Legacy loop: spring edition
In this edition, we take a look at recent cases where estate administrations have been delayed and we provide you with our hints and tips for progressing slow estate administrations and continuing to generate legacy income at this difficult time.
Charities can be faced with a number of hurdles when it comes to estate administration. Currently those challenges may be due to the knock on effect of Covid-19 or a result of other challenges and claims, perhaps brought by disgruntled beneficiaries or family members. We take a look at two such recent cases.
Ali v Taj (2020)
Mr Mohammed Taj died in 2007 and a grant of probate was obtained in May 2008. The residuary beneficiaries of Mohammed’s estate, his widow and children from his first marriage, were still yet to receive an inventory and accounts from the executors relating to the estate 11 years after his death.
Requests for information were made numerous times by the residuary beneficiaries, however only limited, deficient information was provided by the executors. The executors stated that the delay was due investigations being carried out by HMRC into Mohammed’s affairs.
The residuary beneficiaries subsequently issued a summons for an inventory and account.
A first hearing took place without notice to the parties and the judge ordered the executors to provide an inventory and account within 28 days and pay the residuary beneficiaries’ costs. The executors appealed and a further hearing to consider the summons application took place, with all parties and counsel in attendance.
The court upheld the previous finding, noting that providing an account and inventory was a “cardinal” and important duty of a personal representative and beneficiaries are usually always entitled to this information.
This case highlights executor’s duties and provides a useful reference for when faced with situations where executors may be dragging their feet in providing estate inventories and accounts, delaying completion of an administration of an estate as a result.
RNLI v Sonya Young (2019)
Mr Brian Cole, a former lifeboatman, left a legacy of £268,000 from his estate worth nearly £300,000 to the RNLI in his last will. His previous will made in 2012 had left the majority of his estate to his former partner, Ms Angela Saunders, and his will before that made in 2008 left the majority of his estate to his daughter, Ms Sonya Young. His latest will left Angela and Sonya both £5,000 each.
The administration of Brian’s estate was delayed due to Angela and Sonya’s prevarication and assertion that Brian’s last will was invalid on the grounds of mental capacity. As a result, the RNLI issued a probate claim to propound the last will.
The RNLI’s claim was successful and the Judge, Master Teverson, ordered probate of the last will in an oral judgment on 19 July 2019.
Unfortunately Sonya had turned down a pre-trial settlement offer from the RNLI of approximately £30,000 and she had spent around £54,000 of Brian’s estate funds by the time of the judgment. A charging order was subsequently placed on her house and she faces having to sell her home to pay the RNLI the shortfall in their legacy.
Following the landmark Supreme Court decision in Ilott v Mitson (2017), it is encouraging to see courts continuing to uphold charity legacies equivalent to the majority of the estate. This case also highlights the importance of pushing forward estate administrations whilst protecting estate assets.
TOP TIPS ON HOW TO PROGRESS ESTATE ADMINISTRATIONS
Cases such as Taj v Ali and RNLI v Young give us food for thought when considering what charities should do when faced with a delay to an estate administration.
Here are our top tips for what to do when faced with this:
1. Don’t be afraid
If a person wants to prevent an estate being administered by challenging a will, they can lodge a caveat at the probate registry to prevent a grant of probate being obtained. Sometimes, the person who lodges the caveat (the ‘caveator’) takes little further action and this leads to a delay in an estate being administered and prolong legacies being paid to beneficiaries.
If payment of a legacy to you is delayed due to a caveat being lodged, do not be afraid to challenge it. You can consider ‘warning off the caveat’ by objecting to the caveat being in place and stating your interest in the estate to the Probate Registry. The caveator then has 14 days from the date of the warning to respond and state their position (known as “entering an appearance”). If the Probate Registry is not satisfied with the ‘appearance’, it may be refused or you could apply to have it struck out, resulting in a grant of probate then being taken.
This can be a good way to challenge a potential claim at an early stage. Should the matter go to court in the future, the caveator may be at a risk of having a costs order made against them due to keeping a caveat in place without bringing a will challenge purely in order to delay probate.
2. Protect estate funds
Where a probate dispute arises, it is a good idea to take steps to protect the funds in the estate at an early stage to avoid the risk of funds being spent, as in RNLI v Young.
There are a number of ways this can be done;
- By seeking the agreement of the other party to move funds into a solicitor’s account or pay funds into court pending resolution of the matter.
- Consider seeking a freezing order over the deceased’s assets. This is likely to be more appropriate with complex estates, particularly where funds are held in multiple or overseas accounts and there is a high risk of funds being misappropriated or withdrawn.
- Where an executor or trustee has acted in a way that warrants their replacement, an application for their removal could be considered to protect estate assets. An independent or professional executor or trustee can then be appointed in their place.
3. Interim distributions
Where administration of an estate is delayed, and perhaps has been for some time, you could attempt to agree an interim distribution of a legacy owed to you with the executors and other beneficiaries.
Interim payments can be a good way to secure payment of your legacy and bring in legacy income more quickly.
Interim distributions are often a viable option where the value of the estate is such that it can accommodate an interim payment whilst retaining enough of a fund to cover future liabilities.
Ask questions of the executors to check that they are not holding on to funds without good reason. Queries could be made as to what the future liabilities are likely to be, when these liabilities are likely to occur and whether they can be funded in different ways, such as by regular income from other assets in the estate. This may be viewed more objectively by a professional executor as they do not to have the same emotional connection to the estate as lay executors.
It is important however that, where there is ongoing litigation between beneficiaries, all beneficiaries are treated equally and the interim distribution does not leave one party with an unfair fighting fund.
4. Early settlement
Early resolution of a dispute is always beneficial to all parties. It is both cost effective and saves time for both parties as the estate can be distributed more quickly.
Where there is some merit in a potential claim, various methods of alternative dispute resolution can be considered, including mediation, round table discussions and without prejudice negotiations. This can be implemented at all stages of litigation as well as the pre-litigation stage.
Despite the current lockdown and social distancing measures in place, mediations and court hearings are continuing to be held remotely by electronic means. As such, offers to mediate should continue to be made and accepted to try and achieve early settlements in disputes.
5. Seek legal advice
To avoid the unnecessary delay of estate administrations, it is best to seek legal advice at the point that you are made aware of a potential dispute.
Obtaining legal advice as early as possible can help to resolve disputes in a timely manner and save costs further down the line.
Shakespeare Martineau has launched a free legal helpline offering bespoke guidance on a range of subjects from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too.
Available from 10am-12pm Monday to Friday, call 0800 689 4064.
General advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.
All the latest views and insights on COVID-19 (coronavirus)