20.3 Administration of Estates
Key Takeaways
- Administration of Estates Act 1925 s.25 requires personal representatives to collect and get in the estate and administer it according to law, and to inventory, account and deliver up the grant when the court requires.
- Before distributing, personal representatives must secure assets, preserve value, collect money, issue proceedings where necessary, pay funeral and testamentary expenses, follow the will or intestacy, and account to beneficiaries.
- Trustee Act 1925 s.27 advertisements protect against unknown claimants of whom the personal representatives have no notice after at least two months; they do not protect against a known missing beneficiary, a known creditor, or allow property to be kept by a recipient as against a tracing claim.
- Trustee Act 1925 s.27 advertisements do not prejudice a true owner's right to follow property into the hands of a recipient who is not a purchaser, and do not replace the searches a purchaser would make.
- Personal representatives have wide statutory powers of sale under Administration of Estates Act 1925 s.39, pass legal title to land by assent under s.36, and appropriate assets under s.41 with the consents that section requires.
Once the grant is in hand, FLK2 shifts from "who may collect" to "what must they do, and when can they safely hand property over". Personal representatives who distribute too early, to the wrong person, or without paying tax and debts, are personally at risk. The September 2026 FLK2 specification lists the pre-distribution duties in a fixed order; learn that list, then learn the protection tools that sit beside it.
Statutory duty and the FLK2 pre-distribution list
Administration of Estates Act 1925 s.25 (substituted by the 1971 Act) is short and mandatory. The personal representative must:
- collect and get in the real and personal estate and administer it according to law;
- when required by the court, exhibit a full inventory and render an account;
- when required by the High Court, deliver up the grant.
The FLK2 specification then unpacks "administer according to law" into seven working duties. Treat them as a sequence, not a menu.
| Duty | What it means in practice | Typical exam failure |
|---|---|---|
| Take all reasonable steps to collect in and secure the estate | Change locks, insure, notify banks, take control of share certificates and chattels, register a restriction against a solely owned registered title | Leaving a vacant house uninsured over a weekend |
| Preserve the value of the estate | Maintain, rent out where sensible, avoid speculative trading, obtain proper valuations before sale | Selling quoted shares in a panic on a single badly chosen day without advice |
| Collect money due to the estate | Debts owed to the deceased, unpaid salary, refunds, declared but unpaid dividends, insurance proceeds payable to the estate | Writing off a solvent debtor because "the family do not want a fuss" |
| Issue proceedings where necessary | Issue before limitation expires; use the grant as title to sue | Waiting for a family meeting while the limitation clock runs |
| Pay funeral and testamentary expenses | Reasonable funeral, the cost of the grant, IHT that is a testamentary expense, administration costs properly incurred | Paying a huge family party as a "funeral expense" and then finding the estate is short |
| Follow the terms of the will or the intestacy provisions | Pay demonstrative, general and specific gifts in the right order; apply Administration of Estates Act 1925 s.46 and the statutory trusts on intestacy | Paying a residuary beneficiary before a still-unpaid pecuniary legatee because the residue is "almost ready" |
| Account to the beneficiaries | Estate accounts, income and capital accounts, tax certificates, and an explanation of appropriations and assents | A single spreadsheet with no distinction between income and capital |
Administration of Estates Act 1925 s.44 (the "executor's year") is a shield, not a target. A legatee cannot compel payment of a legacy until one year from death, except with the court's permission. Personal representatives may distribute earlier if it is safe, but they are not obliged to. They also must not treat the year as a reason to sit on a wasting asset.
Liabilities of personal representatives, and protection
Personal representatives are liable to unpaid creditors, unpaid or underpaid beneficiaries, HMRC, and (if they distribute too soon) successful 1975 Act claimants. The specification requires you to handle four protection problems separately: unknown beneficiaries, missing beneficiaries, insolvent beneficiaries, and creditors.
Unknown beneficiaries and unknown creditors — statutory advertisements. Trustee Act 1925 s.27 lets personal representatives advertise in the Gazette and, where land is involved, in a newspaper circulating in the district where the land is situated, requiring claims within a time that is not less than two months. After that time they may distribute having regard only to claims of which they then had notice, and they are not liable to a person of whose claim they did not have notice. Two limits, both examined constantly:
- s.27 does not prejudice the true owner's right to follow the property into the hands of a recipient who is not a purchaser;
- it does not free the personal representatives from searches a purchaser would make.
If they already know of a possible claimant, advertising does not wash that knowledge away. An advertisement is a tool against people they do not know exist, not against a son they have not managed to telephone.
Missing beneficiaries — Benjamin orders, insurance, payment in. Where a beneficiary cannot be found after reasonable enquiry, the court may authorise distribution on the footing that the missing person has died (a Benjamin order, after Re Benjamin). That protects the personal representatives if the missing person later appears; it does not destroy the missing person's right to follow remaining assets. Missing-beneficiary insurance is often cheaper and faster than an application. Payment into court under the Trustee Act is a further option where the doubt cannot be resolved and insurance is unavailable. None of these tools is a substitute for looking: the court expects a paper trail of enquiries, certificates and advertisements first.
Insolvent beneficiaries. A bankrupt beneficiary does not receive their share. Once you have notice of bankruptcy, the share is an asset of the bankruptcy estate and must be paid to the trustee in bankruptcy. Paying the beneficiary because they "need the money" is a misapplication. A beneficiary who is merely short of cash, or who has unsatisfied county court judgments but is not bankrupt, is not treated as insolvent for this purpose; you pay them unless a third-party debt order or similar has attached the entitlement. If the estate is insolvent, a different code applies: the Administration of Insolvent Estates of Deceased Persons Order 1986 imports the Insolvency Act order of priority. Funeral, testamentary and administration expenses have a special place, but personal representatives who prefer a friendly unsecured creditor over HMRC or other unsecured creditors of equal rank are personally at risk. Do not make any distribution of residue from an estate you suspect is insolvent.
Creditors. Known creditors must be paid or secured. Unknown creditors are the reason you place s.27 advertisements. Contingent liabilities (an outstanding guarantee, a possible negligence claim) are dealt with by retention, insurance, or a court-directed indemnity. Distributing because "nobody has written in yet" before the advertisement period expires is not protection.
| Problem | First-line protection | What it does not do |
|---|---|---|
| Unknown beneficiary or creditor | Trustee Act 1925 s.27 advertisements, wait at least two months | Protect against people you already know about |
| Missing known beneficiary | Enquiries, Benjamin order, missing-beneficiary insurance, payment in | Destroy the missing person's tracing rights against volunteers |
| Insolvent beneficiary | Pay the trustee in bankruptcy | Let you withhold the share as extra residue for the others |
| Insolvent estate | Stop distributions; apply the 1986 Order / Insolvency Act ranking | Let you pay a family creditor first "as a kindness" |
| Possible 1975 Act claim | Wait until six months after the first grant, or retain a fund / take an indemnity if you must distribute earlier | Give absolute safety after six months if you have notice of an intended claim |
Section 61 of the Trustee Act 1925 remains a backstop: the court may excuse a personal representative who acted honestly and reasonably and who ought fairly to be excused. It is not a planning tool. Advise the protection steps first; do not plan to rely on s.61.
Sale of assets to raise funeral expenses, tax, debts and legacies
Personal representatives have wide statutory powers of sale (Administration of Estates Act 1925 s.39, together with the Trusts of Land and Appointment of Trustees Act 1996 powers over land). The FLK2 question is not "can they sell?" but "what should they sell, and in what order?"
- Check the will for an express order of realisation, a power to postpone, or a direction to retain a particular asset.
- Do not reach for an asset that has been specifically given if residue or a general pecuniary fund can meet the bill. Selling the specifically given painting to pay a pecuniary legacy, while leaving a cash ISA untouched, is the classic marshalling error.
- Funeral expenses, Inheritance Tax that is a testamentary expense, and ordinary debts come out of the general estate before legacies.
- Value properly. A forced sale of land without marketing evidence is a preservation failure as well as a valuation failure.
- Think about Capital Gains Tax before the contract is exchanged. A sale by the personal representatives during administration is their disposal (HMRC Capital Gains Manual CG30700). If instead they assent the asset to a beneficiary who then sells, the disposal is the beneficiary's. That choice is taught in the next section; it belongs in the sale decision, not as an afterthought.
- For land, remember that an assent (Administration of Estates Act 1925 s.36) is how personal representatives pass legal title to the person entitled. Selling to a third party uses the grant as proof of title and a transfer by the personal representatives.
If the will creates a trust of land that continues after administration, once residue is ascertained the personal representatives should assent to themselves as trustees (or to the appointed trustees) so that the two offices are not blurred.
Distribution
Distribution is the last act, not the first. A working order for a solvent testate estate is:
- Confirm the grant is valid and unrevoked, and that caveats and standing searches have been checked.
- Complete s.27 advertisements and any Benjamin or insurance steps.
- Pay or provide for funeral and testamentary expenses, Inheritance Tax, and debts.
- Consider the six-month family-provision window (below).
- Pay specific gifts by delivery or assent, then pecuniary legacies, then residue.
- Take receipts. For land, use a written assent. For appropriated assets, follow Administration of Estates Act 1925 s.41 (appropriation with consents where required).
- Produce estate accounts and tax certificates so that beneficiaries can complete their own returns.
Intestacy distribution follows Administration of Estates Act 1925 s.46 and the statutory trusts: issue take on the statutory trusts with hotchpot issues only where the older hotchpot rules still apply on the facts, and a surviving spouse or civil partner takes the statutory legacy and interest plus the personal chattels and the statutory share of residue. Do not invent the current statutory-legacy figure in an exam answer unless the question states it; the machinery is what FLK2 is testing.
Partial intestacy (a will that fails to dispose of some residue) is administered under the will for the parts that work and under s.46 for the gap. That is also the situation that sends a person entitled to undisposed-of residue up the r.20 ladder.
Personal representatives of a solvent estate want to pay a residuary beneficiary three months after death. Funeral expenses and Inheritance Tax that is a testamentary expense are still unpaid, and a six-month family-provision window is still running. Which advice is correct?
Personal representatives place Trustee Act 1925 s.27 advertisements in the Gazette and a local newspaper, wait two months, and then pay residue to the named beneficiaries. A previously unknown creditor later comes forward. Which statement is correct?
A will leaves £80,000 to the testator's daughter. Before the personal representatives pay, they receive notice that a bankruptcy order has been made against her. What should they do with the legacy?