Administration of Estates, Wills and Intestacy

Everyone dies, and most people leave property behind. The law of administration of estates makes sure that the property is gathered, the debts are paid, the tax is settled and what is left reaches the right people. If the deceased left a will, the will says who does this and who gets what. If he did not, the law says.

For accountants the topic matters in practice, because a bank, an insurer or a company will not release a dead client’s money or shares without a court document, and because estates are one of the main reasons that people need professional advice. In the exam the topic produces short definition and list questions, plus problems about a person who died without a will.

This topic covers the sources of the law, wills, testators and executors, intestacy, letters of administration and probate, the types of letters of administration, administrators and executors compared, the rights and duties of personal representatives, caveats, and the rule against intermeddling.

Why the law exists, and its sources

The purpose of the law is to ensure that a dead person’s property does not become a problem for his relatives and for society. The problems include who is entitled to inherit, in what shares, how to identify and gather the property, which law governs the deceased’s personal affairs, how to vest the property legally in the beneficiaries, and how to pay the debts owed when he died.

The property of every deceased person is subject to administration and distribution under the law. This is done through:

1. the will of the deceased, if he made one;
2. customary law, the particular customary law the deceased was subject to, if he died intestate;
3. common law rules on intestacy, under the reception statutes, where the deceased was domiciled in or originated from a state with no local administration of estates statute, died intestate, and was not subject to customary law; and
4. the Administration of Estates Law of the particular state of the federation.

Wills

A will is a document made by a person called a testator, by which he appoints persons called executors (an executrix if female) to manage his estate after his death and directs how it is to be distributed to named beneficiaries.

It has been described as a testamentary and revocable document, voluntarily made, executed and witnessed according to law by a testator with a sound disposing mind, in which he disposes of his property subject to the limits the law imposes, and gives such other directions as he sees fit to his personal representatives (Kole Abayomi). A person who dies leaving a will dies testate.

A will is ambulatory: it takes effect only on the death of the testator, so he may revoke or change it as long as he lives. Section A in November 2020 asked why a will is said to be ambulatory, and the answer was that it takes effect after the death of its maker. November 2017 asked for an explanation of a will (2½ marks).

Intestacy

A person who dies without a will dies intestate. So does a person whose purported will fails or is declared invalid for any reason. The dangers are that the estate may be squandered, or may be beyond reach where no one is known to be entitled to inherit.

In some cases the estate is taken over by the Administrator-General for the state as an unrepresented estate (section 2 of the Administrator-General Law).

Who may apply for letters, in order of priority

May 2023 asked for six persons in their order of priority (6 marks). The examiners listed:

1. the surviving spouse;
2. the children of the deceased;
3. the parents;
4. brothers and sisters of the full blood;
5. brothers and sisters of the half blood;
6. grandparents;
7. uncles and aunts of the full blood;
8. uncles and aunts of the half blood; and
9. the State, for unclaimed estates (bona vacantia).

Letters of administration

To avoid the squandering of an intestate’s estate, his representatives must obtain letters of administration. This is a document issued by a court with jurisdiction, authorising specified persons, called administrators, to manage the estate of an intestate. It is the alternative to a will where there is none, or where a purported will has failed. November 2017 asked for an explanation (2½ marks).

When letters are needed

May 2023 asked for two situations (6 marks). Letters are needed where a person:

1. leaves a will but names no executor, or names one who is unable or refuses to take probate, or who has died before the testator. The will is then annexed to the application, and the grant is called letters of administration cum testamento annexo (with the will annexed);
2. dies without making a will at all; or
3. leaves a will but dies intestate as to part of his estate: a partial intestacy.

Letters are issued by the Probate Division of the High Court under the state’s Administration of Estates Law and High Court Rules, where the deceased was not subject to customary law at death. They give the administrators the powers, functions and duties of personal representatives, including access to funds and choses in action.

Funds in the custody of banks and insurers, and benefits of company and co-operative society shares held in the name of the intestate, cannot lawfully be reached by his family or anyone else without a valid grant.

In November 2021, Francis died without a will with ₦20 million in his bank account, and the examiners’ answer was that he died intestate. His family must obtain letters of administration appointing administrators, who can then access the deposit.

Types of letters of administration

Administrators and executors

Both are personal representatives. In effect an administrator does for an intestate estate what an executor does for a testate estate. May 2019, November 2021 and Section A of November 2017 and May 2019 tested the difference. The persons appointed by the court to administer the estate of a person who died intestate are administrators.

Vesting of interests

• On death, before probate or letters, the beneficiaries have the equitable interests.
• Where there is a will, the legal interests vest in the executors. Where the deceased died intestate, they vest in the administrators on the grant of letters.
• If the will creates a trust, the personal representatives must vest the trust property in the trustee by a vesting assent by deed. Where the personal representatives are also the trustees, the vesting is implied.

Powers, rights and duties of personal representatives

Personal representatives get their powers only on a valid grant of probate or letters. Probate is legal recognition of the validity of a will and the executor’s title to the estate: the official proving of the will, granted by the Probate Division of the High Court.

Caveat

Any person may oppose a grant by filing a caveat, a written notice to the registrar not to make a grant to the applicant without giving the caveator a right to be heard.

Intermeddling and executor de son tort

Without a grant, every act done in connection with the estate is intermeddling. A person who meddles, even when it is his customary law right, cannot sue or be sued in respect of the estate. A person sued as an administrator or executor who has not been appointed by letters or probate has no standing to defend, and is an executor de son tort, an executor by his own wrong.

Duties of a personal representative

May 2015 and May 2022 asked for these (5 duties, 10 marks). The syllabus gives eight:

1. Gathering and realisation of assets. His first duty is to identify and define the estate by collecting all the assets and liabilities, taking an inventory of the property and debts.
2. Application to court. He must apply for a grant to validate all his acts. Without it he cannot deal with credit bank balances, insurance proceeds, company shares or co-operative interests.
3. Payment of debts and liabilities. Loans, rent, bills (such as electricity), overdrafts, outstanding taxes and interest due. May 2015 added that debts must be paid in order of priority.
4. Payment of estate tax. Every estate is subject to estate tax on the grant of probate or letters, a form of indirect tax on the value of the estate. It is paid from the estate.
5. Accounts and records. He must keep clean and proper accounts and records, and may be reimbursed for necessary and reasonable expenses.
6. Not to profit. He must not profit from the administration, but is entitled to reimbursement of personal money reasonably spent on the estate.
7. Right of action. He may sue in relation to the estate and must defend suits for it. Only actions in rem survive: a personal right of action dies with the person (actio personalis moritur cum persona).
8. Distribution. The final duty is to distribute what remains to the beneficiaries.

Working through the rules

Testate or intestate?

Which grant?

Applicants in order of priority

A man dies intestate leaving a widow, two children and his mother. The widow, as surviving spouse, has first priority to apply for letters. If she declines, the children come next, then the mother.

Worked problems

Problem 1: Francis’s bank balance

1. How he died. Intestate.
2. The steps. The family must apply to the Probate Division of the High Court for letters of administration appointing administrators, preferably the widow or children. The administrators then present the letters to the bank to access the deposit.
3. Administrator. A person appointed by the court to administer the estate of a person who died intestate. An executor is appointed by the testator in his will, whereas an administrator is appointed by the court.

Problem 2: Chief Jack

1. Intestate. He died intestate, so his personal representatives must obtain letters of administration from the High Court, which authorises the administrators to manage the estate.
2. If there was a will. The executors named in the will would administer his estate, appointed by Chief Jack himself.

Problem 3: the intermeddling brother

1. The rule. Without a grant, acts in connection with the estate are intermeddling, even if it is a customary law right.
2. The application. Bode has no letters of administration and has dealt with estate property.
3. Advice. Bode is an executor de son tort. He cannot sue in respect of the estate, but he may be held liable. He should apply for letters, and any family member with a better claim may file a caveat against his application.

Problem 4: a will without an executor

1. The need. A will without an executor requires letters of administration with the will annexed. The bank balance is a partial intestacy.
2. Advice. The family should apply to the Probate Division for letters of administration, with the will annexed, for both purposes.

Questions that have been asked on this topic, and how to answer them

Common mistakes in the exam

• Saying that a person with an invalid will died testate. He died intestate.
• Confusing executors (appointed by the testator) with administrators (appointed by the court).
• Forgetting that banks and insurers need a grant before releasing funds.
• Saying that a relative may deal with the estate without a grant because of customary law. That is intermeddling.
• Saying a personal right of action survives the death. Only actions in rem do.
• Listing too few persons entitled to apply, or in the wrong order.
• Forgetting that estate tax is payable on the grant.
• Saying a personal representative may profit from the estate.

Quick revision

• Will: testamentary, revocable, ambulatory. Testate and intestate. Executor (in the will) and administrator (by the court). Probate and letters of administration.
• Letters needed: no will, no executor or executor cannot act, partial intestacy. Types: without a will, with will annexed, customary, ad colligenda bona, durante absentia, de bonis non.
• Priority: spouse, children, parents, full-blood siblings, half-blood siblings, grandparents, uncles and aunts, the State.
• Duties: gather assets, apply for grant, pay debts, pay estate tax, accounts, no profit, sue and defend, distribute. Intermeddling and executor de son tort. Caveat.

Practice questions

These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.

Section A style: multiple choice

Section B style: written questions

Model answers

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