Learning Outcomes
After reading this article, you will be able to explain and apply the legal rules and practical steps for the administration of estates in England and Wales. You will know the key duties and powers of personal representatives, the sequence and method of estate distribution, the rights of beneficiaries and creditors, and the importance of proper compliance with statutory and common law rules. You will also be able to advise clients on common issues arising during estate administration, suitable for SQE2 assessment.
SQE2 Syllabus
For SQE2, you are required to understand the administration of estates from a practical standpoint. This includes recognising and applying the legal duties of personal representatives and advising clients on all key administrative issues. In your revision, focus on:
- The duties and powers of executors and administrators (personal representatives) in administering estates
- The procedure for collecting in, managing, and distributing assets
- The order and rules for the payment of estate debts and liabilities
- Rights and remedies of beneficiaries during administration
- Creditor claims and the protection measures for personal representatives
- Practical steps and problem-solving in estate administration scenarios
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What is the primary obligation of personal representatives during the administration of an estate?
- How can personal representatives protect themselves from unknown creditors after distributing the estate?
- In what order should personal representatives use estate assets to pay debts and liabilities?
- Do beneficiaries have enforceable rights against personal representatives before completion of estate administration?
Introduction
The administration of estates is a critical area of probate practice for SQE2. When a person dies, their property, debts, and obligations must be managed and distributed strictly in accordance with the law. Personal representatives (PRs)—either executors (if named in a will) or administrators (if appointed when there is no will or valid appointment)—are responsible for this process. Understanding their powers, duties, and liabilities is essential both for providing client advice and for ensuring correct legal outcomes.
Key Term: personal representative (PR)
A person—either an executor or administrator—legally responsible for administering the estate of a deceased individual.
Key duties of personal representatives
Upon death, the PRs owe a range of legal obligations to the estate and persons interested in it. Their fundamental duty is to collect, preserve, and distribute the estate according to the law and any valid will.
Key Term: executor
A personal representative appointed by a valid will to administer the deceased’s estate.Key Term: administrator
A personal representative appointed by the court (usually under the intestacy rules or where no valid executor acts) to administer the estate.
Collecting and securing estate assets
PRs must locate all assets belonging to the deceased, take control of them, and ensure their preservation. This includes valuables, property, investments, and any business interests. PRs may need to insure assets and take practical steps to prevent loss or damage.
Paying debts, liabilities, and expenses
Before making any distributions to beneficiaries, PRs must identify and pay all debts and liabilities of the deceased. This includes funeral and administration expenses as well as any taxes due.
Order of payment
PRs must strictly follow the statutory order when using estate assets to pay debts:
- Funeral, testamentary and administrative expenses.
- Preferential debts (if any).
- Ordinary debts (including unsecured creditors).
- Deferred debts (such as debts to family members that are postponed in priority).
Assets must be applied in a particular statutory order. Generally, undisposed assets and residue are first used.
Distribution to beneficiaries
The PRs distribute what remains after all debts and expenses are paid. Distribution should occur to entitled beneficiaries in accordance with the will or, if none or in part, under the intestacy rules.
Key Term: residue
The remainder of the estate after payment of all debts, taxes, expenses, and specific legacies.
Beneficiary rights and remedies
During administration, beneficiaries do not have strict legal ownership of estate assets. Instead, they hold a “chose in action”—the right to compel proper administration. They cannot normally demand particular assets or interfere with administration until completion. However, PRs owe fiduciary duties, including to act in good faith, keep proper accounts, and avoid conflicts. Beneficiaries can seek court intervention or an account if these duties are breached.
Key Term: chose in action
A right enforceable only by legal action, such as a beneficiary’s right to compel due administration.
Creditor claims and PR protection
Creditors of the estate have the right to claim payment out of estate assets. PRs can be personally liable to creditors if they distribute the estate without having settled all valid claims. However, statutory protections exist if PRs follow the correct procedure.
Statutory advertisements and limitation of liability
To protect against unknown claims, PRs should place statutory “Trustee Act notices” in the London Gazette and a local newspaper under s.27 Trustee Act 1925. After a minimum two-month waiting period following publication, PRs can distribute assets without risk of personal liability to any later-appearing creditor (although the beneficiary may remain liable to account for their share).
Worked Example 1.1
Scenario: An executor pays out all estate assets to beneficiaries shortly after obtaining the grant, without placing any statutory advertisements. Three months later, an unknown creditor approaches for payment of a substantial debt. Is the executor personally liable?
Answer:
Yes. If statutory notices were not placed as required by law, the executor remains personally liable to the creditor for failing to take reasonable precautions before distribution.
Asset realisation and distributions
PRs may need to sell estate assets to generate funds for paying debts or making distributions, subject to any restrictions in the will. They must take reasonable care in carrying out sales and investment decisions.
Beneficiaries’ powers before administration is complete
Generally, beneficiaries cannot demand immediate distribution or take direct action against PRs unless there is breach of duty. However, they can apply to court for administration, for an account, or for removal of PRs in cases of misconduct.
Worked Example 1.2
Scenario: Two beneficiaries under a will believe the executor is delaying distribution without good reason. What remedies, if any, are available?
Answer:
The beneficiaries can apply to court for an account of administration, seek directions, or in severe cases, seek removal and replacement of the executor.
Limitations and liabilities of personal representatives
PRs are personally liable for losses caused by a breach of their statutory or fiduciary duties. They may be excused by the court if they acted honestly and reasonably. PRs may also need to defend or initiate proceedings related to disputed debts or administration disputes.
Final accounts and discharge
On completion, PRs must prepare clear estate accounts showing receipts, payments, and balance distributions. Obtaining signed receipts or formal releases from beneficiaries provides additional protection.
Exam Warning
Failing to strictly follow the statutory order of paying debts may expose PRs to personal liability. Always check the asset order and type of debt involved in client scenarios.
Revision Tip
When advising on estate administration, always consider whether PRs have taken advantage of all statutory protections before distribution or payment to beneficiaries.
Key Point Checklist
This article has covered the following key knowledge points:
- The definition, appointment, and distinction between executors and administrators.
- The main legal duties and practical steps for personal representatives in administering an estate.
- The correct order in which PRs must pay estate debts and liabilities, and statutory asset orders.
- Protection of PRs from personal liability via statutory advertisements and prudent conduct before distribution.
- The position and remedies of beneficiaries during administration, including their chose in action.
- The liability of PRs for breach, and final discharge by proper accounting and signed receipts.
Key Terms and Concepts
- personal representative (PR)
- executor
- administrator
- residue
- chose in action