Learning Outcomes
After studying this article, you will be able to explain the core fiduciary duties of personal representatives and trustees in estate administration, identify the main rights of beneficiaries, and apply the principal remedies available to beneficiaries when duties are breached. You will also be able to distinguish between personal and proprietary remedies, and recognise the circumstances in which beneficiaries can seek court intervention.
SQE1 Syllabus
For SQE1, you are required to understand the rights and remedies of beneficiaries in the context of estate administration. This includes the duties of personal representatives and trustees, the rights of beneficiaries to information and proper administration, and the legal remedies available for breach of duty.
As you work through this article, focus your revision on:
- the fiduciary duties owed by personal representatives and trustees to beneficiaries
- the main rights of beneficiaries during estate administration and trust management
- the remedies available to beneficiaries, including compensation, tracing, and removal of fiduciaries
- the distinction between personal and proprietary claims
- the process for seeking court intervention and the limits of beneficiary control
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.
- What is the difference between a personal and a proprietary remedy for breach of trust?
- Name two core fiduciary duties owed by personal representatives or trustees to beneficiaries.
- What is the main right of a beneficiary if a trustee fails to keep proper accounts?
- In what circumstances can a beneficiary seek to have a personal representative or trustee removed by the court?
Introduction
When a person dies, their estate must be collected, managed, and distributed by personal representatives (PRs)—either executors (if there is a will) or administrators (if there is not). Where assets are held on trust, trustees are responsible for managing those assets for the benefit of the beneficiaries. Both PRs and trustees owe strict fiduciary duties to beneficiaries. Beneficiaries, in turn, have important rights to ensure their interests are protected and can seek a range of remedies if those duties are breached.
Duties of Personal Representatives and Trustees
PRs and trustees are fiduciaries. This means they must act in good faith, for the benefit of the beneficiaries, and avoid conflicts of interest. Their main duties include:
- collecting and safeguarding estate or trust assets
- keeping accurate accounts and providing information to beneficiaries
- investing assets prudently and in accordance with statutory criteria
- distributing assets in accordance with the will, trust, or intestacy rules
- acting impartially between different classes of beneficiaries
Key Term: fiduciary duty The obligation to act honestly, in good faith, and for the benefit of another, avoiding conflicts of interest and not profiting from the position.
Key Term: personal representative The person (executor or administrator) responsible for administering a deceased person's estate.
Key Term: trustee The person or persons holding legal title to trust property for the benefit of beneficiaries, subject to the terms of the trust.
Rights of Beneficiaries
Beneficiaries have several important rights to protect their interests during estate administration and trust management.
Right to Proper Administration
Beneficiaries are entitled to expect that PRs and trustees will administer the estate or trust lawfully, efficiently, and in accordance with the relevant instrument (will or trust deed) and the law.
Right to Information and Accounts
Beneficiaries have a right to request and receive information about the administration of the estate or trust, including accounts and records. Trustees and PRs must keep proper records and provide them on reasonable request.
Key Term: right to information The entitlement of a beneficiary to request and receive relevant information and accounts about the administration of the estate or trust.
Right to Impartiality
Where there are multiple beneficiaries (e.g., life tenants and remaindermen), PRs and trustees must act impartially and not favour one beneficiary or class over another.
Right to Compel Performance
If PRs or trustees fail to perform their duties, beneficiaries can apply to the court to compel them to act, or to restrain them from acting improperly.
Right to Seek Remedies for Breach
If a PR or trustee breaches their duties, beneficiaries have access to a range of remedies, including compensation, tracing, and, in serious cases, removal of the fiduciary.
Remedies Available to Beneficiaries
If a PR or trustee breaches their duties, beneficiaries may seek the following remedies:
Personal Remedies
A personal remedy is a claim against the PR or trustee personally, usually for compensation (equitable compensation or an account of profits) for loss caused by the breach.
Key Term: breach of trust A failure by a trustee or PR to perform their duties or to comply with the terms of the trust or estate, resulting in loss or unauthorised profit.
Proprietary Remedies
A proprietary remedy allows the beneficiary to recover specific property or its traceable proceeds if trust or estate assets have been misapplied or misappropriated.
Key Term: tracing The process by which a beneficiary follows trust or estate property into its new form or hands, to recover it or its substitute.
Removal of PRs or Trustees
The court has power to remove a PR or trustee who is acting improperly, is incapable, or whose continued office would be detrimental to the interests of the beneficiaries.
Injunctions and Court Directions
Beneficiaries can seek injunctions to prevent threatened breaches or ask the court for directions on the administration of the estate or trust.
Benjamin Orders
Where a beneficiary cannot be found, PRs may apply for a Benjamin order, allowing distribution without personal liability if the missing beneficiary later appears.
Key Term: Benjamin order A court order permitting PRs to distribute an estate as if a missing beneficiary had died, protecting the PRs from later claims.
Limits on Beneficiary Control
Beneficiaries cannot generally direct PRs or trustees how to exercise their discretionary powers (unless all are of full age and capacity and absolutely entitled). However, they can compel proper administration and seek remedies for breach.
Key Term: account A formal statement of the administration of the estate or trust, showing receipts, payments, and distributions, which beneficiaries are entitled to inspect.
Worked Examples
Worked Example 1.1
Scenario: A trustee invests all trust funds in a single speculative share without seeking advice. The shares collapse, causing a significant loss. What remedy is available to the beneficiaries?
Answer: The beneficiaries may claim compensation for breach of trust, as the trustee failed to invest prudently and seek advice. The trustee may be personally liable for the loss.
Worked Example 1.2
Scenario: An executor sells estate property to a friend at a price well below market value, without informing the beneficiaries. What can the beneficiaries do?
Answer: The beneficiaries may apply to the court for the executor's removal for breach of fiduciary duty, seek an account of the executor's dealings, and claim compensation for any loss suffered.
Worked Example 1.3
Scenario: A beneficiary suspects that trust funds have been misapplied and used to buy a car in the trustee's name. What proprietary remedy is available?
Answer: The beneficiary may trace the misapplied funds into the car and claim a proportionate share of the car or a charge over it, depending on the circumstances.
Exam Warning
In the SQE1, you may be asked to distinguish between a personal claim (against the PR or trustee) and a proprietary claim (against specific property). Read the facts carefully to determine which remedy is appropriate.
Revision Tip
When answering SQE1 questions, always identify the type of breach, the loss suffered, and whether the beneficiary is seeking compensation, recovery of property, or removal of the fiduciary.
Key Point Checklist
This article has covered the following key knowledge points:
- PRs and trustees owe fiduciary duties to beneficiaries, including loyalty, care, and impartiality.
- Beneficiaries have rights to information, proper administration, and to seek remedies for breach.
- Remedies include personal claims (compensation), proprietary claims (tracing), and removal of fiduciaries.
- The court may grant Benjamin orders to protect PRs where beneficiaries are missing.
- Beneficiaries cannot generally direct PRs or trustees but can compel proper administration and seek court intervention.
Key Terms and Concepts
- fiduciary duty
- personal representative
- trustee
- right to information
- breach of trust
- tracing
- Benjamin order
- account
