Personal representatives and trustees in estate administrati...

Learning Outcomes

This article outlines the distinct roles and legal duties of personal representatives and trustees in estate administration, how and why trusts may be created during the administration of an estate, and the statutory and fiduciary principles applied in SQE1‑style scenarios. It examines common trusts arising on death (discretionary trusts, life interest trusts, trusts for minors, and trusts for disabled beneficiaries) and the circumstances in which statutory trusts arise under intestacy or partial intestacy. It explains key statutory powers and responsibilities, including the Trustee Act 2000 investment and delegation regime, the TA 1925 ss 31–32 powers of maintenance and advancement (as amended by the Inheritance and Trustees’ Powers Act 2014), and beneficiaries’ participation and occupation rights under TLATA 1996. It analyzes how immediate post‑death interests operate, including when an interest in possession qualifies as an IPDI for inheritance tax purposes, and contrasts this with relevant property trusts. It also reviews the allocation of income tax, capital gains tax, and inheritance tax liabilities between PRs, trustees, beneficiaries, and donees, with emphasis on estate rate apportionment and practical problem‑solving approaches typically tested in SQE1 multiple‑choice and scenario‑based questions.

SQE1 Syllabus

For SQE1, you are required to understand the legal responsibilities of personal representatives and trustees in estate administration, and the circumstances in which trusts are created during the administration process, with a focus on the following syllabus points:

• the distinction between personal representatives (executors and administrators) and trustees in the context of estate administration
• the statutory and fiduciary duties owed by personal representatives and trustees
• the creation and operation of trusts arising during estate administration, including discretionary trusts, life interest trusts, and trusts for minors or disabled beneficiaries
• the statutory powers available under the Trustee Act 2000 and related legislation
• practical implications for the administration and distribution of estate assets
• the duty to collect, realise, and distribute under the Administration of Estates Act 1925, including the “executor’s year”
• trustees’ powers under Trustee Act 1925 ss 31 (maintenance) and 32 (advancement), including the Inheritance and Trustees’ Powers Act 2014 changes
• trusts of land and beneficiaries’ participation and occupation rights under TLATA 1996 (ss 11–13)
• IHT classification of trusts created on death (immediate post‑death interests, trusts for bereaved minors/young people, disabled trusts) and liability allocation between PRs and trustees
• beneficiaries’ remedies for breach (personal actions, tracing, actions against strangers to the trust), and PRs’ statutory protections (e.g. TA 1925 s 27 notices, Benjamin orders)

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 primary difference between the role of a personal representative and a trustee in estate administration?
2. Name two statutory duties imposed on trustees by the Trustee Act 2000.
3. In what circumstances might a trust arise during the administration of an estate, even if not expressly created by the will?
4. What is a discretionary trust, and why might it be used in estate administration?

Introduction

When a person dies, the process of collecting, managing, and distributing their assets is governed by strict legal rules. The individuals responsible for this process are known as personal representatives. In many estates, the administration will also involve the creation and management of trusts—either because the will directs it, or because the law requires it (for example, for minor beneficiaries). Understanding the distinction between personal representatives and trustees, and the legal framework for trusts created during estate administration, is essential for SQE1.

Key Term: personal representative
A person (executor or administrator) legally responsible for collecting the deceased’s assets, paying debts, and distributing the estate according to the will or intestacy rules.

On death, title to the deceased’s property vests in the executors (if any) and otherwise devolves to administrators once they obtain a grant. Although the executors’ authority derives from the will, the grant of probate confirms that authority and is usually required to sell land, transfer shares, or access accounts. Personal representatives must distinguish estate assets from property passing outside the estate (for example, joint assets passing by survivorship or life insurance written into trust), and must manage tax consequences across both.

Key Term: executor
A personal representative appointed by will to administer the estate of the deceased.

Key Term: administrator
A personal representative appointed by the court to administer the estate where there is no valid will or no executor able or willing to act.

Personal Representatives: Duties and Powers

Personal representatives (PRs) are the starting point for estate administration. They are either executors (appointed by will) or administrators (appointed under intestacy rules). Their core duties are to collect in the estate assets, pay all debts and liabilities, and distribute the remaining assets to those entitled.

The duty “to collect and get in the real and personal estate of the deceased and administer it according to law” is set out in the Administration of Estates Act 1925 (AEA 1925) s 25. PRs are expected to act efficiently and without undue delay. The informal expectation known as the “executor’s year” reflects that PRs are not bound to distribute the estate before one year from death, but should aim to have the estate ready to distribute by then.

Key Term: executor’s year
The informal period of 12 months from death within which PRs are expected to collect, realise, and be ready to distribute the estate.

PRs must also handle practicalities such as raising funds to pay inheritance tax (IHT) due before the grant. They may borrow, use direct payment schemes, or (where available) have banks release funds pre‑grant. Interest on loans used to pay IHT on personalty vesting in PRs may be deductible against the estate’s income for up to one year.

Statutory and Fiduciary Duties

PRs must act with care and in good faith. They are personally liable for losses caused by breach of duty. Their main duties include:

• collecting and safeguarding all estate assets
• obtaining accurate valuations for tax and distribution purposes
• paying all debts, taxes, and liabilities before distributing assets
• distributing the estate in accordance with the will or intestacy rules

PRs must also comply with statutory duties, such as those under the Trustee Act 2000 when acting as trustees (for example, when holding assets on trust for a minor).

The Trustee Act 2000 (TA 2000) imposes a statutory duty of care. Section 1 requires reasonable care and skill, taking account of any specialist knowledge or experience, or the standard reasonably expected of professional PRs. PRs may be relieved by the court (TA 1925 s 61) if they have acted honestly and reasonably and ought fairly to be excused. PRs should also protect themselves by advertising for unknown creditors and claimants under TA 1925 s 27; once the statutory notice period expires, PRs may distribute without personal liability for unknown claims (though claimants can pursue recipients).

Key Term: fiduciary duty
The obligation to act honestly, in good faith, and in the best interests of the estate or trust beneficiaries, avoiding conflicts of interest and unauthorised profit.

A breach of duty by a co‑PR will not normally make another PR liable unless negligence is implicated. PRs must avoid devastavit (waste of estate assets), for example by leaving a viable business to collapse or failing to insure valuable assets.

Powers of Personal Representatives

PRs have wide powers to manage estate assets, including the power to sell, insure, or invest assets, and to appropriate assets to satisfy legacies. These powers may be extended or limited by the will or by statute.

Under TA 2000 s 3, PRs have a general power of investment “as if absolutely entitled”, subject to s 4 standard investment criteria (suitability and diversification) and s 5 obligations to take proper advice unless unnecessary. TA 2000 s 8 authorises PRs to purchase UK land for investment, occupation by a beneficiary, or any other reason.

PRs can run the deceased’s sole trader business temporarily with a view to sale or winding up, but without specific authority they risk personal liability for new trading debts, subject to indemnity where liabilities were reasonably incurred in realising assets. PRs may apply the statutory order of application of assets to pay debts and expenses (AEA 1925 s 34 and Sch 1 Pt II), and must respect secured creditors’ rights (AEA 1925 s 35). They can use appropriation to transfer specific assets to beneficiaries in satisfaction of their entitlements, observing fair value and any tax or relief implications.

When minors are entitled under a will or intestacy, PRs must hold property on trust and may apply income for maintenance, education, or benefit under TA 1925 s 31, and advance capital under s 32 (as amended by the Inheritance and Trustees’ Powers Act 2014). Consent is required if advancement would prejudice a prior interest.

Trustees in Estate Administration

A trustee is someone who holds and manages assets for the benefit of others (the beneficiaries) according to the terms of a trust. In estate administration, trustees may be appointed by the will, or may arise automatically by law (for example, where a beneficiary is under 18).

Key Term: trustee
A person who holds and manages property for the benefit of others, bound by the terms of the trust and statutory duties.

Trustees can be the same individuals as PRs or different persons appointed in the will or later under statutory powers. Trusts of land usually require at least two and not more than four trustees for overreaching purposes. Where the trust concerns land, the Trusts of Land and Appointment of Trustees Act 1996 (TLATA 1996) shapes trustees’ functions and beneficiaries’ participation rights.

Statutory Duties Under the Trustee Act 2000

Trustees must comply with the Trustee Act 2000, which imposes a statutory duty of care when exercising powers or making decisions. Key duties include:

• investing trust assets prudently, considering suitability and diversification
• reviewing investments regularly
• taking proper advice where appropriate
• acting impartially between beneficiaries

Key Term: statutory duty of care
The legal obligation under the Trustee Act 2000 to exercise such care and skill as is reasonable in the circumstances, having regard to any special knowledge or experience.

Under TA 2000 s 11–15, trustees may delegate certain functions (such as investment management) subject to proper supervision, setting objectives, and periodic review. TA 2000 s 8 permits trustees to purchase UK land for investment or occupation by a beneficiary, though co‑ownership powers or purchases of land abroad typically require express authority.

Trusts of land attract TLATA 1996 duties: trustees must, so far as consistent with the general interest of the trust, consult beneficiaries with interests in possession (s 11) and give effect to their wishes where appropriate. Beneficiaries with an interest in possession may have rights to occupy trust land if consistent with trust purposes (s 12–13), subject to reasonable conditions.

Fiduciary Responsibilities

Trustees must act solely in the interests of the beneficiaries, avoid conflicts of interest, and not profit from their position unless expressly authorised. They must not self‑deal or take unauthorised fees. Breach of fiduciary duty can result in personal liability, and beneficiaries may bring personal claims for loss and proprietary claims (tracing) against trustees or third parties who assisted in or received property from a breach with requisite knowledge.

Powers of Trustees

Trustees have powers to invest, delegate certain functions, advance capital to beneficiaries, and apply income for maintenance or education, subject to the trust instrument and statutory rules.

Key Term: power of maintenance
The statutory power under TA 1925 s 31 to apply trust income for a minor beneficiary’s maintenance, education, or benefit and, post‑2014, to pay income to beneficiaries aged 18 notwithstanding contingent capital interests.

Key Term: power of advancement
The statutory power under TA 1925 s 32 to advance capital to a beneficiary with a vested or presumptive share, up to the whole share for trusts created on/after 1 October 2014, subject to bringing advances into account and obtaining consent if a prior interest is prejudiced.

Advances which reduce the fund from which a life tenant receives income require that life tenant’s written consent. For trusts created before 1 October 2014, advances were limited to one‑half of the beneficiary’s vested or presumptive share.

Beneficiaries generally cannot direct trustees, but can seek the court’s intervention if trustees fail to perform duties, or challenge decisions that are capricious or outside power. Where all beneficiaries are adult, of full capacity and together absolutely entitled, they may demand termination of the trust under the rule in Saunders v Vautier.

Key Term: rule in Saunders v Vautier
If all beneficiaries are of full age and capacity and together absolutely entitled, they may terminate the trust and require trustees to transfer the trust property to them.

Under TLATA 1996 s 19, such beneficiaries may instead direct trustee retirement and appointment of new trustees of their choice without ending the trust, preserving tax planning or asset protection features.

Trusts Created During Estate Administration

Trusts may be created during estate administration in several ways:

• by express provision in the will (e.g., a life interest trust or discretionary trust)
• automatically by law (e.g., where a beneficiary is a minor)
• by intestacy rules (e.g., statutory trusts for children)

Key Term: trust
A legal arrangement where one or more persons (trustees) hold property for the benefit of others (beneficiaries) according to specified terms.

Testamentary trusts must satisfy the three certainties: intention, subject matter, and objects. The Wills Act formalities apply to the will; once admitted to probate, the PRs vest property in the trustees. Certain trusts created on death attract special IHT treatment.

Key Term: statutory trust
A trust that arises automatically by operation of law (for example, under intestacy) holding property for beneficiaries (often issue) contingently until they attain 18 or marry earlier, with substitution for issue of a deceased beneficiary.

Key Term: immediate post‑death interest (IPDI)
An interest in possession arising on death under a will or intestacy, under which the beneficiary is entitled to income (or equivalent enjoyment) immediately and continuously since death. For IHT, the fund is aggregated with the life tenant’s estate.

Types of Trusts Commonly Arising

Discretionary Trusts

A discretionary trust gives trustees the power to decide how and when to distribute income or capital among a class of beneficiaries. This provides flexibility to respond to changing needs or circumstances. Discretionary trusts created on death are normally within the “relevant property” regime for IHT (anniversary and exit charges at trustees’ level), so trustees must administer with tax in mind and keep distributions under review.

Key Term: discretionary trust
A trust where trustees have discretion over how to distribute trust income or capital among beneficiaries.

Letters of wishes often guide trustees, but are not binding. In exercising discretions, trustees must act within the trust’s terms, for proper purposes, and impartially.

Life Interest Trusts

A life interest trust (also called an interest in possession trust) gives a named beneficiary the right to income (or use of property) for life, with the capital passing to others (the remaindermen) on their death. Where the life interest arises on death and qualifies as an IPDI, the trust fund is treated as part of the life tenant’s estate on their death for IHT purposes, and the trustees are liable for the IHT attributable to the trust property (with the PRs responsible for IHT on the free estate).

Key Term: life interest trust
A trust where a beneficiary has the right to income or use of trust property for life, with capital passing to others on their death.

If a life tenant surrenders their IPDI before death, the surrender is a lifetime transfer of value: a PET if capital then passes absolutely to an individual, or a lifetime chargeable transfer if capital passes on trust.

Trusts for Minors

Where a beneficiary is under 18, the law may require assets to be held on trust until they reach adulthood. Trustees must manage the assets and may apply income for the minor’s maintenance, education, or benefit. The minor’s interest in capital will usually be contingent upon attaining 18 (or a higher age if specified in the will). If the minor dies before vesting, the interest fails, and the property passes as directed in the will or under intestacy.

Trusts for Disabled Beneficiaries

Special trusts can be created for disabled beneficiaries to protect their interests and, in some cases, preserve eligibility for means‑tested benefits. For IHT, a qualifying disabled trust is treated similarly to a qualifying interest in possession: no anniversary or exit charges, and aggregation of the trust fund with the disabled beneficiary’s estate on death.

Statutory Trusts

If a will fails to dispose of all the estate, or where there is a partial intestacy, the law may impose a statutory trust. The personal representatives hold the assets on trust for the persons entitled under the intestacy rules. On intestacy without a surviving spouse/civil partner, many entitled categories take “on the statutory trusts”: shares are equal per stirpes, with minors’ interests contingent on attaining 18 (or marrying earlier), and substitution for issue of deceased beneficiaries.

Under such statutory trusts, TA 1925 s 31 and s 32 provide default income and advancement powers pending vesting, unless excluded or varied by applicable instruments.

Administration and Funding of Trusts

Once all debts and liabilities are paid, PRs transfer assets to the trustees of any trusts created by the will or by law. Trustees then manage those assets according to the trust terms and statutory duties.

PRs and trustees must coordinate tax compliance. On death, IHT attributable to non‑settled property is primarily the PRs’ liability; IHT attributable to settled property comprised in an IPDI is primarily the trustees’ liability. Where property passing by survivorship or lifetime gifts with reservation is included in the estate, liability may fall on donees primarily, with PRs having secondary liability if unpaid after statutory periods. The “estate rate” method is often used to apportion the estate’s IHT across assets (including settled property), so each item bears a proportional share.

Key Term: estate rate
The average rate of IHT applicable to the chargeable estate; used to apportion the total tax attributable to particular assets or funds proportionately to their values.

Capital gains tax (CGT) does not arise on vesting of the estate in PRs or on assents/appointments to beneficiaries or trustees, but PRs and trustees may incur CGT on disposals during administration or trust management. Trustees of relevant property trusts face ten‑year anniversary and exit charges for IHT; trustees of IPDI/disabled trusts do not, but must account for IHT on the life tenant’s death.

Worked Example 1.1

A will leaves the residue of an estate to be held on trust for the testator’s spouse for life, with the remainder to their children equally. The spouse survives the testator. What are the roles of the personal representatives and trustees?

Answer:
The personal representatives collect the estate, pay debts, and transfer the residue to the trustees. The trustees then hold the assets, pay income to the spouse during their lifetime, and distribute the capital to the children on the spouse’s death.

Worked Example 1.2

A testator dies leaving a minor child as the sole beneficiary. The will does not create a trust. What happens to the child’s inheritance?

Answer:
The personal representatives must hold the assets on statutory trust for the child until they reach 18. Trustees (who may be the same people as the PRs) manage the assets and may apply income for the child’s maintenance or education.

Worked Example 1.3

A will establishes a discretionary trust of residue for “such of my issue as my trustees shall in their absolute discretion decide.” What investment and decision‑making standards govern the trustees?

Answer:
Trustees must apply the TA 2000 duty of care, consider the standard investment criteria (suitability and diversification), take proper advice unless unnecessary, review investments regularly, and act impartially between beneficiaries. Discretionary distributions must be for proper purposes within the class and not capricious.

Worked Example 1.4

A will creates an IPDI for A (life tenant) over a £300,000 fund, remainder to B. A dies when the free estate is £200,000. How is IHT liability allocated?

Answer:
The trust fund is aggregated with A’s estate for IHT, so the total chargeable estate is £500,000. Trustees are primarily liable for the IHT attributable to the trust fund, calculated using the estate rate across the combined value, while PRs are liable for the IHT on the free estate. B is concurrently liable if trust property vests before tax is paid.

Worked Example 1.5

Trustees hold land on trust of land for C (life tenant) with remainder to D. C seeks to occupy. Can trustees refuse?

Answer:
Under TLATA 1996, a beneficiary with an interest in possession may have a right to occupy if consistent with the trust’s purposes or acquisition. Trustees must consult and balance the general interests of the trust (including other beneficiaries). Reasonable conditions can be imposed, but outright refusal must be justified by trust purposes or fairness.

Worked Example 1.6

Trustees propose advancing £50,000 capital from a fund held on trust “for E for life, remainder to F.” What consent is required?

Answer:
An advance of capital that would prejudice E’s prior life interest (by reducing income) requires E’s written consent under TA 1925 s 32. The amount advanced is brought into account on final distribution. For trusts created on/after 1 October 2014, the aggregate advanced can be up to F’s whole presumptive share.

Worked Example 1.7

A trust holds residue for G absolutely at age 25. At 22, all beneficiaries are adult and absolutely entitled if age were ignored. Can they end the trust?

Answer:
Not unless all persons with potential interests are adult and of full capacity and together absolutely entitled now. A contingent beneficiary is not absolutely entitled until the contingency occurs; therefore the rule in Saunders v Vautier cannot be used unless the terms or court consent enable acceleration.

Key Duties and Liabilities

Both PRs and trustees are personally liable for losses caused by breach of duty. They must act promptly, keep accurate records, and act impartially. Trustees must also comply with any express powers or restrictions in the trust instrument.

Beneficiaries’ remedies include:

• compelling due administration (PRs/trustees can be required to perform duties)
• personal claims for breach of trust or devastavit
• proprietary claims (tracing into identifiable property/proceeds)
• actions against “strangers to the trust” for dishonest assistance or knowing receipt
• claims against recipients of estate assets wrongly paid (where tracing fails, a personal action may still lie)

PRs can protect themselves by:

• advertising under TA 1925 s 27 for unknown creditors/beneficiaries
• seeking court directions or a Benjamin order where beneficiaries are missing despite reasonable searches
• ensuring proper valuation and record‑keeping
• taking professional advice on investments and tax

Exam Warning

If a personal representative or trustee fails to comply with their statutory or fiduciary duties, they may be personally liable to replace lost assets or pay compensation to beneficiaries.

Revision Tip

For SQE1, be able to distinguish between the roles and duties of personal representatives and trustees, and explain when a trust arises during estate administration.

Key Point Checklist

This article has covered the following key knowledge points:

• The distinction between personal representatives and trustees in estate administration.
• The statutory and fiduciary duties owed by personal representatives and trustees.
• The creation of trusts during estate administration, including by will, by law, or under intestacy.
• The main types of trusts encountered: discretionary trusts, life interest trusts, trusts for minors, and trusts for disabled beneficiaries.
• The key statutory powers and duties under the Trustee Act 2000.
• The personal liability of PRs and trustees for breach of duty.
• How TLATA 1996 affects trusts of land (consultation and occupation rights).
• How TA 1925 ss 31–32 operate and the ITPA 2014 changes to maintenance and advancement.
• IHT treatment of trusts created on death (IPDI, bereaved minors/young people, disabled trusts) and allocation of liability between PRs and trustees.
• Use of estate rate apportionment and coordination of tax compliance across free estate and settled property.

Key Terms and Concepts

• personal representative
• executor
• administrator
• fiduciary duty
• trustee
• statutory duty of care
• trust
• discretionary trust
• life interest trust
• executor’s year
• statutory trust
• immediate post‑death interest (IPDI)
• power of maintenance
• power of advancement
• rule in Saunders v Vautier
• estate rate