A duty to execute - A look at the ongoing duties of executors

Thursday, 01 October 2009

So I am now no longer an executor?’ Lay executors often express relief on finalising the administration of a deceased relative’s estate. Disappointingly for them, it is not so clear cut. A distinction needs to be made between the duration of the office of an executor and the duration of the powers of executors over the assets in an estate.

The powers of an executor over an asset cease once it is assented to a beneficiary, or where an assent can be implied under Section 36 Administration of Estates Act 1925 (ignoring any rights of recovery that may arise in certain circumstances). Aside from these assented assets, the general rule is that an executor remains an executor for life (unless they had renounced probate of the will, without having intermeddled).

Several situations may therefore arise where an executor may be called on to fulfil further duties, even though an estate has apparently been finalised:

  • A reversionary interest to which the deceased was entitled may fall in many years after the death and the executor will have to deal with reporting the values to HMRC and selling the assets or assenting them to the beneficiaries.
  • The executor may be needed to exercise a power of appointing new trustees, which remained vested in the deceased at death where the deceased was the sole trustee of a settlement (Section 36(b) Trustee Act 1925). This can arise unexpectedly, for example where an earlier appointment or retirement of trustee is later found to have been invalid.
  • Any of a number of circumstances in which the deceased’s estate might need to be represented, for example in relation to a compensation settlement for shareholders such as that announced by Shell in 2008 for overstatement of its reserves in favour of those who purchased shares between 1999 and 2004.

This is illustrated in the following examples:

Example 1

Mr McGregor died in 2004 and the administration of his GBP1 million estate was finalised in 2006. His brother Giles acted as executor and in due course assented Mr McGregor’s house and market garden to his daughter, Flora, as the sole beneficiary of the residuary estate. In early 2009 it came to light that Mr McGregor had also owned a plot of land that the solicitors had overlooked, situated a couple of miles away from his home, which he had neglected because it had been overrun by rabbits. Giles has to put his executor’s hat on again and deal with the disclosure to HMRC of the plot, the settlement of unpaid inheritance tax (including any penalties) and the assent to Flora.

Example 2

Tommy Tiptree created a trust by will on his death in 1990 for his nephew Toby and issue. Toby died without issue in 2009 and the trust fund reverted to Tommy Tiptree’s estate. Tommy Tiptree’s executor must step in again and deal with the trust fund as a new asset falling into the estate.

Example 3

Jack was a trustee of the Johnson family trust, together with his brother Joe. They had become tired of being trustees and decided to retire. The deed of their retirement and the appointment of two new trustees was defective because Jack failed to sign the deed and Joe’s signature was not witnessed, with the result that neither were discharged from the trusts and the appointment of the new trustees was invalid. Joe died ten years ago, followed by Jack two years later, and the defect in the deed went unnoticed until recently. As Jack was the last surviving trustee (all subsequent appointments being invalid), the power to appoint new trustees devolved from him to his personal representative(s) (under section 36(1)(b) Trustee Act 1936), who must now execute a deed appointing the new trustees.

Acting as an executor can be an onerous task, given the lifelong nature of the office. However, in the case of undiscovered creditors and unknown beneficiaries (but not those whose existence is known but are simply missing) coming to light at a later stage, executors may take some comfort from the statutory protection from personal liability, afforded by advertising for claims in accordance with section 27 Trustee Act 1925 (the Section 27 notice should follow the wording of the statute, so as to make it clear that it is not merely the claims of creditors which are required to be disclosed, but also those of beneficiaries: Re Aldhous, Noble v Treasury Solicitor [1955] 2 ALL ER 80).

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Amanda Edwards

Amanda Edwards TEP is a Solicitor with Boodle Hatfield.

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