Personal representatives and trustees in estate administrati...

Learning Outcomes

This article examines the duties of personal representatives and trustees and the remedies available to beneficiaries in estate administration, including:

• Core fiduciary and statutory duties owed by personal representatives (PRs) and trustees, including duties of care, good faith, impartiality, and proper use of powers and restrictions conferred by statute or instrument
• The nature and scope of beneficiaries’ rights during the administration period, focusing on the chose in action to compel due administration and the limits on entitlements before completion of administration
• The distinction between personal remedies (equitable compensation, account, devastavit) and proprietary remedies (tracing into property or substitutes), and why that distinction matters for recovery, priority, and insolvency
• Circumstances and legal grounds for challenging improper administration, including applications for accounts and inquiries, removal or substitution of PRs or trustees, and appointment of judicial trustees
• Principles of tracing, especially into mixed funds and substitutes, the operation of the lowest intermediate balance rule, and limitations imposed by the bona fide purchaser for value without notice defence
• Timing, procedure, and heads of liability for beneficiary claims against PRs, trustees, or third parties for breach, knowing receipt, or dishonest assistance, and the main available defences, including TA 1925 s.61, limitation periods, and statutory advertisements under TA 1925 s.27
• Administrative and investment powers of PRs and trustees in collecting, managing, and distributing assets, including investment duties, powers of maintenance and advancement, and the use of injunctions, receivers, or judicial trustees to protect the estate or trust

SQE1 Syllabus

For SQE1, you are required to understand the duties of personal representatives and trustees and the remedies available to beneficiaries in estate administration, with a focus on the following syllabus points:

• the core fiduciary, statutory, and common law duties of personal representatives and trustees
• key obligations regarding the collection, preservation, investment, and distribution of estate and trust assets
• the types of breach that can arise and their consequences, including devastavit, malinvestment, self-dealing, unauthorised profits, and misapplication of property
• the personal and proprietary remedies available to beneficiaries, including accounts, compensation, tracing, and the restoration of trust assets
• the procedural and substantive grounds for removal, substitution, or limitation of PRs or trustees (e.g., AJA 1985 s.50, TA 1925 s.36/s.41)
• mechanisms for beneficiaries to compel administration, require the rendering of accounts, or obtain judicial guidance (administration actions)
• the interaction between statutory and equitable remedies, noting priority, proprietary versus personal relief, and insolvency implications
• available defences for fiduciaries—including informed beneficiary consent, statutory advertisements, exoneration by the court (TA 1925 s.61), and operation of limitation statutes (e.g., Limitation Act 1980 s.21)
• the application and limits of tracing (into substitute property, mixed funds, and through third parties), and the impact of the bona fide purchaser defence
• secondary liability of third parties for knowing receipt or dishonest assistance
• special rules for the management of trusts of land under TLATA 1996, and the powers and duties around investment, maintenance, and advancement

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the main difference between a personal and a proprietary remedy for breach of trust?
2. Name two statutory duties owed by personal representatives to beneficiaries.
3. What is the effect of a successful tracing claim by a beneficiary?
4. In what circumstances can a court remove a trustee or personal representative?

Introduction

When a person dies, their estate is managed and distributed by personal representatives (PRs) or, where a trust arises, by trustees. Both are fiduciaries, under duties of honesty, integrity, skill, impartiality, and loyalty to the intended beneficiaries. The administration process, often complex and lengthy, may require PRs and trustees to collect assets, pay debts and taxes, make insurance and investment decisions, maintain proper accounts, and consult appropriately with interested parties. Statutes such as the Administration of Estates Act 1925 (AEA 1925), Trustee Act 1925 (TA 1925), and Trustee Act 2000 (TA 2000) establish many of the powers, obligations, and remedies relevant to this area.

Beneficiaries, before completion of administration, have no proprietary interest in specific assets of the deceased’s estate or in trust property. Instead, they hold a chose in action—a right to require proper and timely administration and, when necessary, can invoke the court’s equitable jurisdiction to hold fiduciaries accountable for breach.

Key Term: fiduciary duty
A legal obligation to act honestly, loyally, and in good faith for the benefit of another, avoiding conflicts of interest and unauthorised profit.

PRs must collect and safeguard estate assets, pay all debts and liabilities, and distribute the estate in accordance with the will or, if no will exists, under intestacy rules. Trustees must manage trust assets in accordance with the trust instrument and relevant law, taking account of duties under TA 2000 and guidance on investment, diversification, and ongoing review. They must act with reasonable skill and care throughout, as required by common law and by statute.

Key Term: duty of care
The obligation to exercise reasonable skill and care in managing another’s property, as required most notably by TA 2000 s.1 and common law.

Breaches of these duties may result in significant loss or injustice to beneficiaries, who have a range of remedies at their disposal, including personal claims for equitable compensation and proprietary claims to recover specific property.

Key Term: breach of trust
A failure by a trustee or PR to comply with their duties, resulting in loss to the estate or trust or any unauthorised gain.

Key Term: administration action
Court proceedings seeking accounts and inquiries to compel due administration, including orders for taking accounts, identifying assets and liabilities, and directions for distribution.

The effectiveness and selection of remedies requires careful analysis of the nature of the breach, the type of asset involved, the conduct of the fiduciaries, and the interests of other parties (including third parties and creditors).

Duties of Personal Representatives and Trustees

Personal representatives (executors and administrators) and trustees owe strict fiduciary and statutory duties to beneficiaries. For personal representatives, these core obligations are set by the AEA 1925 and include:

• collecting and safeguarding all estate assets (real property vests in PRs under AEA 1925 s.1; personal property vests by common law)
• paying funeral costs, taxes, debts, and testamentary expenses with due diligence and in accordance with the priority rules of AEA 1925 s.34 and Schedule I, Part II
• distributing the estate to those entitled under the will or, on intestacy, under the statutory regime, complying with incidence of liability rules (e.g., secured debts under AEA 1925 s.35 pass with the asset unless the will provides otherwise)
• concluding administration promptly, within the “executor’s year” (AEA 1925 s.44), unless administration is unusually complex or disputed
• ensuring full and proper accounts are kept, and rendering these when required by beneficiaries or by court direction
• managing assets prudently, taking into account insurance, safe custody, and suitable investment pending distribution (TA 2000 ss.1–5)

Trustees’ core duties are similar but may be given further procedural and substantive content by the trust instrument and by legislation, notably:

• acting in accordance with express and implied terms as well as statutory powers (TA 1925, TA 2000, and TLATA 1996 for trusts of land)
• prudently exercising the general power of investment and complying with the standard investment criteria—suitability and diversification (TA 2000 s.3–s.5)
• obtaining and reviewing proper financial advice before and during investment, unless they reasonably conclude it is unnecessary (TA 2000 s.5)
• exercising powers of maintenance and advancement for beneficiaries, within statutory and any further express limits, including using capital or income for minors’ maintenance or advancement (TA 1925 s.31, s.32 as amended by Inheritance and Trustees’ Powers Act 2014)
• consulting and having regard to the wishes of adult beneficiaries with interests in possession (TLATA 1996 s.11)
• acting impartially between beneficiaries with different interests, particularly when exercising discretionary powers
• not making unauthorised profits or permitting conflicts of interest (subject to a valid charging clause) and self-dealing only if expressly permitted

Key Term: equitable compensation
A monetary award requiring a trustee or PR to restore the trust or estate to the position it would have been in but for the breach.

PRs and trustees are under a further duty to comply with the requirements of HMRC regarding tax calculations, reporting, and payment (including inheritance tax, income tax, and capital gains tax arising during administration or trust management). Failure to act with due care can expose the fiduciary to personal liability, including for tax, interest, and penalties.

Remedies for Breach of Duty

Legal remedies available to beneficiaries depend on the nature of the breach, the remedies sought, and the assets or interests involved. The main divisions are between personal remedies (claims against the fiduciary personally) and proprietary remedies (asserting rights to specific property or recoverable assets), as well as certain procedural remedies for compelling administration.

Personal Remedies

Personal remedies operate as claims against the fiduciary directly. The principal personal remedies are:

• equitable compensation for loss caused by a breach of duty or maladministration, calculated to restore the trust or estate to the position it would have been in but for the default
• an account of administration, compelling the fiduciary to render full accounts and answer for assets received, dealt with, and any defaults (including accounts on a wilful default basis if deliberate wrongdoing or gross carelessness is alleged)
• an account of profits, requiring delivery of any unauthorised profits (e.g., secret commissions, self-dealing profits) made by the fiduciary, regardless of whether the trust suffered loss
• a devastavit claim—where PRs are alleged to have wasted the estate by maladministration or negligence (e.g., failing to collect assets, selling at undervalue, improper investment)
• a claim for mesne profits, where a fiduciary (or a third party in possession of trust land without entitlement) is required to account for profits made during wrongful occupation

Key Term: devastavit
A personal representative’s breach of duty, either wilful or negligent, causing loss to the estate; the PR is personally liable to make good the loss.

Key Term: account
An equitable order compelling a fiduciary to render detailed and accurate accounts of all dealings with estate or trust assets, identifying any defaults, with power for the court to issue directions and make surcharges where appropriate.

Personal claims generally aim to replenish or compensate the trust fund or estate. Where a fiduciary has dissipated an asset, for example through negligent sale at undervalue, beneficiaries may recover the difference between the actual sale proceeds and the value that would have been obtained had the duty been properly performed. Similarly, where a profit has been made from a breach (such as receipt of undisclosed commission by an executor or trustee), the court will ordinarily compel full disgorgement under an account of profits even if the estate or trust did not suffer loss.

In appropriate cases, courts can order accounts and inquiries on the “wilful default” basis. This is more severe, since it expands the fiduciary’s liability to assets that would have come into their hands but for the breach.

Personal remedies are also available against third parties who have knowingly received misapplied trust or estate assets (knowing receipt) or who have dishonestly assisted in a breach (dishonest assistance/accessory liability).

Proprietary Remedies and Tracing

Where trust or estate property has been misapplied, directly or through conversion into another form, beneficiaries may trace and assert claims to the substituted asset, provided conditions are met. Proprietary remedies can have considerable advantages, such as giving beneficiaries priority in insolvency, entitlement to increases in value, and effective claims in respect of specific property.

Key Term: tracing
The process by which beneficiaries follow misapplied trust or estate property into proceeds or substitute assets and claim a continuing proprietary interest.

Tracing is essential when the original property has changed form or has been mixed. In equity, tracing is available into:

• unmixed property, even if converted into another asset (e.g., sale proceeds used to buy land, shares, or other assets)
• mixed funds where trust or estate funds have been intermixed with the funds of the fiduciary or others—in such cases, beneficiaries can assert an equitable charge, a proportionate share, or "adopt the most beneficial route" so the wrongdoer does not profit from the breach (Re Hallett’s Estate (1880); Re Oatway [1903])
• further substitute property to which the mixed fund is applied

Mixing with innocent parties introduces complex proportionality rules—beneficiaries take a rateable share, not to the exclusion of the other party.

The “lowest intermediate balance” rule applies to mixed bank accounts, limiting the recoverable sum to the smallest balance after misapplication, before any further additions.

Where misapplied property has been transferred to a third party, beneficiaries can trace and recover property except against:

Key Term: bona fide purchaser for value without notice
A person who acquires property in good faith, for value, and without actual or constructive notice of the beneficiary’s interest or any breach; such a purchaser takes free of prior equitable claims.

Proprietary remedies include:

• claims for return of the specific property (if still identifiable) or substitute property
• enforcement of an equitable lien or charge over property acquired using trust or estate funds (securing repayment or share of value)
• claims to a proportional ownership share (where funds have been mixed and used for acquisition)

Proprietary claims can be used in conjunction with personal claims, particularly where only partial recovery is possible through one route.

Beneficiaries may also pursue personal claims against third parties in knowing receipt (where property received with sufficient knowledge of breach) or dishonest assistance (where a person participates in a breach with requisite fault). These claims do not depend on tracing but often arise alongside proprietary claims.

Removal and Replacement

Courts have broad powers, both statutory and equitable, to remove, substitute, or limit the role of PRs or trustees whose continued office is incompatible with the proper administration of the estate or trust. The threshold is whether removal is “expedient in the interests of the beneficiaries as a whole” or for the due administration of the trust or estate, not merely because of a single breach.

Key Term: removal of trustee or personal representative
A court order replacing a PR or trustee where it is expedient for the proper administration of the estate or trust; expediency is judged in light of beneficiaries’ interests, seriousness of breach, or breakdown in relations.

In the exercise of this jurisdiction:

• For PRs, removal or substitution can be ordered under AJA 1985 s.50 on the application of a beneficiary or other PR, and a court can “pass over” an executor before a grant is made if justified.
• For trustees, the power to appoint new trustees or remove existing ones rests with the court under TA 1925 s.41 (or s.36 for non‑judicial appointment where applicable) and the general jurisdiction of the court as developed in leading cases (e.g., Letterstedt v Broers (1884)).

Removal may be ordered for persistent failure, dishonesty, hostility making administration impossible, conflict of interest, incapacity, or unfitness for office. Appointment of judicial trustees (Judicial Trustees Act 1896) is also available if litigation or replacement would be disproportionate.

In some cases, beneficiaries sui juris and together entitled to the whole beneficial interest may, under TLATA 1996 s.19, direct the retirement and replacement of trustees, unless expressly excluded by the instrument.

Injunctions and Other Equitable Remedies

Beneficiaries may seek injunctions (including interim, proprietary, and freezing injunctions) to prevent threatened breach or improper dealing with assets, such as improper sales, unauthorised distributions, or continuing self-dealing. The court may also:

• set aside unauthorised transactions or improper transfers, restoring property to the estate or trust
• order the delivery up of assets or documents, including chattels or property records
• appoint a receiver to take control of assets if necessary to protect beneficiaries’ interests
• grant directions for ongoing management in the course of an administration action

These remedies are often employed as interim or preventive measures to safeguard the trust or estate while the substantive dispute is resolved.

Defences and Limitations

Fiduciaries may be able to defend or limit liability by raising statutory, common law, or equitable defences, depending on the facts and the nature of the claim.

Consent, Acquiescence, and Estoppel

If beneficiaries, fully informed and with capacity, have consented to or acquiesced in the fiduciary’s conduct, they may be estopped from pursuing claims. This principle is limited if a beneficiary is under a disability or if all interested parties do not concur.

Relief Under Statute

Key Term: relief under s.61 TA 1925
A discretionary power enabling the court to relieve a trustee or PR from personal liability for breach of trust where they acted honestly and reasonably and ought fairly to be excused.

The court will grant relief (in whole or in part) under TA 1925 s.61 only if satisfied that the fiduciary acted both honestly and reasonably and that it would be just to excuse the breach. This is especially relevant where a trustee has relied on professional advice or has faced particularly difficult or ambiguous circumstances.

Statutory Advertisements: Protection Against Creditors

PRs who publish statutory advertisements to creditors under TA 1925 s.27, and distribute the estate after proper notice periods, are protected from personal liability to unknown creditors or claimants who subsequently emerge. However, this protection does not extend to liability for breach of trust or distribution contrary to the interests of known beneficiaries.

Concerning the Inheritance (Provision for Family and Dependants) Act 1975, PRs should delay distribution until the expiry of six months after the grant to avoid personal exposure if a lawful claim is brought and cannot be met from remaining assets.

Exclusion and Charging Clauses

Trust instruments sometimes include exoneration clauses or charging clauses. Exoneration clauses may limit or exclude liability for negligent, but not fraudulent or dishonest, conduct. Charging clauses permit professional trustees or PRs to be paid for their work, but a fiduciary cannot profit otherwise. Clauses attempting to exclude liability for wilful default, dishonesty or fraud are void as contrary to public policy.

Key Term: wilful default
Deliberate or reckless failure to perform fiduciary duties; sufficient to justify accounts on the footing of wilful default.

Limitation Periods

The Limitation Act 1980 sets out time limits for claims:

• The general limitation period for breach of trust is six years from the date of breach (s.21(3)).
• However, no limitation period applies to actions:
  • to recover trust property or the proceeds thereof from the trustee, or
  • for fraudulent breach of trust or where the trustee has profited from the breach (s.21(1)).
• Where facts are deliberately concealed, limitation runs from discovery (s.32).
• Claims against third parties for knowing receipt or dishonest assistance are generally subject to six years; in proprietary claims, the limitation depends on the property right being asserted.

The subtleties of limitation and exception should always be checked against current statutory text.

Worked Example 1.1

Scenario:
A trustee sells trust property at a significant undervalue to a friend, causing a loss to the trust. What remedies are available to the beneficiaries?

Answer:
The beneficiaries can claim equitable compensation from the trustee for the difference between the true value and the sale price—restoring the fund to its proper position. If the friend was aware of the breach or received the property with knowledge of the trustee’s duties, the beneficiaries may claim the property itself from the friend under a proprietary remedy (subject to the bona fide purchaser defence). Removal of the trustee may also be sought due to serious breach.

Worked Example 1.2

Scenario:
A personal representative mixes estate funds with their own money and uses part of the mixed fund to buy shares. The estate suffers a loss. What can the beneficiaries do?

Answer:
The beneficiaries can trace their proportionate share of the mixed fund into the shares acquired and claim either a proportionate interest in the shares or an equitable charge for their share of the purchase money. For any unrecoverable loss, they can obtain equitable compensation from the PR.

Worked Example 1.3

Scenario:
An executor receives a secret commission from a broker for placing a large estate sale with that broker. No loss to the estate can be shown; the commission was undisclosed.

Answer:
The executor has profited in breach of fiduciary duty. The beneficiaries are entitled to an account of profits and to have the executor disgorge the commission, regardless of whether actual loss can be shown. If the pattern of conduct or its seriousness undermines trust in the executor, application for removal may also be justified.

Worked Example 1.4

Scenario:
Administration stalls for over a year. The sole executor fails to respond to beneficiaries and has not collected significant assets. Beneficiaries wish to replace the executor.

Answer:
Where the executor is unwilling or unfit, beneficiaries can seek court directions for accounts and inquiries. They may apply for substitution or removal under AJA 1985 s.50, showing the expediency and necessity for proper administration. The court will consider persistent failure or breakdown in relations as grounds for removal and for appointing a replacement or judicial trustee.

Worked Example 1.5

Scenario:
Five years after a trustee’s negligent sale at undervalue, beneficiaries bring a claim. The trustee argues the claim is time-barred.

Answer:
The general six-year limitation period for breach of trust applies. However, if the claim is to recover trust property—i.e., a proprietary claim—or involves fraudulent breach or deliberate concealment, it is not barred by limitation (Limitation Act 1980 s.21(1)). The beneficiaries can pursue either route, subject to the facts, and may also claim equitable compensation within the limitation period.

Exam Warning

In an applied context, always distinguish personal claims (against the fiduciary) from proprietary remedies which attach to specific assets or their substitute. Remember tracing is not available against a bona fide purchaser for value without notice.

A common error is assuming beneficiaries have specific ownership during administration—they have, instead, a chose in action. Remedies commonly begin with accounts and inquiries, sometimes moving to more specific relief depending on what is uncovered.

Revision Tip

In any given scenario: identify the applicable duty, assess whether there has been a breach, ascertain the loss or unauthorised gain, and select the appropriate remedy—personal or proprietary—depending on recoverability and enforcement needs.

Summary Table: Remedies for Breach of Duty

Key Point Checklist

This article has covered the following key knowledge points:

• PRs and trustees owe fiduciary and statutory duties to beneficiaries, including duties of care, loyalty, good faith, impartiality, investment, and proper consultation where required.
• Beneficiaries have no proprietary interest during administration, but a right (chose in action) to require due administration, enforceable by accounts and inquiries.
• Breach of duty may give rise to personal remedies (compensation, account, devastavit) and proprietary remedies (tracing and recovery of assets or their proceeds).
• Beneficiaries may seek the removal or substitution of PRs or trustees for unfitness, breach, or breakdown in relations, using statutory (AJA 1985; TA 1925) and equitable avenues.
• Tracing may be possible into misapplied property and its substitutes or in mixed funds, subject to the bona fide purchaser defence and rules governing mixtures.
• The court may award interim or protective remedies, including injunctions, delivery up, or appointment of judicial trustees/receivers.
• Fiduciaries may have defences such as fully informed consent, statutory advertisements (TA 1925 s.27), relief under TA 1925 s.61, and limitation (subject to exceptions for fraud or proprietary claims).
• The distinction between personal and proprietary remedies is important for questions of priority, insolvency, and available relief. Remedy selection is strategic and context-driven.

Key Terms and Concepts

• fiduciary duty
• duty of care
• breach of trust
• equitable compensation
• tracing
• removal of trustee or personal representative
• devastavit
• account
• bona fide purchaser for value without notice
• relief under s.61 TA 1925
• wilful default
• administration action