WAE.07 — Administration: Collecting, Paying Debts, Distributing

The PRs' job after the grant: get in the assets, pay liabilities, then distribute. The grant (probate for executors; letters of administration for administrators) is the PRs' proof of title to deal with the estate.

Collecting (getting in) the assets

• PRs collect all assets vesting in them. Executors' authority derives from the will and runs from death; they can act before the grant (which only confirms authority). Administrators' authority derives from the grant — they have no power before it, save to preserve the estate.
• Property passing outside the will/intestacy is not theirs to collect: joint tenancies (pass by survivorship), nominated pension/death-in-service benefits, and life policies written in trust. Watch this distinction constantly.

Paying debts and the order of liability

• Secured debts fall on the charged property: AEA 1925 s.35 — the beneficiary takes the property subject to the mortgage unless the will shows a contrary intention (a general direction to pay debts is NOT enough).
• Unsecured debts: a solvent estate uses the statutory order in AEA 1925 s.34(3) / Sch 1 Pt II (property undisposed of, then residue, etc.); an insolvent estate uses the order in the Administration of Insolvent Estates of Deceased Persons Order 1986 — secured creditors, then funeral/testamentary/admin expenses, preferential, ordinary, then deferred debts.
• Protect yourself: advertise under Trustee Act 1925 s.27 (London Gazette, local paper, ≥2 months). This protects PRs personally against unknown claims, not known creditors. It does not extinguish the claim: an unknown creditor or beneficiary can still follow the property into the hands of anyone, other than a purchaser, who received it (s.27(2)(a)).

Tax before distribution

• IHT must be addressed first; the grant generally won't issue until IHT due on delivery of the IHT400 is paid. NRB £325,000; RNRB £175,000 (tapered above £2m); 40%, or 36% on an estate component that meets the charitable giving condition (gifts to charity of at least 10% of that component's baseline amount: IHTA 1984 Sch 1A). Charity gifts exempt (IHTA 1984 s.23) and do not use the NRB. Instalment option for land/business; interest still runs.

Distributing

• Pay legacies before residue; pecuniary legacies abate proportionately if the estate is short.
• Wait until at least 6 months from the grant before distributing — Inheritance (Provision for Family and Dependants) Act 1975 claims run from the grant; distribute earlier and PRs risk personal liability.
• Take receipts and advertise under s.27. Where a known beneficiary cannot be traced, the PRs can apply for a Benjamin order (Re Benjamin [1902] 1 Ch 723: permission to distribute on the footing that the beneficiary predeceased the deceased) or take out missing-beneficiary insurance.
• Misuse of estate assets = devastavit → PRs personally liable.

Common traps

• Confusing executor (acts from death) with administrator (acts from grant).
• Treating a "pay my debts" clause as displacing s.35 — it doesn't.
• Distributing before the 6-month I(PFDA) window (6 months from the grant) or before s.27 advertising.
• Thinking s.27 protects against known creditors or beneficiaries — it does not.

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