Can administrators appropriate a property to beneficiaries before the beneficiaries have been definitively ascertained / traced?
We are acting for two family members who have obtained a grant of letters of administration for the estate of a lady who died some time ago, intestate with no close relatives. Some 23 relatives have been discovered who are entitled to a share of the estate (in differing proportions). However we have not yet traced or made contact with these relatives - we have just got a family tree from a search agent.
The main asset of the estate is a flat and this is going to be sold for a likely gain on the probate value. Can the administrators appropriate to themselves as trustees holding as bare trustees for the beneficiaries and benefit from all the many individual CGT allowances? Can they do so by means of a memorandum of appropriation or does it have to be an assent at the Land Registry?
Under an intestacy, s.41 Administration of Estates Act 1925 will apply, so that the beneficiaries’ consent will be required for a valid appropriation - no contact, no consent.
If the proportion of the estate to which the known beneficiaries are entitled is known, then it is possible to appropriate proportionate shares to them, with the remainder of the property staying within the estate. If the known beneficiaries’ shares are not certain, but you know their minimum entitlement, you might appropriate no more than that (after allowing for the outgoings from the estate – you don’t want to over distribute).
Yes, they can appropriate by a simple memorandum of appropriation, and the beneficial interests will pass by that means, thus safeguarding all the individual personal allowances. Whether it is wise to do so before the beneficiaries have been definitively ascertained is another matter.
But s. 41 is not the be-all and end-all, is it?
First question - has the administration been concluded? Possibly not, if you have not traced some beneficiaries.
Second question, is residue ascertained, in the sense that you have a fund ready and available to discharge all liabilities including here the costs of tracing the beneficiaries. If so, then the prs probably hold on trust for the beneficiaries as bare trustees, rather than as prs.
Finally, if all else fails, why do you need to appropriate? Each beneficiary is being attributed his aliquot share of an estate asset. that is not an appropriation, in my view. you can do it simply by a written assent. i know of no requirement that the assentee needs to execute the assent.
No, the administration has not concluded yet. We’re still in the throes of trying to trace various family members and that is going to take some time.
Residue is ascertained but most of the value is in the flat which is going to be sold so it is not liquid although there will be enough funds to cover all liabilities in due course.
I was particularly concerned about the CGT. There’s a gain on the probate value and the administrators have only got this year’s annual allowance left as it is almost three years since the death. The gain is going to be about £45,000. I just wondered whether we could benefit from many individual CGT allowances on the disposal as there are so many potential beneficiaries and if so how I would go about doing that.
Provided the Administrators have raised sufficient cash from elsewhere in the Estate to cover all known expenses and to provide a reserve for anticipated expenses then residue has been ascertained and, as Thomas Dumont has said, the PRs then hold the remaining assets as Bare Trustees for the class of Beneficiaries.
We have recently managed to persuade HMRC that this was the case where a property was sold after the PRs’ annual exemptions had been lost but I think there had also been payments on account made to the residuary beneficiaries, which helped our cause. Perhaps a Declaration by the Administrators that they now held the property as Bare Trustees for the class of Beneficiaries would be a good idea. You would also need to make full disclosure to HMRC just to protect the PRs and to try and get clearance.