Personal Representatives giving you trust issues?

In an ideal world, those appointed and tasked with administering an estate (personal representatives) will do so without controversy. However there are an increasing number of instances where beneficiaries have become concerned about whether personal representatives (executors or administrators) are administering an estate properly, so what can beneficiaries do to ensure the proper administration of the estate?

First and foremost, it is important to understand that a personal representative holds the assets for the beneficiaries. This means that they owe you, as beneficiaries, numerous duties including not only the duty to administer the estate correctly and in a timely manner, but also in line with their fiduciary duties to include an overarching duty of loyalty to the beneficiaries.

How to hold personal representatives to account

The starting point in determining whether something has gone wrong, is to secure relevant information. A beneficiary who has not received accounts should request copies which should be given within a reasonable period. What is a reasonable time to deliver the accounts depends on the nature of the estate and the likelihood of accounts having been prepared for the period in question. For example, if the estate is complex and includes worldwide assets, complicated investments and the personal representatives are only in their first month of administration, a request for accounts at this point would not be reasonable. In many instances too, there will be a requirement to obtain a Grant of Representation (which can take some time to process at the Probate Registry) which may be required before assets, such as land and property, can be dealt with.

Personal representatives are under a duty at common law and pursuant to section 25(b) of the Administration of Estates Act 1925 to keep accounts and records of the estate and to be ready with an inventory and account when called for by the beneficiaries and/or the court.

They are also under a duty at common law and pursuant to section 25(a) of the Administration of Estates Act 1925 to collect in the deceased’s estate and administer it according to law. This duty must be carried out with due diligence and where there is a delay of more than one year from the date of death (known as the so-called “Executor’s Year”), the burden is on the personal representative to show some valid reason for the delay.

If personal representatives are struggling to prepare accounts, the problem may be resolved by the beneficiaries and personal representatives agreeing to the appointment of an accountant or other professional to prepare or audit the accounts.

If personal representatives who have taken out a Grant unreasonably delay or refuse to provide an inventory and account of their dealings with the estate, the most straightforward and cost-effective way of securing accounts is by an application under the non-Contentious Probate Rules 1987 (normally issued in the Probate Registry) for the personal representatives to fulfil their obligations under the Administration of Estates Act, as set out above.

The court has wide powers under Civil Procedure Rules to direct accounts and inquiries as it considers necessary to enable the estate to be carried out. Indeed a court can order accounts and inquiries of its own initiative. Similarly, applications for accounts to be produced and verified or to be prepared by someone else or for an account on the footing of a failure/breaches of duties by the personal representative (wilful default) can also be brought under the Civil Procedure Rules.

If you are a beneficiary of a Trust (created in lifetime or on death), you too may be able to inspect and take copies of trust documents. Trustees are similarly under enforceable duties to beneficiaries to include a duty to account for the way they have dealt with Trust assets (subject to some limitations).

What next steps can be taken?

Having discovered that the personal representatives have not administered the estate properly, you, as a beneficiary, may wish to consider proceedings against the personal representatives to ask that the estate be restored or compensation is given to the beneficiaries on the basis that the personal representative has acted in violation of his/her duties. These claims normally fall under the headings of devastavit (deliberate, reckless or negligent mismanagement of the estate e.g. squandering or misapplying assets), breach of trust or of a fiduciary duty owed to the beneficiaries.

Examples of devastavit include a failure to collect in assets (e.g. sale of a property at an under-value, failing to dispose of assets before they lose value or using assets for a personal representative’s own purposes), a failure to discharge debts (or indeed paying debts that the estate is not bound to pay).

Examples of failing to administer according to law include:

• Applying estate assets in the wrong order
• Paying out the wrong beneficiaries or in the wrong amounts (whether by mistake, deliberately or by misinterpreting the will or intestacy rules). This might happen where the personal representative has failed to make the usual searches and enquiries to establish who the beneficiaries are.

Examples of breaches of trust can include:

• A failure to account for profits made
• A failure to exercise all the rights of a shareholder (where an estate includes shares in a private or public company) and take the steps that a personal representative can take (including appointing removing/appointing directors) to ensure that he/she receives proper information about how the company is being run.
• A failure to act impartially between the beneficiaries
• A failure to invest assets prudently
• Acting in a position of conflict

In addition to taking action for a personal representative to make good any loss caused by them to the estate, you may include in your action a claim that they pay the costs of the action (subject to certain rules) and may also seek an order for the personal representative to be removed and replaced by someone who is more fit and proper. This is not covered under this note but we can advise further on removal of personal representatives and trustees under section 116 Senior Courts Act 1981, section 50 Administration Justice Act 1985, section 41 Trustee Act 195 or under the court’s own powers.

If you are a beneficiary and issues raised in this article ring true, please get in touch. An action for the above claims should not be taken without full consideration of the issues from a specialist legal advisor. There are certain defences that personal representative and trustees can sometimes rely upon, and it is also important to consider these before proceeding.

AMPA Trust Corporation

As a firm, we are also often instructed to act as independent professional personal representatives and trustees in place of those the court may have removed. We operate AMPA Trust Corporation which can itself be appointed and which brings with it a number of benefits including:

Continuity – new trustees are never needed as a trust corporation provides continuity of service as clients are not relying on one person.. This can create substantial savings in professional fees: with a trust corporation, the appointment and retirement of directors will not affect the assets within particular estates/trusts.

Availability – individual trustees aren’t always available due to holidays and other commitments, but a trust corporation will always be available.

Professionalism – our trust corporation directors and signatories are senior members of the private client team who have a wealth of experience in dealing with trusts and estates.