a job on to deal with calling in their assets, settling their debts and distributing what is left in accordance with the law.

This process is often referred to as probate but is better described as estate administration.

The task will usually fall to either an executor appointed in the will or a beneficiary under the intestacy rules.

If there is a will but no executor willing or able to act then certain beneficiaries can step in.

Whoever takes on the role is described generally as the Legal Personal Representative (LPR).

Depending on the assets in the estate the LPR may need to apply for a grant of representation from the Probate Registry.

If they do and the court issues them with a grant, then that grant is proof to any asset holder that they are dealing with the properly appointed LPR and they can hand over assets to them in good faith.

In recent years, banks and building societies have loosened their rules about releasing what they consider to be small accounts.

While the limits vary from bank to bank a general limit of £15,000 is common.

Clients often tell us that they went to notify the bank about someone’s passing to be given a form to sign and the funds were then handed to them.

On one hand this is a flexible arrangement.

LPRs often find it is very helpful to have some estate money to hand to deal with administration expenses.

This is particularly true where there is a house in the estate as the insurance premiums, utility bills and, eventually, council tax still need to be paid.

However, care should be taken. If an LPR takes possession of estate assets they may be treated as having intermeddled in the estate.

Once an LPR intermeddles they have no choice but to complete the administration of the estate.

If an estate is bankrupt or has significant levels of debt they may not want to have to deal with the administration.

If the LPR has taken possession of the funds they need to be careful not to use it straightaway to pay the only creditor they know about.

If an estate is bankrupt the creditors should all be paid pro rata. If one is treated in priority to others then the LPR becomes liable for the debt.

If the LPR pays over money to beneficiaries in priority to creditors then they can also become liable for the debt.

If they pay money to a beneficiary who is subject to a bankruptcy order then they may be liable to that person’s trustee in bankruptcy.

Using an informal procedure to access estate money does not remove the formalities placed on LPRs by law.

If you would like assistance or advice dealing with the administration of an estate then please do not hesitate to call our wills, trusts and probate team.

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