3. Powers of the Personal Representatives in Dealing with the Assets

3. Powers of the Personal Representatives in Dealing with the Assets

Collecting & Securing Assets

In particular, a person representative has the power to commence legal proceedings to collect assets for the estate, including but not limited to obtain a freezing order against the party holding the assets so that that party cannot dispose of those assets until court order. There may be costs consequences to the personal representative personally though, especially if the claim is actually a claim involving beneficiaries. E.g. if the beneficiaries consider the personal representative having unduly initiated or defended a legal action, they may ask the court not to allow the representative to be reimbursed from the estate for the legal costs. To make sure he or she will be entitled to recovering the costs from the estate, the prudent way to do in case of doubt is for the personal representative to obtain authorization from the Court before commencing or defending the action (such authorization is called “Beddoe order”).

Likewise, a personal representative has the powers to defend the estate in a legal action and to reach settlement with the claimant. The same costs concerns set out above apply more or less equally to the defence of a claim.

In collecting the assets, the personal representative must act with due diligence, meaning to take reasonable steps to collect all assets due to the deceased as quickly as practically possible.

Powers To Dispose of the Assets

Generally speaking, a personal representative has the powers to sell the assets of the estate for the purpose of paying debts or expenses of the estate or for the purpose of distribution.

Exceptions include specific gift under a will (i.e. the deceased gave a specific asset to a specific beneficiary). In such case, unless the overall assets of the estate is not enough to pay off its debt and hence the specific gift has to be sold too, the beneficiary has the right to insist on taking that particular gift.

Another exception is a spouse’s right of first refusal over the matrimonial property. It means that, unless, as mentioned, the assets of the estate are not enough to pay off its debt, a spouse has the right to take the matrimonial property in satisfaction of his/her share under intestacy. If the matrimonial property is worth more than his/her share under intestacy, he or she may pay the shortfall to the estate in return for the whole of the matrimonial property. Please refer to question 1 of Case Illustration for details.

Other than exceptions such as above, a beneficiary of the estate generally does not have the right to insist on keeping a particular asset unsold.  

Powers of Management of the Assets, e.g. postpone distribution, delegate, insure, mortgage/charge, investment

Time for distribution: There was a saying of “executor’s year” which expects a personal representative to distribute the assets according to the will or intestacy in one year after the deceased’s demise. But it is far from a hard rule. There are many circumstances under which the representative may postpone full distribution such as ongoing claim by a third party claimant against the estate. A representative may make partial and proportional distribution if the circumstances require and/or permit. But the personal representative must act honestly on the timing of distribution and must not postpone unreasonably.

Delegation: Generally speaking, insofar as reasonable, a personal representative may delegate his powers to an agent, e.g a solicitor or an accountant when the estate is complicated: s.27 of Trustees Ordinance (Cap 29).  

Insurance, mortgage/charge, investment: If there are reasonable grounds why distribution cannot be effected immediately, e.g. minority interest, outstanding debt or litigation or unripeness to sell, a personal representative may exercise powers to manage such as power to insure, to mortgage or to invest.