Administering estates when someone dies

Cause for concern as the number of grant applications fall

The recently published results of some research carried out by probate genealogists, Title Research, regarding the issue of grants of representation in England and Wales is a cause for concern.

Currently, it is possible for applications for grants of representation to be made by solicitors by way of a solicitor's application and by the public by way of personal application. The most significant trend displayed by figures released by the Probate Service for 2008 is the fall in grants issued on the basis of solicitor applications. As Title Research point out, the figures are stark. From a high of 225,190 solicitor applications in 2006, the number fell by 11% to 201,530 in 2007 and by a further 10% to 191,429 in 2008.

Given the economic downturn, it would be reasonable to assume that increasingly savvy consumers are undertaking DIY probate and that, as a result, personal applications will increase, thus explaining the fall in the number of solicitor applications for grants. However, the research has found that there has been virtually no change in the number of personal applications for the past three years. Furthermore, as there has been no decline in number of deaths in these years, the question arises, what is happening to these "missing" estates and how are they being administered?

As Title Research suggests, whilst it may seem that consumers are using solicitors less and less to deal with probate, more worryingly, it may also be the case that they are not bothering to obtain a grant of representation at all. Title Research suggests that an almost inevitable effect of fewer estates being administered through solicitors and the public not troubling with grants is an increase in misdistribution, including fraudulent misdistribution, of estates, with a likely increase in underpayment or evasion of Inheritance Tax if there is a failure to properly account to HM Revenue & Customs. If Title Research's assertions are correct, then what are the implications for the public?

The Duties of Personal Representatives

Broadly speaking, a personal representative is an executor appointed in a Will or where there is no Will (an intestacy), the personal representative will be an administrator (one of the next of kin).

The main duties of personal representatives are to identify the assets and liabilities of the estate and to accurately value the same and to report such information to HM Revenue & Customs and to pay all relevant taxes that may be due. Having done this, the personal representatives are then responsible for ensuring that the proceeds of the estate are correctly paid out to the beneficiaries in accordance with the terms of the Will or, if there is an intestacy, in accordance with the intestacy rules.

Intermeddling

Clients need to be aware that if they take any action in respect of an estate that a personal representative would normally be expected to take, they put themselves at risk of being accused of intermeddling and by doing so they may make themselves an executor de son tort. Acts which have been held to amount to intermeddling include selling property, paying debts, collecting debts and carrying on the deceased's business. An executor de son tort has no authority to act in the administration of the deceased's estate and can obtain no rights from his intermeddling. The effect of being an executor de son tort is that such a person becomes personally liable to the creditors and beneficiaries to the extent of the amount of the deceased's estate that comes into his hands as if he were a personal representative. He is also liable for Inheritance Tax to the extent of such property and is also subject to the HM Revenue & Customs penalty regime (see below).

Devastavit

No matter how tempting it may be to become involved in administering an estate, it is most important that clients are clear as to the basis on which their authority to do so arises and the duties and responsibilities that such authority confers on them.

When a personal representative (whether executor, administrator or executor de son tort) accepts office, he accepts the duties of office. A failure to carry out those duties properly is called a devastavit for which the personal representative will be personally liable to the disappointed beneficiaries (or next of kin) for any loss suffered by them as a result of the devastavit.

With regards to Inheritance Tax, the law states that personal representatives have a legal duty to deliver Inheritance Tax account within the time allowed and to provide a correct account and correct information and documents otherwise penalties may be levied, and/or prosecution sought.

The duties of a personal representative are onerous and should certainly not be undertaken lightly. The financial penalties that can now be levied by HM Revenue & Customs can be substantial and in extreme circumstances a custodial sentence may be imposed for a failure to comply with the law in this area. Coupled with the fact that clients may also be faced with claims from disappointed beneficiaries or next of kin, we would suggest that, given the many pitfalls, it is absolutely essential that anyone contemplating administering an estate takes professional advice before doing so.

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