UC-NRLF STUDENT'S GUIDE vt> EXECUTOR8HIP ACCOUNTS R. MLCoM. F.C.A ^Eagfif^figaSiS EX IJBRJS THE STUDENT'S GUIDE TO EXECUTORSHIP ACCOUNTS SECOND EDITION. THE STUDENT'S GUIDE TO EXECUTORSHIP ACCOUNTS BY ROGER N. CARTER. M.CoM., F.C.A. n (SENIOR HONOURS, JUNE 1893) JOINT AUTHOR, WITH MR. ADAM MURRAY, F.C.A., OF "A GUIDE TO INCOME-TAX PRACTICE." SECOND EDITION LONDON : GEE & CO , (PUBLISHERS) LTD., 34 MOORGATE STREET, E.G. 1912. PREFACE TO THE FIRST EDITION. A S Honorary Secretary of the Manchester Chartered Accountants Students' Society for five years, I heard frequent inquiries for a book on Executorship, which, while giving a brief summary of the principal points of the Law, was specially designed to assist a student in neatly setting out answers to such short questions on Accounts as are usually asked at the Examinations of the Institute. It is in the hope that it will answer this purpose that this little Handbook is submitted for the approval of the Students of the Profession. The examples given are such as have been, or may reasonably be expected to be, asked at the Examinations. I shall at all times be pleased to receive suggestions for future usefulness. ROGER N. CARTER. 1 6 Kennedy Street, Manchester. June 1899. 263156 PREFACE TO THE SECOND EDITION. T*HE First Edition of the " Student's Guide " was published at a time when the principles of Aggregation and Gradation were comparatively new, and it was thought well to deal with the Duties payable under the Act of 1881 in the body of the work. At the present time these provisions have only a slight interest for Students, and they have consequently been relegated to an Appendix. The issue of the present Edition has given the opportunity, not only of adjusting the figures in the Examples in respect of new Duties, but also of introducing a number of points which have been the subject of decisions in the Courts. At the same time, every endeavour has been made not to overweight the book with cases. ROGER N. CARTER. 1 6 Kennedy Street, Manchester. February 1912. CONTENTS. PAGE CHAPTER I. DEFINITION OF TERMS i II. SUMMARY OF THE LAW RELATING TO WILLS, EXECUTORS, AND ADMINIS- TRATORS : A. The Office of an Executor 6 B. Probate 6 C. Administrations ..." 7 D. The getting in and Distribution of the Estate 9 E. Legacies ... ... ... ... 10 F. Realty and Personalty 12 G. Apportionment ... ... ... 12 H. Investments 17 I. The Rule in Howe v. Lord Dartmouth 25 J. Carrying on the Testator's Business 27 K The Distribution of the Estate of an Intestate 27 L. Responsibilities of Trustees ... 33 III. PAYMENT OF PROBATE OR ESTATE DUTY 36 IV. PAYMENT OF LEGACY OR SUCCESSION DUTY 51 V. THE AUDIT OF TRUST ACCOUNTS ... 56 VI. SPECIMEN ACCOUNTS ILLUSTRATING VARIOUS POINTS 57 VII. PRO FORMA ACCOUNTS OF THE ESTATE OF JAMES ALEXANDER 146 APPENDIX I. DUTIES PRIOR TO 1894 J ^3 II. EXTRACTS FROM STATUTES, &c 188 INDEX ... ... ... ... ... ... ... 225 CASES CITED OR EXEMPLIFIED. PAGE Allhusen v. Whittell .. .. .. .. .. 105 144 Alston, Re .. .. .. .. .. .. .. 117 122 Amphlett v. Parke . . .. .. .. .. .. 113 Atkinson, Re\ Barbers' Co. v. Grose-Smith .. .. 118 121 122 Attorney-General v. De Preville . . . . . . . . 38 ., v. Beech .. .. .. .. .. 38 ,, v. Earl Grey . . .. .. .. 186 Bacon, Re.. .. .. .. .. .. 141 143 144 Barker, 7?^ .. .. .. .. .. .. 117 Bates, Re ; Hodgson v. Bates .. .. .. .. 131 132 Beech, A. G. v. See Attorney-General. Bentinck, Re .. .. .. .. .. .. 9 Bouch v. Sproule .. .. .. .. .. . . 14 16 Bowlby, Re . . . . . . . . . . . . 16 Briggs, Re .. .. .. .. .. .. 9 Brown v. Gellatly . . . . . . . . . . . . 127 Bulkeley v. Stephens .. .. .. .. .. 131 Caldecott v. Caldecott .. .. .. .. .. 113 Chaytor, Re; Chaytor v. Home .. .. .. .. 131 132 Chesterfield's Trusts, In re .. .. .. .. 26 136 180 Cottrell, Re ; Buckland v. Bedingfield . . . . . . 142 Dartmouth, Howe v. See Howe. Dawson, Re; Arathoon v. Dawson .. .. .. .. 141 144 Dimes v. Scott . . . . . . . . . . . . 127 Dodson, Re . . . . . . . . . . 40 Dover Coalfields Extension, Re .. .. .. .. 26 Duckworth, Re .. .. .. .. .. .. 131 EarLof Chesterfield's Trusts, In re. See Chesterfield. X. CASES CITED OR EXEMPLIFIED. PAGE Fish, In re ; Lea v. Fish .. .. .. .. .. 43 Foster, Re ; Lloyd v. Carr .. .. .. .. 117 118 126 Francis, Re ; Barrett v. Fisher . . . . . . . . 26 Gilbert, Re . . . . . . . . . . . . 98 Goodenough, In re.. . . .. .. .. ..26 136 Grant, Re.. .. .. .. .. .. .. 139 142 Gray v. Siggers .. .. .. .. .. .. 132 Hadley, Re . . . . . . . . . . . . 40 Hankey, Re . . . . . . . . . . . . 9 Hargreaves, Re . . . . . . . . . . 98 Harrison, Re . . .. .. .. .. .. 143 Henry, Re ; Gordon 7'. Gordon .. .. .. .. 141 144 Holgate v. Jennings .. .. .. .. .. 113 Howe v. Lord Dartmouth .. .. .. .. 25 127 147 148 Howorth, Re .. .. .. .. .. .. 142 Hume v. Richardson .. .. .. .. .. 129 Jones, Re . . .. . . . . . . . . . . 9 Lambert v. Lambert .. .. .. .. .. 113 Lyon v. Mitchell .. .. .. .. .. .. 117 Macdonald v. Irvine .. .. .. .. .. 127 Maddock, Re .. .. .. .. .. .. 40 Moore, Re.. .. .. .. .. .. .. 114 126 Muffett, Re .. .. .. .. .. .. 141 Nesbit's Settlement ; Nesbit v. Nesbit .. .. .. 16 Nicholson, Re; Eade v. Nicholson .. .. .. 132 Noble v. Cass .. .. .. .. .. 26 Northage, Re ; Ellis v. Barfield .... 16 Osmond, to .. .. .. .. 9 Pearce, Re ; Crutchley v. Wells .... 132 Peel, Sir R., Re i?8 CASES CITED OR EXEMPLIFIED. XI. PAGE Perkins, Re . . . . . . . . . . .. 143 144 Pollock v. Pollock .. .. .. .. .. .. 13 Porter v. Baddeley .. .. .. .. .. .. 131 132 Power, Re.. .. .. .. .. .. .. 40 Poyser, Re .. .. .. .. .. .. 144 Kobbins, Re . . . . . . . . . . . . 144 Samson, Re .. .. .. .. .. .. g Scott, Junr., Re .. .. .. .. .. n 39 149 Sheldon, Re .. .. .. .. .. .. 131 132 Slater (dec.). In re .. .. .. .. .. .. i Stevens v. King .. .. .. .. .. .. n Stewart v. Kingsdale .. .. .. .. .. 117 Taylor, Re; Matheson v. Taylor .. .. .. .. 133 Thompson, Re . . . . . . . . . . . . 144 Treasure, Re . . . . . . . . . . . . 40 Walsh v. Wabh . . . . . . . . . . . . 2 g Whitehead v. Whitehead .. .. .. .. .. 13 Williams, .fo .. .. .. .. .. ... 9 Wilson, Re ; Moore v. Wilson .. .. .. .. 131 132 ,, v. Cox well .. .. .. .. .. 9 Wright v. Callender . . . . , . . . . . 142 CHAPTER T. Definition of Terms. AdemptioH. The taking away of a legacy by reason of the testator having alienated the subject of it during his life. In Re Slater (deceased) (C.A. 1907) it was held that where a testator had bequeathed the income of his Lambeth Water Stock, and had subsequently, under Act of Parliament, received an amount of Metropolitan Water Board Stock in lieu thereof, the legacy was adeemed. Administrator. One appointed by the Court to administer the estate of a deceased person who has died without appoint- ing an executor, or where from any cause the appoint- ment of executor has failed. Advancement. The expression applied where a testator has made a payment to a child during his lifetime, and directs that the same shall be brought into account. Capita (Per). Literally '-'by the head." The expression is used in connection with the distribution of an estate where the parties claim in their own right and not by representation. See Per stirpes. B 2 CHAPTER I. DEFINITION OF TERMS. Chattels Personal. Goods which belong immediately to the person of the owner, and for which, if they are injuriously withheld from him, he has no other remedy than a personal action. Chattels Real. An interest issuing out of some immovable thing, e.g., a lease. Codicil. An instrument made subsequently to a will, by which the dispositions of the will are added to, taken from, or otherwise altered. A codicil must be executed with the same formalities as a will. See Will. Corpus. Capital. Demonstrative Legacy. A bequest ''by will for the payment of which a certain fund, &c., is demonstrated or pointed out. Devise. A gift of realty by will. Donatio mortis causa. A gift in anticipation of death. The essentials of it are : (1) The gift must be made in the expectation of the death of the donor. (2) It must be conditional to take effect only on his death. (3) There must be a delivery of the subject-matter in his lifetime. Equitable Assets. Those which the testator has made a by his will, e.g., real estate devised for payment of debts. CHAPTER I. DEFINITION Ol- TERMS. 3 fcxccntor. A person appointed by a testator to carry out the directions and requests in his will, and to dispose of the property according to his testamentary provisions after his decease. Executor de son tort. One who takes upon himself the office of executor by intrusion, not being so constituted by the deceased. An executor dc son tort has all the liabilities and none of the rights of an ordinary executor. Hotchpot. The expression used in connection with the bring- ing into account of an advance already received. In an intestacy any advancement (q.v.) made must be brought into account before the party can have a share of the estate. Lapse. The falling of a legacy into the residue by reason of the death of the legatee in the lifetime of the testator. Lease. A conveyance of property for life or years, c., by one who has a greater interest in the property. Legacy. A bequest of personalty by will. Legal Assets. Every item of property come to the hands of the executor virtute officii, i.e., which he would have had a right to recover if the testator had merely appointed him executor without saying anything about his property or the application thereof. Life-tenant. A person enjoying an interest in an estate determining on his death. Personaltv. Sec Chattels Personal. B 2 4 CHAPTER I. DEFINITION OF TERMS. Preference. The right of an executor or administrator (in case the estate is insolvent) to pay one creditor in priority to others of the same degree. This he may do even after the commencement of a creditor's action and before judg- ment, but the plaintiff may prevent this by obtaining a receiver. All right of preference (but not of retainer} ceases when a decree for administration has been pronounced. Probate. The official copy of the will of a testator issued under the seal of the Court. Realty. Landed property, including all estates and interests in land which are held for life (not for years, however many), or for some greater estate, and whether such lands are freehold or copyhold. Remainderman. A beneficiary entitled to receive an estate (or a portion thereof) on the death of the person enjoying the life interest called the life-tenant. Residue. The balance of an estate after discharging debts, duties, funeral expenses, and legacies. Retainer. The right of an executor or administrator to retain (out of legal assets, %.v.) a debt due by the deceased to himself in preference to others of the same degree. See also Preference. There is no right of retainer in respect of a legacy. Specific Legacy. A bequest by will of a specific thing. CHAPTER I. DEFINITION OF TERMS. 5 Stir/>cs (f't'r). Literally " according to the stocks," the expres- sion being used in the distribution of an estate where the parlies claim by representation. For example, where one of several brothers is dead and his family take his share between them the estate is said to be distributed per stirpes, whereas if the brothers and nephews take equally they would be said to share per capita. Trustee. One having the legal ownership of property, but without the beneficial interest. Will. The legal declaration of a man's intention which he wills to be performed after his death. In order to be valid a will must be in writing, signed at the foot or end by the testator or some other person in his presence and by his direction, such signature being also made or acknowledged by him in the presence of two or more witnesses present at the same time, such witnesses attest- ing and subscribing the will in his presence. A gift to an attesting witness (or to his or her wife or husband) is void. CHAPTER II. Summary of the Law relating to Wills, Executors, and Administrators. A. THE OFFICE OF AN EXECUTOR. There is practically no limit as to who may be appointed an executor. The person appointed, however, is not bound to act he may renounce probate if he does so without having acted at all. He may also retract his renunciation before administration has been granted. On the death of one of several joint executors the office remains with the survivors, and on the death of the last survivor, his executor becomes executor of the first testator. Where, how- ever, the last survivor or a sole executor dies intestate, his administrator does not become executor of first testator it then becomes necessary for the next-of-kin to take out letters of administration. B. PROBATE. The will should be proved or administration taken out as soon as possible after the death, as, the probate or letters of administration being the legal evidence of the executor's or administrator's title, he can do very little till he has obtained the one or the other, as the case may be. CHAPTER II. ADMINISTRATIONS. 7 Probate in Solemn Form (or in form of law, or -per testes). This method is adopted when there is any likelihood of dispute, &c. Witnesses are summoned to appear, and are sworn and examined as to the validity of the will. Probate in Common Form. This is the ordinary formal manner of obtaining probate in undisputed cases without attendance of witnesses, &c. C. ADMINISTRATIONS. Where a person dies without making a will it becomes necessary to appoint some person to realise the estate and dis- tribute it amongst those entitled. In these cases it is usual to appoint only one person to administer, the Court preferring a sole rather than a joint administration. Speaking generally, the grant follows the interest, i.e., as between several next -of - kin, the one having a greater interest will have the grant rather than one having a smaller interest. The next-of-kin stand in the following order in respect of their right to obtain administration : 1. Husband or wife. 2. Child or children. 3. Granchild or grandchildren. 4. Great grandchildren. 5. Father. 6. Mother. 7. Brothers and sisters. 8. Grandfathers or grandmothers. 8 CHAPTER II. ADMINISTRATIONS. 9. Nephews and nieces, uncles, aunts. 10. Great grandfathers or great grandmothers. Administration will only be granted to a creditor failing any other representative. Administration cum testamento annexo (or with the will annexed). This grant is made where there has not been any executor appointed by the will, or where the appointment has failed, e.g., bv the death of the executor named in the lifetime of the testator. Administration de boms non administratis (or of the goods unadministered), usually described as de bonis non. This grant is made when a sole executor or administrator has died before completing the administration of the estate (in the case of an executor only when he leaves no executor). Administration durante minore (itate (or during the minority of an infant). This grant is made where the person entitled to administration is an infant. Administration pcndente lite (pending an action). This is a grant made to a person pending an action touching the validity of a will. Administration will also be granted durante absentia (during the absence of the one entitled) ; durante dementia (during his lunacy) ; ad litem (to represent the estate in Chancery proceed- ings) ; ad colli gen da (in default of persons entitled to administration). Previous to 1893 the powers of an executor were somewhat more extensive than those of an administrator, but since the Trustee Act 1893 (56 & 57 Vic. cap. 53), they are, for all practical purposes, identical. CHAPTER II. GETTING-IN THE ESTATE, &C. 9 D. THE GETTING-IN AND DISTRIBUTION OF THE ESTATE. Having seen the testator buried in a manner suitable to the estate which he has left behind him, the executor's duty is to pay the duties and the funeral expenses and debts ; get in the estate, pay the legacies, &c., and invest the funds in proper securities (if left in trust), or distribute them among the persons entitled. After payment of funeral and testamentary expenses, in paying the debts, the following are the rules of priority : 1. Debts due to the Crown. 2. Debts having priority by particular statutes, e.g.. if the deceased were an officer of a friendly society or savings bank and had funds in his hands. 3. Debts of record, e.g., judgments, statutes (now obsolete), and recognisances. *4. Specialty and simple contract debts. 5. Voluntary bonds. An executor may pay a statute-barred debt. If the estate is not sufficient to pay all debts and legacies, the estate must be applied for debts in the following order, which is known as " marshalling " the assets : 1. Personalty not bequeathed, or only bequeathed by way of residue. 2. A real fund created specifically for payment of debts. ""The following is extracted from " Law Notes " December 1906 : 1. An executor may prefer a simple contract creditor to a specialty. (Re Samson (C.A. 1906) following Re Osmond and overruling J? Hankey.) 2. But he may not retain (Wilson v. Coxwell; Re Jones; Re Briggs). 3. A simple contract debt due to the Crown ranks in front of simple contract creditors who are not specialty creditors (Re Bentinck). 4. A simple contract creditor can obtain piiority even over a specialty creditor by first obtaining judgment against the executor (Re Williams). IO CHAPTER II. LEGACIES. 3. Real estate devised for payment of debts. 4. Real estate not specifically devised. 5. Real or personal estate devised or bequeathed subject to payment of debts. 6. General pecuniary legacies. 7. Real or personal estate specifically devised ' or bequeathed. 8. Real or personal estate which the testator had power to appoint, and which he appointed by his will. 9. The paraphernalia of the widow. E. LEGACIES. The legacies should be paid within a year of the death, and if not so paid they carry interest from that date at 4 per cent. per annum. Annuities commence from the testator's death, <.!vm< -iits on account of them being due at the end of the year. A legacy is a bequest of personalty by will. Legacies are of -linds specific, demonstrative, and general. A -> -itic legacy is a bequest of a specific thing, e.g., my my 1,000 Consols, &c. A demonstrative legacy is a bequest for payment of which tin fund, &c., '^demonstrated or pointed out, e.g., one of my h<>r>r's. .100 out of my 1,000 Consols. A g< : -i.il legacy is one payable out of the general assets of ' <'.<< 100 Consols. 100, &c. CHAPTER II. LEGACIES. II In certain cases a specific legacy is more advantageous than a demonstrative legacy, but in other cases it is the rr\vrs-. For example, in the case of deficiency of assets a specific legacy must not be sold for payment of debts until the general assets are exhausted ; but if the testator chances to have -old the object of the specific bequest before his death it is adeemed, and the specific legatee loses his legacy ; whereas if the fund pointed out for payment of a demonstrative legacy has been so disposed of, the demonstrative legatee does not lose his legacy but is entitled to receive the value of it. Where a legatee (other than a child, &c., of the testator) dies in the testator's lifetime the legacy lapses, i.e., falls into the residue; but (Stevens v. King (1904) ) a legacy to discharge a moral obligation was ordered to be paid to the legal personal representative. Where, however, the legatee is a child, &c., who has died leaving issue, the gift takes effect as if he had died immediately after the testator. In Re Jno. Scott, Junr. (dec.} (C.A., 1900), the facts were that Mr. Jno. Scott, Junr., died 2 2nd January 1899, leaving issue, and Mr. Jno. Scott, Senr.. died i2th May 1899, having devised certain property to his son. It was held that as such devise or bequest did not lapse, but took effect as if Mr. Jno. Scott, Junr., had died immediately after his father, the property was deemed to pass on the death of Mr. Jno. Scott, Junr., and estate duty was payable on that account in addition to the duty payable on the death of Mr. Jno. Scott, Senr. Where the legacy is charged on land it does not lapse (i.e., fall into the residue), but it ceases to be payable for the benefit of the realty on which it is charged. As to maintenance for an infant, see Section 43 of the Conveyancing Act (post}. 12 CHAPTER II. REALTY AND PERSONALTY. F. REALTY AND PERSONALTY. Realty is such property as is fixed and immovable, e.g., land, houses, &c. Rt-nts of freehold property are realty until they have actually fallen due (when they become personalty). Personalty is goods, hare should be made payable on the same day. Resolutions to this effect were duly passed, and tin- transaction was carried nut. The question then arose whether the shares allotted to the i. presentatives of BouHi belonged to the widow as income, or formed an addition to ilu- capital of the estate. The Court unanimously decided that they were capital. CHAPTER II. APPORTIONMENT BONUSES, &C. 15 Lord Herschell said that the only ground upon which to act in such cases was well expressed by Lord Justice Fry in the Court of Appeal " When a testator or settlor directs or permits the subject of his disposition to remain as shares or stocks in a company which has the power either of distributing its profits as dividend or of converting them into capital, and the company validly exercises this power, such exercise of its power is binding on all persons interested under the testator or settlor in the shares, and consequently what is paid by the company as dividend goes to the tenant-for-life, and what is paid by the company to the shareholders as capital, or appro- priated as an increase of the capital stock in the concern, enures to the benefit of all who are interested in the capital." He proceeded to say that where a company has power to increase its capital and appropriate its profits to such increase, it could not be considered as having converted any part of its profits into capital when it made no such increase, even if a company which had no power to increase its capital might be regarded as having thus converted profits into capital by the accumulation and use of them as such. Passing on to the question whether the company did dis- tribute the accumulated profits as dividend or convert them into capital, he remarked upon the fact that the new capital paid up was exactly equal to the amount of profits to be dis- tributed, and said it was obviously contemplated and was practically certain that all the shareholders would fall in with the arrangement, and that no money would in fact pass. He considered that the company did not pay, or intend to pay, any sum as dividend, but intended to and did appropriate the undivided profits dealt with as an increase of the capital stock of the concern. l6 CHAPTER II. APPORTIONMENT BONUSES, &C. In Re Nesbifs Settlement; Nesbit v. Ncsbit (1911), a gas company distributed .250,545 out of reserve (equal to 3 6s. 8d. per share). They gave shareholders the option to take new shares at par, and the trustees took shares with their proportion (483 6s. 8d). It was held, following Re Northage ; Ellis v. Bar field (1891), and distinguishing Bouch v. Sproule, that only the amount in excess of the 483 was capital, and the life-tenant was entitled to a charge on the shares for that amount. A question sometimes asked at the examination is for the apportionment of : Rent for March quarter ^10 o o Less income-tax, Sch. A, at is i 13 4 8 6 8 where the testator has died 3ist December. If this can be described as a "trap," it is a legitimate one. The tax, of course, is is. in the on 33 6s. 8d. (40- Jth) for the year to 3ist March consequently income is entitled to Rent ... ... ;io o o Less tax on 5/6ths of 10 084 9 " 8 And capital must be debited fths of 1 i3 s - 4 ilh: uniting this prinriple, see post.} CHAPTER II. INVESTMENTS. 17 H. INVESTMENTS. Executors are chargeable with interest on balances in hand where there is a clear case of improper retention. Such interest is charged at 4 per cent. Where there is something further than mere negligence, e.g., if an executor has employed money in his trade, he will be charged with 5 per cent. He will also be charged with 5 per cent. where he has made 5 per cent, or has damaged the estate to that amount. Where he has employed the money in business he will be charged compound interest. The securities in which trustees are allowed to invest are laid down by the Trustee Act 1893 (56 & 57 Vic. cap. 53) as follows : PART I. Investments. " i. A trustee may, unless expressly forbidden by the instrument (if any) creating the trust, invest any trust funds in his hands, whether at the time in a state of investment or not, in manner following, that is to say : " (a) In any of the Parliamentary stocks or public funds or Government securities of the United Kingdom : " (b) On real or heritable securities in Great Britain or Ireland : " (c) In the stock of the Bank of England or the Bank of Ireland : " (d) In India three-and-a-half per cent, stock, and India three per cent, stock, or in any other capital stock which may at any time hereafter be issued by the Secretary of State in Council of India under the authority of Act of Parliament, and charged on the revenues of India : c l8 CHAPTER II. INVESTMENTS. '' (e] In any securities the interest of which is for the time being guaranteed by Parliament : " (/) In consolidated stock created by the Metropolitan Board of Works, or by the London County Council, or in debenture stock created by the Receiver for the Metropolitan Police District : " (g) In the debenture or rentcharge, or guaranteed or pre- ference stock of any railway company in Great Britain or Ireland incorporated by special Act of Parliament, and having during each of the ten years last past before the date of invest- ment paid a dividend at the rate of not less than three per centum per annum on its ordinary stock : " (//) In the stock of any railway or canal company in Great Britain or Ireland whose undertaking is leased in perpetuity or for a term of not less than two hundred years at a fixed rental to any such railway company as is mentioned in sub- section (g), either alone or jointly with any other railway company : " (*') In the debenture stock of any railway company in India the interest on which is paid or guaranteed by the Secretary of State in Council of India : " (;') In the * B ' annuities of the Eastern Bengal, the East Indian, and the Scinde Punjaub and the Delhi Railways, and any like annuities which may at any time hereafter be created on the purchase of any other railway by the Secretary of State in Council of India, and charged on the revenues of India, and which may be authorised by Act of Parliament to be accepted by trustees in lieu of any stock held by them in the purchased railway ; also in deferred annuities comprised in the CHAPTER II. INVESTMENTS. IQ register of holders of annuity Class D and annuities comprised in the register of annuitants Class C of the East Indian Railway Company : " (#) In the stock of any railway company in India upon which a fixed or minimum dividend in sterling is paid or guaranteed by the Secretary of State in Council of India, or upon the capital of which the interest is so guaranteed : " (/) In the debenture or guaranteed or preference stock of any company in Great Britain or Ireland, established for the supply of water for profit, and incorporated by special Act of Parliament or by Royal Charter, and having during each of the ten years last past before the date of investment paid a dividend of not less than five pounds per centum on its ordinary stock : " (m) In nominal or inscribed stock issued, or to be issued, by the corporation of any municipal borough, having, accord- ing to the returns of the last census prior to the date of investment, a population exceeding fifty thousand, or by any county council, under the authority of any Act of Parliament or Provisional Order : " (n) In nominal or inscribed stock issued or to be issued by any commissioners incorporated by Act of Parliament for the purpose of supplying water, and having a compulsory power of levying rates over an area having, according to the returns of the last census prior to the date of investment, a population exceeding fifty thousand, provided that during each of the ten years last past before the date of investment the rates levied by such commissioners shall not have exceeded eighty per centum of the amount authorised by law to be levied : C 2 2O CHAPTER II. INVESTMENTS. " (o) In any of the stocks, funds, or securities for the time being authorised for the investment of cash under the control or subject to the order of the High Court, and may also from time to time vary any such investment. " 2. (i) A trustee may under the powers of this Act invest in any of the securities mentioned or referred to in section one of this Act, notwithstanding that the same may be redeemable, and that the price exceeds the redemption value. " (2) Provided that a trustee may not under the powers of this Act purchase at a price exceeding its redemption value any stock mentioned or referred to in subsections (g), (i), (k), (1), and (m) of section one, which is liable to be redeemed within fifteen years of the date of purchase at par or at some other fixed rate, or purchase any such stock as is mentioned or referred to in the subsections aforesaid, which is liable to be redeemed at par or at some other fixed rate, at a price exceeding fifteen per centum above par or such other fixed rate. " (3) A trustee may retain until redemption any redeemable stock, fund, or security which may have been purchased in accordance with the powers of this Act. " 3. Every power conferred by the preceding sections shall be exercised according to the discretion of the trustee, but subject to any consent required by the instrument, if any, creating the trust with respect to the investment of the trust funds. " 4. The preceding sections shall apply as well to trusts created before as to trusts created after the passing of this Act, and the powers thereby conferred shall be in addition to the powers conferred by the instrument, if any, creating the trust. CHAPTER II. INVESTMENTS. 21 "5. (i) A trustee having power to invest in real securities, unless expressly forbidden by the instrument creating the trust may invest and shall be deemed to have always had power ti invest " (a) on mortgage of property held for an unexpired term of not less than two hundred years, and not subject to a reservation of rent greater than a shilling a year, or to any right of redemption or to any condition for re-entry, except for non-payment of rent ; and " (b) on any charge, or upon mortgage of any charge, made under the Improvement of Land Act 1864. " (2) A trustee having power to invest in the mortgages or bonds of any railway company or of any other description of company may, unless the contrary is expressed in the instru- ment authorising the investment, invest in the debenture stock of a railway company or such other company as aforesaid. " (3) A trustee having power to invest money in the deben- tures or debenture stock of any railway or other company may, unless the contrary is expressed in the instrument authorising the investment, invest in any nominal debentures or nominal debenture stock issued under the Local Loans Act 1875. " (4) A trustee having power to invest money in securities in the Isle of Man, or in securities of the Government of a Colony, may, unless the contrary is expressed in the instru- ment authorising the investment, invest in any securities of the Government of the Isle of Man, under the Isle of Man Loans Act 1880. " (5) A trustee having a general power to invest trust moneys in or upon the security of shares, stock, mortgages, bonds, or 22 CHAPTER II. INVESTMENTS. debentures of companies incorporated by or acting under the authority of an Act of Parliament, may invest in, or upon the security of, mortgage debentures duly issued under and in accordance with the provisions of the Mortgage Debenture Act 1865. " 6. A trustee having power to invest in the purchase of land or on mortgage of land may invest in the purchase or on mortgage of any land, notwithstanding the same is charged with a rent under the powers of the Public Money Drainage Acts 1846 to 1856, or the Landed Property Improvement (Ireland) Act 1847, or by an absolute order made under the Improvement of Land Act 1864, unless the terms of the trust expressly provide that the land to be purchased or taken in mortgage shall not be subject to any such prior charge. " 7. (i) A trustee, unless authorised by the terms of his trust, shall not apply for or hold any certificate to bearer issued under the authority of any of the following Acts, that is to say: " (a) The India Stock Certificate Act 1863 ; " (b) The National Debt Act 1870; " (c) The Local Loans Act 1875 ; " (d) The Colonial Stock Act 1877. (See Appendix II.) " (2) Nothing in this section shall impose on the Bank of England or of Ireland, or on any person authorised to issue any such certificates, any obligation to inquire whether a person applying for such a certificate is or is not a trustee, or subject them to any liability in the event of their granting any such certificate to a trustee, nor invalidate any such certificate if granted. CHAPTER II. INVESTMENTS. 23 " 8. (i) A trustee lending money on the security of any property on which he can lawfully lend shall not be chargeable with breach of trust by reason only of the proportion borne by the amount of the loan to the value of the property at the time when the loan was made, provided that it appears to the Court that in making the loan the trustee was acting upon a report as to the value of the property made by a person whom he reasonably believed to be an able practical surveyor or valuer instructed and employed independently of any owner of the property, whether such surveyor or valuer carried on business in the locality where the property is situate or elsewhere, and that the amount of the loan does not exceed two equal third parts of the value of the property as stated in the report, and that the loan was made under the advice of the surveyor or valuer expressed in the report. " (2) A trustee lending money on the security of any lease- hold property shall not be chargeable with breach of trust only upon the ground that in making such loan he dispensed either wholly or partly with the production or investigation of the lessor's title. " (3) A trustee shall not be chargeable with breach of trust only upon the ground that in effecting the purchase of or in lending money upon the security of any property he has accepted a shorter title than the title which a purchaser is, in the absence of a special contract, entitled to require, if in the opinion of the Court the title accepted be such as a person acting with prudence and caution would have accepted. " (4) This section applies to transfers of existing securities as well as to new securities, and to investments made as well 24 CHAPTER II. INVESTMENTS. before as after the commencement of this Act, except where an action or other proceeding was pending with reference thereto on the twenty-fourth day of December one thousand eight hundred and eighty-eight. " 9- (i) Where a trustee improperly advances trust money on a mortgage security which would at the time of the invest- ment be a proper investment in all respects for a smaller sum than is actually advanced thereon the security shall be deemed an authorised investment for the smaller sum, and the trustee shall only be liable to make good the sum advanced in excess thereof with interest. " (2) This section applies to investments made as well before as after the commencement of this Act except where an action or other proceeding was pending with reference thereto on the twenty-fourth day of December one thousand eight hundred and eighty-eight." Section i substantially replaces a similar section in the Trust Inv.-stment Act 1889 (52 & 53 Vic. cap. 32), which section is repealed by this Act. Similarly, Section 8 replaces a like section in the Trustee Act 1888, until which Act the position of a trustee lending money on mortgage was a very hazardous one. A second mortgage is not ipso facto improper, but would be so except under special circumstances.* A contributory mortgage (i.e., one where two or more persons join) is improper, the reason, doubtless, being that where money * In this case the trustees might have to pay out the first mortgagee in order to protect their interests which would obviously be a most hazardous position. CHAP. II. THE RULE IN HOWE V. LORD DARTMOUTH. 25 had been so invested it would not be under the trustee's own sole control.! Subsection (o) of Section i. These investments are almost all included under the other subsections. By the Trustee Act (1893) Amendment Act 1894, Section 4, it was provided that " A trustee shall not be liable for breach of trust by reason only of his continuing to hold an investment which has ceased to be an investment, authorised by the instru- ment of trust or by the general law." In other words, if a trustee invest in the Guaranteed, &c., Stock of a railway, which has paid 3 per cent, on its Ordinary Stock for ten years, he will not be compelled to sell if it failed to pay the 3 per cent, in a subsequent year, though it would then cease to be eligible as a new investment. The same applies to an investment in a stock under Section i (m), &c., where the population falls subsequently. I. THE RULE IN Howe v. Lord Dartmouth (1802). The principle laid down in the case of Howe v. Lord Dart- mouth is as follows : If a testator gives his -personal estate, or the residue thereof, in trust for, or directly to, several persons in succession, and the subject of the bequest is of a wasting nature, e.g., lease- holds, long annuities, &c., the Court implies the intention that f Here the trustees could not act at all without the consent of their co-mortgagee which might be even worse. 26 CHAP. II. THE RULE IN HOWE V. LORD DARTMOUTH. such perishable estate should assume a permanent character, and so become capable of succession. The Court, accordingly, in these cases directs a conversion into Consols, and trustees and executors are bound to observe the same rule in their administration of property out of Court. Similarly, where there are future or reversionary interests there must be a conversion of the same in favour of the tenant- for-life. The rule only extends to bequests of personal property, including leaseholds, and devises of real property are not affected by it. In the case of a property not producing income (e.g., a life policy), the following rule was laid down in Re Earl of Chesterfield' s Trusts, 1883 : Ascertain what sum put out at 4 per cent, on the day of the death at compound interest, yearly rests, and less tax, would amount at the date when actually realised to the amount realised. This sum is capital, and the balance is income. In Re Good enough, 1895. 3 per cent, was taken. (For examples illustrating this principle, see post.} In Re Francis; Barrett v. Fisher (1905), which applied A^/tf v. Cass (1828), it was held that directors' fees received by a trustee were to be accounted for to the estate, and were capital. But in Re Dover Coalfield Extension, Lim. (C.A., 1908), it was held that directors' fees were not trust property, and need not be accounted for. Neither of the former cases was cited in the Dover case, but they must be regarded as overruled. CHAPTER II. INTESTACIES. 2J J. CARRYING ON THE TESTATOR'S BUSINESS. Executors who carry on the testator's business, though by direction in the will, are personally liable to the creditors, but with a right to be indemnified out of the assets. A direction in the will to carry on the trade does not authorise the employ- ment in the trade of more capital than the testator had in it at his decease, and on any loss arising from so conducting the business the executors are personally liable. K. THE DISTRIBUTION OF THE ESTATE OF AN INTESTATE. The following Tables show the persons entitled to the estate of anyone who dies intestate : INTESTATES' ESTATES PERSONAL PROPERTY. By the Intestates' Estates Act 1890 (53 & 54 Vic. cap. 29), a very important change was made in the law (Statute of Distributions, 22 & 23 Car. II. cap. 10) as regards provision for widows of men who die intestate and without issue after the ist of September 1890, whereby it is enacted that the real and personal estate of an intestate so dying passes absolutely to the widow as far as the first ^500 in value is con- cerned. If under ^500 she takes the whole ; if above ,500 she takes ^"500 in addition to what she was entitled to under the law previously in force. The effect of these Acts is as follows : // the Intestate die, leaving His representatives take in the proportion following : Wife only, no blood relations. 500 and half balance to wife, other half to the Crown. Wife, no near relations. 500 and half balance to wife, rest to next-of-kin in equal degree to intestate. 28 CHAPTER II. INTESTACIES. // the Intestate die, leaving Wife and child, or children, and children of a deceased child. Wife and father. Wife and mother. Wife and brother. Wife, brother or sister, and children of a deceased brother or sister. Wife, mother, nephews, and nieces. Wife, mother, brothers, sisters, and nephews and nieces (children of deceased brothers and sisters) . No wife or child. Children by one or more wives and the issue of deceased children. Husband and children. His representatives take in the proportion following : One-third to wife, rest to child or children ; and if children are dead, then to their lineal descendants, subject to this, that such child or children as had estate by settle- ment of intestate, or were advanced by him in his lifetime, shall bring such estate or advancement into account (but heir does not bring real estate into account). 500 and half balance to wife, and half to father. ^500 and half balance to wife, and half to mother. 500 and half balance to wife, other half to brother. 500 and half balance to wife, one- fourth to living brother or sister, one-fourth to deceased brother's or sister's children. 500 and half balance to wife, one- fourth to mother, and other fourth to nephews and nieces per stirfes. 500 and half balance to wife, residue to mother, brothers, sisters, and nephews and nieces (as to nephews and nieces per stirpes). All to next-of-kin of equal degree. All children equally percaf ita, issue of deceased children per stirpes; no difference between children of different wives. Whole to husband. CHAPTER II. INTESTACIES. If the Intestate die, leaving Mother, but no wife, child, father, brother, sister, nephew or niece. Mother, and brother or sister. Mother, and brothers and sisters. Father, and brothers and sisters. Child and grandchild by deceased child. If no child, children, or represen- tatives of them. Brother or sister, and children of a deceased brother or sister. Brother and grandfather. Brother's grandson, and brother's or sister's daughter. Brother and two aunts. Grandfather, no nearer relation. Father's father, and mother's mother. Grandmother, uncle or aunt. Uncle, and deceased uncle's child. Uncle by mother's side, and de- ceased uncle or aunt's child. Two aunts, nephew, and niece. Uncle's or aunt's children, and brother's or sister's grand- children. Nephew by brother, and nephew by half-sister. Nephew by deceased brother, and nephews and nieces by deceased sister. His representatives take in the proportion folloii'ing : The whole to mother. Equally between them. Whole to them equally. Whole to father. Half to child, half to grandchild, who takes by representation. All to next-of-kin in equal degree to intestate. Half to brother or sister per capita, half to children of deceased brother or sister per stirpes. Whole to brother. All to daughter. All to brother. All to grandfather. Equally to both. All to grandmother. All to uncle. All to uncle. Equally to all. Equally to all. Equally per capita. Each in equal shares per capita, and not per stirpes (Walsh v. Walsh). 30 CHAPTER II. INTESTACIES. INTESTATES' ESTATES REAL PROPERTY. The descent of the real estate is rather more complicated than that of the personal estate, and it is only the most elementary questions that are asked upon it. It may be convenient, however, to give the complete table. The provisions (below) of the Intestates' Estates Act as to a proportion of ^500 to the widow, in certain cases, must be borne in mind. // Intestate die, leaving Real Property would descend to : Wife only, no blood relations. One-third to wife for life, rest to Crown; copyholds to lord of manor. /One-third to wife for life ; rest to eldest son or his issue. One-third to wife for life in any case. Rest to eldest son or his issue, such son and his issue, whether male or female, being preferred to any other son and his issue, and all sons and Wife and child, or children, and their issue, whether male or female, * being preferred to all daughters and their issue, whether male or female. If no son, rest to daughters equally. If daughters and grandchildren (sons and daughters of deceased daughter) 1 rest to daughters and eldest son of * deceased daughter. Wife and father. One-third to wife for life ; rest to father, if deceased purchased same, or had it left him by will. Wife and mother. One-third to wife for life ; rest to mother, there being no heirs on father's side. Wife and brother. One- third to wife for life ; rest to brother. CHAPTER II. INTESTACIES. // Intestate die, leaving Wife, brother, or sister, and chil- dren of a deceased brother or( sister. Wife, mother, nephews and nieces. W T ife, mother, brother, sisters, and nieces (children of deceased brothers and sisters). No wife or child or issue of a deceased child. Children by one or more wives, and the issue of deceased children. Husband and child or children. Mother, but no wife, child, or issue of a child, father, brother, sister, nephew, or niece, or more distant descendants of father. Mother, and brothers and sisters. roperty ii'oidd descend to : One-third to wife for life in any case ; rest to eldest brother or his issue. (See above, " Rest to eHest son or his issue," under head " Wife and child," &c.) Sister and children of deceased sister, rest equally between sister and nephew (eldest). Sisters and nieces, only, children of deceased sister, rest equally be- tween nieces. One-third to wife for life ; rest to nephew (eldest), or nieces, if brother left no son. One-third to wife for life in any case ; rest to eldest brother. Rest to nieces, equally, if children of elder brother deceased. Lineal ancestor paternal, males of whole blood first. All to eldest son, or his issue. (See above, " Rest to eldest son or his issue," under head "Wife and child," &c.) Daughters equally. Husband for life ; afterwards to only child or to eldest son or issue of a deceased eldest son. If all daughters, to them equally. All to mother in default of lineal ancestors on the father's side, issue of such ancestors. All to eldest brother. 3 2 CHAPTER II. INTESTACIES. // Intestate die, leaving Mother and sisters. Father, and brothers and sisters. Child and grandchild by deceased child. Brother and grandfather. Brother's grandson, and brother or sister's daughter. Brother and two aunts. Grandfather (no nearer). Father's father, and mother's mother. Grandmother and uncle, or aunt on father's side (no nearer). Uncle, and deceased uncle's child. Uncle by mother's side, and de- ceased uncle's or aunt's child. Two aunts, nephew, and niece, children of deceased brother. Uncle or aunt's children, and brother's grandchildren through a son. Nephew by brother, and nephew by half-sister. Nephew by deceased brother, and nephews and nieces by deceased sister. Real Property would descend to : All to sisters. All to father. See above, " Rest to eldest son or his issue," under head "Wife and child," &c. All to brother. All to great-nephew, if eldest brother's grandson. All to brother's daughter if child of eldest brother. Brother, all. All to grandfather. All to father's father. All to uncle or aunt. Uncle, unless deceased uncle was elder brother, when his child takes all. Child of deceased uncle on father's side, or (if none) child of deceased aunt on father's side. Nephew. Eldest brother's grandson, or if grand-daughters between them equally. Nephew by brother. All to eldest nephew, son of deceased brother. CHAPTER II. RESPONSIBILITIES OF TRUSTEES. 33 Hv the Intestates' Estates Act 1890 it is provided that as between the real and personal representatives the ,500 is to be borne in proportion to the net values of the real and personal estate respectively. For this purpose the value of the real estate is to be taken as 20 years' purchase of the annual value for income tax purposes, less any mortgage, &c., charged thereon, and the value of the personal estate as determined for the purpose of estate duty, less debts and funeral and testa- mentary expenses. The Act is reproduced in Appendix II. For examples illustrating the principle, see post. Previous to the Land Transfer Act 1897 (60 & 61 Vic. cap. 65) on the death of any person the real estate passed direct to the heir-at-law or devisee, according to whether he died intestate or not, but now, by section i of that Act, Where real estate is vested in any person without a right in any other person to take by survivorship it shall, on his death, notwithstanding any testamentary disposi- tion, devolve to and become vested in his personal representatives or representative from time to time as if it were a chattel real vesting in them or him. x L. RESPONSIBILITIES OF TRUSTEES. The tendency of recent legislation has been to afford relief to trustees where possible, e.g., the section in the Act of 1888 as to mortgages (repealed and re-enacted by the Act of 1893) and Section 8 of the same Act, which is as follows : Trustee Act 1888 (51 6 52 Vic. cap. 59). " (i) In any action or other proceeding against a trustee or any person claiming through him, except where the claim is 34 CHAPTER II. RESPONSIBILITIES OF TRUSTEES. founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy or is to rccorcr trust property, or the proceeds thereof still retained by tJie trustee or pre- viously received by tJie trustee and converted to Jiis use, the following provisions shall apply : " (a) All rights and privileges conferred l>y any Statute of Limitations shall be enjoyed in the like manner and to the like extent as they would have been enjoyed in such action or other proceeding if the trustee or person claiming through him had not been a trustee or person claiming through him : " (b) If the action or other proceeding is brought to recover money or other property, and is one to which no existing Statute of Limitations applies, the trustee or person claiming tH rough him shall be entitled to the benefit of and be at liberty to plead the lapse of time as a bar to such action or other pro- ceeding in the like manner and to the like extent as if the claim had been against him in an action of debt for money had and received, but so nevertheless that the statute shall run against a married woman entitled in possession for her separate use, whether with or without a restraint upon anticipation, but shall not bcgjn to run against any beneficiary unless and until the interest o f such beneficiary shall be an interest in possession. "(2) No beneficiary, as against whom there would l>e a good defence by virtue of this section, shall derive any greater or other U-nelit from a judgment or order obtained by another beneficiary than he could have obtained if he had brought such a lion or other proceeding and thi> > tion had been pleaded. CHAPTER II. RESPONSIBILITIES OF TRUSTEES. 35 " (3) This section shall apply only to actions or other pro- ceedings commenced after the first day of January one thousand eight hundred and ninety, and shall not deprive any executor or administrator of any right or defence to which he is entitled under any existing Statute of Limitations." Further relief is afforded by the Judicial Trustees Act 1896 (59 & 60 Vic. cap. 35) giving the Court power, in effect, to relieve a trustee who has innocently committed a breach of trust whereby loss has resulted to the estate. Appendix II contains some important sections of the Act of 1893- D 2 CHAPTER 111 Payment of Probate or Estate Duty. THE first duty of an executor or administrator is to see as to the payment of the estate duty. This should be done as soon as conveniently may be. Until the Finance Act of 1894, the principal enactment as to duties was the Customs and Inland Revenue Act 1881. This Act laid down the duties payable in respect of probates or letters of administration granted on or after ist June 1881. As, in all cases, regard is to be had to the date of the death, it may be well to state at this point that : The Act of 1894 applies to persons dying after ist Aug. 1894. 1896 ,, ,, 3oth June 1896. ,, 1900 ,, ,, 3ist Mar. 1900. 1907 ,, ,, i 9 th April 1907. 1910 ,, ,, 29th April 1909. The duties prescribed in the 1881 Act do not apply in the case of any person dying after ist August 1894, but as it is necessary to understand what they were in order to see the sweeping change effected by the Finance Act 1894, they are stated in Appendix I. Whereas before 1894 duty was only payable on personal estate, and (with slight exception) at a uniform ratr whatever CHAPTER III. ESTATE DUTY ACT OF 1894, & C ' 37 the value of the estate, the Act of 1894 introduced two great principles : (1) Aggregation, i.e., payment of duty upon the entire value of the property " passing," whether real or personal ; and (2) Graduation, i.e., payment at a graduated rate rising in certain specified proportions, according to the net value of the property which " passes " on the death. It will be noticed that all property which passes is to be aggregated. If the deceased left ^50,000 and had made a gift of ^5.000 within 12 months (now three years) of his death, the whole would be liable to duty in the ,55,000 scale. By Section 2 of the Act the following property is deemed to -pass, and is therefore subject to duty : (a) Property of which deceased was at the time of his death competent to dispose. (b) Property in which the deceased or any other person had an interest ceasing on the death of the deceased, to the extent to which a benefit accrues or arises by the cesser of such interest except (practically) pro- perty held by him in trust. The value of the cesser of an interest is the capital value of the property producing that interest (1894, Section 7). 38 CHAPTER III. ESTATE DUTY.- ACT OF 1894, ^ C ' (c) Certain property which, under the Acts of 1881 and 1889, was liable to " account duty " (see Appendix I), except that those sections are now to be read as if real property were included as well as personal property, and as if the words " voluntary." &c., were omitted. By Section 59 of the Act of 1910. (i) property- given under a marriage settlement does not pass, nor (2) any gift in the nature of normal expendi- ture, nor (3) any gift not exceeding ,100. In the case of Attorney -General i\ Beech (1899), it was held in the House of Lords that where a life-tenant surrendered her interest to the remainderman more than 12 months before her death the property did not " pass " on her death, and duty was therefore not payable upon it. And where a life-tenant surrendered his interest within twelve months of his death the property was not " deemed to pass " (A. G. v. De Preville C.A., December 1899). The serious results which this might have had to the Revenue, if allowed to stand are obvious. Accordingly, by the Finance Act 1900, it is provided that in the case of a person dying after 3ist March 1900 such property shall be deemed to puss unless the surrender, &c., is bond fide made twelve months (now three years) before death, and the property is thenceforth retained to the entire exclusion nf such life-tenant. CHAPTER III. ESTATE DUTY ACT OF 1894, & C - 39 (i<>nnt of the duty, except that the duty on an estate of over ,100 and not exceeding ,200 was i ; but by the 1900 Act duty is now payable on the exact amount of the estate. Before 1894 the \;ilu- of the estate was taken at lite of the affidavit, but now (1894, Section 6) it is to be taken at the date of the death, and interest is to be paid on tln> duty CHAPTER III. ESTATE DUTY ACT OF 1894, &C. 43 from that date up to the date of the affidavit. By the Act of 1894 this interest was to be at the rate of 3 per cent, less income tax, and was to be part of the duty, i.e., to be paid out of capital (Re Fish; Lea v. Fish (1897 ), but by the Act of 1896, Section 18, the rate is to be 3 per cent., without deduction of income tax, and it is payable out of income. Where the property passing includes property in a foreign country, and duty is payable in that country, it may be deducted from the value of the poverty before assessing the duty here (1894, Section 7 (4)); but where the property is situate in a British possession, and duty is payable there, the amount of that duty may be deducted from the estate ditty payable here in respect of that property (1894, Section 20). Where the property which passes includes a reversionary interest, duty upon the reversion may be paid at the option of the person accountable either at once or when it falls in (1894, Section 7 (6) ). If the duty is not paid at once, then (a) For the purpose of ascertaining the scale of duty into which the rest of the estate falls, the reversionary interest is to be taken as the value at the date of the death. (b] The rate of duty payable upon the interest when it does fall into possession is to be ascertained by taking the actual amount realised for it, together with the value of the rest of the estate as previously ascertained. Thus, suppose an estate consists of certain property valued at ^9 1, ooo, and a reversion on ^10,000, the present value of 44 CHAPTER III. ESTATE DUTY ACT OF 1894, &C. which is ^5,000. If duty is paid at once it is paid on ,96,000 at 8 per cent., but if not all paid at once the 91.000 would be paid on at 8 per cent., and when the reversion fell in a duty of 9 per cent, on ^10,000 would be payable, the estate being valued on the above principle at ; 101,000 (91,000 and ;io.ooo). If the deceased has contracted for an annuity not exceeding >5 to be paid to any person on his death, the value of such annuity is exempt from duty, but if there be more than one such, only the annuity first granted is exempt (1894, Section 15 (i)). Duty may be remitted in respect of books, &c., of national, scientific, or historic interest, and bequeathed for the public benefit (1894, Section 15 (2)). Where any property such as pictures, &c., appears to the Treasury to be of national interest, and is settled on different ITN. nis in succession, it is not to be aggregated, but is to form -late by itself, and is exempt from duty whilst enjoyed by a person not competent to dispose of it (1896, Section 20). This has been extended (1910, Section 63) to give exemption from legacy duty to such property, whether settled or not, and duty is only payable when the property is sold. By the Act of 1900, if a soldier, sailor, &c., dies after nth October 1899 from wounds inflicted or disease contracted within twelve months of death while on active service against an enemy, the Treasury may remit (or repay) duty (estate, legacy, or succession) to an amount not exceeding .150 leviable in r.-NjHTt of property passing upon the death of the deceased CHAPTER III. ESTATE DLJTY ACT OF 1894, &C. 45 to his widow or lineal descendants, if the total value, for the purpose of estate duty, of the property so passing does not exceed .5,000. Similar provisions to Sections 33, 36, &c. (Appendix I) of the Act of 1 88 1 were enacted by the Act of 1894, and it is also provided that where the estate exceeds .300* (gross), but not ^500, a fixed duty of 505. may be paid. If this duty is paid within 12 months there is not to be any interest payable upon it. Where the net estate (exclusive of property settled otherwise than by the will of the deceased) does not exceed 1,000 it is to form an estate by itself, and not to be aggregated with settled property, and the payment of the estate duty frees it from all other duties. Estate duty is not payable in respect of property settled by the will of some person other than the deceased, and on which probate or account duty has been paid, unless he had power to dispose of it (1894, Section 21). Thus, if A. died on or before ist August 1894, leaving a life interest in certain real and personal property to B., and the capital to C. on the death of B., on the death of B. (after ist August 1894) estate duty would be payable on the capital value of the real estate, but not on that of the personal estate, the latter having paid probate duty but not the former. But this exemption is not operative if the duty was paid in respect of an interest in expectancy on the death of a person other than the settlor. *By the Act of 1910, Section 61, unpaid purchase money of any of the property may be deducted. 46 CHAPTER III. - ESTATE DUTY FORM. EXAMPLE A. Illustrating tin filling up of the form for payment of estate dut v generally. A testator dies 3ist December 1910, leaving Cash in the house, ,13. Cash in the bank, ^500. ,10,000 4 per cent, debenture stock of the Lancashire and Yorkshire Railway Company, valued at 115 per cent., x. d. Dividend due ist January. ^8,000 2\ per cent. Consols, valued at 80 x. d. There is owing to him on mortgage at 4 per cent. ,5,000, the interest being due 3ist March and 3oth September. There are debts outstanding to tradesmen, &c., amounting to ;ioo. He appoints his two brothers executors, and bequeaths them ;ioo each. The residue he bequeaths to his widow and daughter in equal shares. The funeral costs ,50. Probate is applied for 3ist March 1911. stocks \\-iv ivalised at the above prices on 3ist March 191 i. and the mortgage was called in on the same day. On payment of the estate duty particulars would be furnished on (say), Form A 3, as follows : CHAPTER Ilf. ESTATE DUTY FORM. 47 ACCOUNT No. i. Stocks or Funds of the United Kingdom 8,000 25 per cent. Consols at 80 per cent. ... 6,400 o o Proprietary Shares or Debentures of Public Com- panies-- Lancashire and Yorkshire Railway Company 10,000 4 per cent. Debenture Stock at 115 per cent. ... ... ... ... ... ... 11,500 o o Dividends and Interest declared and accrued due in respect of the above investments to date of death 2^ per cent. Consols Quarter-year's Dividend ... 50 o o Lancashire and Yorkshire Railway Half-year's Interest ... ... 200 o o Cash in the house ... 13 o o ,, at the bankers ... ... 500 o o Money out on Mortgage and Interest thereon to date of death, viz. : Mortgage ... ... ... ,5,000 o o 3 months' Interest at 4 per cent, to date of death ... 50 o o. 5,050 o o 23,713 o o SCHEDULE No. i. Part i. Debts due from the deceased Sundry Tradesmen ... ; IO o o Part 2. Blank & Co., for funeral 50 o o SUMMARY OF AFFIDAVIT. Table for determining Rate of Duty. Table for determining A mount of Duty. I. Personal Property, net. . 23,563 o o Estate Duty on the net value of the Personal Property at Total net value of Property the appropriate rate of 6 for determining rate of percent 1,413 15 7 Estate Duty (p. 42) .. 23,563 o o 3 per cent, per annum there- on to date of affidavit, 3 Appropriate rate (p. 42) . . 6 per cent. months 10121 Total duty and Interest 1,424 7 8 48 CHAPTER III. ESTATE DUTY FORM. EXAMPLE B. Illustrating the -filling up of the form for payment of estate duty where the testator had a business of his own and u*as also partner in a business. A testator dies 3ist December 1910 leaving Cash in the house, 20. At the bank, ^480. ;i,ooo Consols. ^5,000 5 per cent. Stock of the Argentine Government. Household Furniture valued at ,250. $5,000 Pennsylvania Railroad Shares. At the date of his death he was carrying on a business, the Balance Sheet of which, on 3ist December, was as follows : Creditors ... ^"J.OGO Machinery ... ^7,000 Capital ... 10,000 Goodwill ... 1,000 Debtors ... 2,000 Cash at the bank 1,000 i 1,000 He was also partner in a firm, the Balance Sheet of which was as follows : Creditors ;i,ooo Land and Buildings ,5,000 A., Capital ;5,ooo Machinery ... 2,000 B., Capital 5,000 Goodwill ... ... 1,000 10,000 Debtors ... ... 2,000 Cash at bank ... 1,000 ;ii,ooo /.'ri.ooo CHAPTER III. ESTATE DUTY FORM. 49 The funeral cost ,50, including 10 for mourning for widow as arranged among the beneficiaries. It may be taken that no dividends were received, and probate was applied for 3ist March 1911. The stocks were valued at par. ACCOUNT No. i. Personal Property situate in the United Kingdom. Stocks of 1 the United Kingdom 2r} per cent. Consols, 1,000 at par ... ... 1,000 o o Stocks of Foreign Countries Argentine Government, 5,000 at par ... ... 5,000 o o Cash in the house ... ... ... ... 20 o o | 1,000) ,, at the bankers - ... ... 1,480 o o I 480) Book Debts ... ... ... ... ... 2,000 o o Household Goods ... ... ... ... 250 o o Stock-in-Trade ... ... ... ... ... 7,000 o o Goodwill of Business ... ... ... ... 1,000 o o Deceased's share in the real and personal property as a partner in the firm of 5?ooo o o 22,750 o o SCHEDULE No. i. Part i. Debts due from the deceased ... ... ,1,000 o o Part 2. Funeral Expenses ... ... 40 o o [Mourning not allowed] Total 50 CHAPTER III. ESTATE DUTY FORM. ACCOUNT No. 2. Personal Property situate Abroad. $5,000 Pennsylvania Shares at par ... ... ^1,000 o o SUMMARY OF AFFIDAVIT. Table for determining Rate of Duty. Table for determining A mount of Duty. I. Personal Property, Ac- Estate Duty on the net value count No. i .. .. 21,710 o o of the Personal Property at II. Personal Property, Ac- the appropriate rate of 6 count No. 2 .. .. 1,000 o o per cent 1.362 12 o 3 per cent, per annum interest 22,710 o o thereon, 3 months from 31 December to 31 March . . 10 4 4 Total net value of Property for determining rate of Total Duty . . . . 1,372 16 4 Estate Duty (p. 42) . . 22,710 o o ^ Appropriate rate of Estate Duty (p. 42) . . . . 6 per cent. N.B. It will be noticed that in the case of the testator's own business the assets and liabilities are all put under their respective heads, but in that of the partnership his interest appears in one amount as his capital in the business. CHAPTER IV. Payment of Legacy or Succession Duty. IT will have been noticed that the estate duty is payable on the entire value of the property deemed to pass on the death, at a scale graduated according to the amount of that 'property. Legacy and succession duty, however, are further duties payable on the amount descending to the beneficiaries and graduated according to the relationship of the beneficiary to the testator. The scale of duty in force prior to 1909 is given in Appendix I, but by the Finance (1909-10) Act 1910, Section 58, any legacy or succession duty previously payable at 3 per cent, became 5 per cent., and the duty which formerly was 5 or 6 per cent, became 10 per cent. The same section also provides that the i per cent, duty is to be levied in future, and that i per cent, is likewise to be paid by a husband or wife of the testator, c., except that the i per cent, is not payable where (1) The value of the property passing does not exceed ,15,000; or (2) The value of the legacy (or total legacy, &c., to the same person) does not exceed ^1,000 ; or (3) The value of the legacy does not exceed ^2,000; and the person taking is the widow, or a child under 21 years of age. E 2 52 CHAPTER IV. LEGACY DUTY FORM. So that the scale now is : Lineals and husband or wife ... i% (except as above). Brothers, &c 5",, All other persons ... ... 10,', It will be noticed that real estate which, previous to 1894, did not pay estate duty (or probate duty as it was then called) paid a higher (succession) duty than the (legacy) duty on personalty. As the Act of 1894 made real estate liable to the estate duty, it abolished the extra ^ and ii per cent, succession duty on real estate. Previous to 1894 also, succession duty was payable on the value of the life interest of the successor. It is now payable on the capital value of his succession. Reverting to Example A. (p. 46), the particulars would be furnished on Form Xo. 3. as follows : EXAMPLE ('. Illustrating filling up form for payment of legacy duty. Receipts. Cash in the house ... ... ... ... 13 o o ,, at the bankers ... ... ... ... 500 o o Mortgage due at the death ... 5,000 o o Interest to 3ist March ... 100 o o 5,100 o o Railway and other Shares L. X: V. Railway jio,oco 4 per cent. Debenture Stock at 115 per cent. ... ... ... 11,500 o o ai per cent. Consols 8,000 Stock at 80 per cent. ... ... ... 6,400 o o Total of Property ... ... 23,513 o o CHAPTER IV. LEGACY DUTY FORM. 53 I'll }'!: JltS. Probate, viz. Duty *A 2 4 7 8 Fees 7 Funeral Expenses ... ... 50 o o Expenses attending Exccutorship Debts ... ... ... 100 o o Legacies, viz. Cash ... ... 190 o o Duty ... ... 10 o o 200 o o ''774 7 8 Deduct total of Payments from total of Property. Net Amount of Property ... ... 21,738 12 4 Income of Shares, &c , to time of sale L. & Y. Railway ... ... 2K 25 per cent. Consols to 5th January ... ... ... 50 o o 2} per cent. Consols to 5th April 50 o o 300 o o Total ... ... ... ... 22,038 12 4 Deduct any portion of the Residue not liable to Duty ... ... ... ... Nil. Residue on which duty is chargeable ... ^.'22,038 12 4 X.B. It will be noticed that the dividend on Consols due 5th April is added to the residue, though the Consols were valued on 3ist March. This arises because the Bank of England books for Consols, and many other stocks, are closed long before the dividend day (fully a month), and they are quoted ex div. considerably before the dividend is due. 54 CHAPTER IV. INCIDENCE OF LEGACY DUTY. EXAMPLE D. Illustrating incidence of duty on legacies. Referring to Example B. (p. 48), let us suppose the will to be as follows : Testator appointed his friend A. executor. He bequeathed to A. ... ... ... ... ^Joo B. (brother) ... ... ... 500 C. (his father's brother's son) ... 500 D. (his wife's brother)... ... 500 E. (his brother's wife)... ... 200 all to be paid free of duty. The residue he directed to be divided equally between his grandson F., his nephew G., and his friend A. The estate duty was duly paid, and the stocks may be considered as realised ist April (cum div.) at par, and the legacies paid on the same day. Draw the account for payment of duty on the residue, showing the duty payable. The following particulars would be rendered on the Form No. 3. and then F.'s, G.'s, and A.'s one-third shares would be carried on to No. i Forms and duty paid at i, 5, and 10 per cent, respectively. Cash in the house ... ... ... ... 20 o o ,, at the bankers ... ... ... ... 1,480 o o Furniture, &c. ... ... ... ... ... 250 o o Stock-in-trade ... ... ... ... 7,000 o o Goodwill of Business ... ... ... ... 1,000 o o Book and other Debts ... ... ... ... 2,000 o o Carried forward ... ... ... ... 11,750 o CHAPTER IV. -- INCIDENCE OF LEGACY DUTY. 55 Brought forward ... ... ... ... .11,750 o o 2\ per cent. Consols, 1,000 at par ... ... 1,000 o o Stocks, c., of Foreign States 5,000 Argentine Government Stock at par ... ... ... 5 5 ooo o o Other Property, viz. $5,000 Pennsylvania Railroad Shares ... ... 1,000 o o Testator's interest in real and personal estate as partner in firm of ............... ... ... 5 s ooo o o Total Property ... ... ... 23,750 o o Payments. Probate (PExpenses) ... ... i>37 2 l6 4 Funeral Expenses ... ... 50 o o Debts due at the death ... 1,000 o o Expenses attending Executorship Duty. Legacy. Pecuniary Legacies, A. 10 100 B. C. D. E. Duty thereon Notes on the Working. The legacy to E. (the brother's wife) pays 5 per cent, duty, being the same rate as one to her husband would have paid, but that to D. (the wife's brother) pays 10 per cent., he being a stranger in blood to the testator. Of course, had the legacies not been left " free of duty," each legatee would have received the legacy less the duty thereon. 25 5 5 5 5 5 10 2OO i,8oo 145 1,800 145 , **.(" ^ 4s37 ID 4 Net Residue ... - 19,382 3 8 CHAPTER Y. The Audit of Trust Accounts. To those who have followed the examples given, and who, therefore, understand the mode of making n-p Trust Accounts, little need be said as to their audit. The auditor's duty is (generally) to see : (1) That all the assets left by the testator are brought into account. This information he will obtain from the affidavit for estate duty purposes. (2) That the estate has been distributed in accordance with the will. (3) That the proper duties have been paid. (4) That the trust moneys are invested in proper securities. (5) That the accounts are properly vouched, both as to receipts and payments. (6) That the securities are in order at the date of any Balance Sheet he may certify. Students should carefully study the audit provisions in the Judicial Trustee Rules and the Public Trustee Act (post). CHAPTER VI. Specimen Accounts Illustrating Various Points. Example of an Account for Beneficiaries. REVERTING to Example C. (p. 52), the account furnished to the parties would be as follows either with the payments deducted from the receipts, or in a Dr. and Cr. form : An Account of the Estate of the late A. B. from 31 st December 1910 (the date of his death} to 31 st March ign. Receipts. Cash in the house ... ... ... ... ^13 o o ,, at the bankers ... ... ... ... 500 o o Mortgage due at the death ... ^5,000 o o Interest to 3ist March ... 100 o o 5,100 o o Railway and other Shares L. & Y. Railway ^10,000 4 per cent. Debenture Stock at 115 per cent. ... ... ... 11,500 o o 2\ per cent. Consols ^8,000 at 80 per cent. ... ... ... 6,400 o o Income of Shares, &c., to date of sale L. & Y. Railway ... ... 200 o o 2\ per cent. Consols to 5th January ... ... ... 50 o o 25 per cent. Consols to 5th April 50 o o 300 o o Total Receipts ... ... ... 23,813 58 CHAPTER VI. EXAMPLE ILLUSTRATING ACCOUNT FOR BENEFICIARIES. Payments. Probate, viz. Duty 1,424 7 8 Fees - 1,424 7 8 Funeral Expenses ... ... 50 o o Expenses attending Executorship Debts ... ... ... 100 o o Legacies, viz. Cash ... 1 9 Duty ... 10 o o 200 o o Balance ... ... ... ... ... 22,038 12 4 Due to Widow, one-half 11,019 6 2 Less Duty at i per cent. ... no o 4 10,909 5 10 Daughter, do. ... ... 10,909 5 10 Duty payable ... ... 220 o 8 - 22,038 12 4 N.B. It will be observed that the duty is payable by the beneficiary entitled, and not out of the estate generally. Reverting to Example D. (p. 54), the account furnished to the beneficiaries would be similar to the above, but concluded as follows : CHAPTER VI. EXAMPLE ILLUSTRATING ACCOUNT 59 FOR BENEFICIARIES. Balance ... ... 19,382 3 8 Due to-- Grandson, one-third share ... 6,460 14 7 Duty at i per cent. 64 12 o 6,396 2 7 Nephew, one-third share ... 6,460 14 7 Duty at 5 per cent. 323 o o Friend, one-third share ... 6,460 14 6 Duty at 10 per cent. 646 o o 5,814 14 6 Duty ... ... ... 1,033 I2 - 19,382 3 8 N.B. It will be observed that each beneficiary bears duty on his own share. 60 CHAPTER VI. EXAMPLE ILLUSTRATING THE OPENING OF TRUST BOOKS GENERALLY. Example illustrating the <>pcning of Trust Hooks The assets being as in Example B. (p. 48), the testator directed his trustees to invest ,5,000 in trust to pay the income to his daughter H. during her life, and on her death to divide the said legacy among her children as and when they should attain 21 years of age, the interest due to a minor to be paid to his guardian. The residue he directed to be divided equally between his two sons, K. and M. Make the necessary Journal entries and open the Trust Books. Accountants differ in opinion as to whether the Ledger should be opened with the assets at their Probate values or not. It has been argued that, if they are so entered, 'an Executor might be charged with the value if not realised. Such a contention appears quite untenable. An Executor is surely chargeable only for a breach of trust, and would then be chargeable whether the fact were entered in the books or not. In my view it is a question of expediency, and one strong argument in favour of using the figures as a matter of account is that it then becomes impossible for any asset or liability to be overlooked on a division. In the present instance the working is given, using the figures by \\a\ of memo. only. In the larL r T example (/'*/) the other prinripli- is follow:--!. CHAPTER VI. EXAMPLE ILLUSTRATING THE OPENING 6l OF TRUST BOOKS GENERALLY. Sundries Dr. ... ... ,6,500 o o To Estate Account ... ... .6,500 o o b in the house ... ... 20 o o M. & L. D. Bank, Lim., Cash at the Bank ... ... ... 480 o o Consols 1,000 Stock, value for estate duty at par ... ... ;i,ooo o o Argentine Government 5,000 5 per cent. Stock, value for estate duty at par 5,000 o o Household Furniture, value for estate duty ... 2 5 Pennsylvania Railroad Shares 5,000 Shares, value for estate duty at par ^1,000 o o Machinery Value for estate duty 7,000 o o Goodwill of business Value for estate duty ^"i,oco o o Sundry Debtors Value for estate duty ^2,000 o o M. & L. D. Bank, Lim., Cash at the bank, Business Account ... i,oco o o A. B. cV Co. Testator's interest in the firm 5,000 o o 6,500 o o 62 CHAPTER VI. EXAMPLE ILLUSTRATING THE OPENING OF TRUST BOOKS GENERALLY. Estate Account Dr. To Sundry Creditors .1,000 o o ESTATE ACCOUNT. 19 s d s d Dec. 31 By Sundries: Cash in the house 20 o o Cash at the hank . . 480 o o Cash at the B u s i ness Ac . . 1,000 o o Testator's Int. in the firm of A. B. &. Co... 5,000 o o 6,500 o o CASH ACCOUNT. Bank Cash 1910 s d s d Dec. 31 To Balances . . 480 o o 20 o o M. & L. D. BANK (BUSINESS ACCOUNT). 1910 Dec. 31 To Balance sd . . 1,000 o o A. B. & Co. 1910 s d Dec. 31 To Testator's Interest in the firm .. .. 5,000 o o INVESTMENT ACCOUNTS. Open by way of memo. only. CHAPTER VI. EXAMPLE ILLUSTRATING THE WRITING-UP 63 OF TRUST BOOKS GENERALLY. Example illnslrating the writing-up of Trust Books. The following transactions took place : 1911. Jan. 4. Paid Mourning & Co., Lim., for Funeral, &c., by cheque ^50 o o ,, 5. Received Dividend on Consols and paid to Bank ... 650 ,, 20. Sold Consols for, and paid to Bank ... 1,112 12 6 Feb. i. Transferred Cash at Bank on Business Account to the Executors' Account. ,, 20. Received all Debts due and paid to Bank 2,000 o o ,, Paid all Debts due by Cheque 1,000 o o ,, ,, ,, Cash in hand to Bank ... ... 20 o o Mar. 31. ,, Estate Duty and Fees (say) 1,600 o o April i. Received Dividend on Argentine Stock and paid to Bank 62 10 o ,, ,, Received proceeds of sale of Goodwill and paid to Bank 500 o o ,, ,, Received proceeds of sale of Machinery and paid to Bank ... 6,000 o o ,, 20. Sold Argentine Stock for ... 6,000 o o ,, Furniture for 300 o o May i. ,, Pennsylvania Shares 1,150 o o ,, ,, Received from A. B. & Co. ... ... 5,000 o o and Interest 83 6 8 ,, Divided Residue and paid off the two sons. 64 CHAPTER VI. EXAMPLE ILLUSTRATING THE WRITING-UP OF TRUST BOOKS GENERALLY. Write up Cash Account and post up the Ledger. CASH ACCOUNT. Bank Cash s d s d 480 O O 20 O O IQIO Dec. 31 To Balances 1911 Jan. 5 Consols, dividend 650 20 Consols realised i, 112 12 6 Feb. i M. & L. D. Bank, Busi- ness A/c . . 1,000 o o 20 Book Debts 2,000 o o Cash, per contra 20 o o April i ,, Argent.Stock, dividend . . 6z 10 o Goodwill realised 500 o o Machinery realised 6,000 o o 20 Argent. Stock realised . . 6,000 o o Furniture realised 300 o o May i Penn. Shares realised i, 150 o o A. B. &Co. .. 5,000 o o A.B.&Co., interest 83 6 8 23,714 14 2 20 o o Bank 19" s d Jan. 4 By Funeral Ex- penses, M. &Co., Lim. 50 o o 20 Debts due at the death.. 1,000 o o Feb. 20 Bank, per contra Mar.3i Estate Duty & Expenses i, 600 o o May i K 8,032 7 i M 8,032 7 i Balance . . 5,000 o o Cash 23,714 14 2 2O O O May i To Balance . . 5,000 o o K. STATE ACCOUNT. 1911 s .1 1910 s d May To Funeral Expenses. . 50 Dec. 31 By Balance . . . . 6,500 o o Debts 1,000 o ion Estate Duty, &c. . . H. Legacy in trust Balance s d 1, 600 5,000 o o Ma'y i Goodwill .. Machinery . . Furniture .. 500 6,000 300 O o o K., i share 8,032 7 i M.,| 8,032 7 : -> . Book Debts English Govern 2,000 12 fi 4 14 Stocks of Foreigr 12 O Countries 6,000 O O , Foreign Property. H Income Account. 1,150 152 i 8 23,714 _ 14 asi^ J 23,714 ^ 14 2 . CHAPTER VI. EXAMPLE ILLUSTRATING THE WRITING-UP 65 OF TRUST BOOKS GENERALLY. BOOK DEBTS. 191 1 May i To Estate Account s d . . 2,000 o o IQII Feb. 20 By Cash . . .. 2,000 S <1 P *ENGLISH GOVERNMENT STOCKS. IQII May i To Estate Account s d . . 1,112 12 6 1911 May i By Con sols .. 1,112 1 H 1 r, *STOCKS OF FOREIGN COUNTRIES. ign s d May i To Estate Account . . 6,000 o o 1911 May i By Argentine Government ,. 6,000 o o ^FOREIGN PROPERTY. 1911 s d May i To Estate Account .. 1,150 o o 1911 May i By Pennsylvania Shares . . 1,150 o o FUNERAL EXPENSES. 1911 Jan. 4 s d To Cash, M. & Co., Lim. 50 o o 1911 May i By Estate Account s 50 o d DEBTS DUE AT THE DEATH. 1911 Jan. 20 s d To Cash 1,000 o o 1911 May i By Estate Account s .. 1,000 (1 o ESTATE DUTY AND EXPENSES. ign Mar. 20 s d To Cash .. .. 1,600 o o 1911 May i By Estate Account .. 1,600 o d M & L. D. BANK (BUSINESS ACCOUNT). 1910 Dec. 31 s d To Balance .. .. 1,000 o o 1911 Feb. i By Cash s . . I ,OOO O d * These Accounts are not absolutely necessary, but they are convenient for collecting the items under headings for transfer to the Estate Account. 66 CHAPTER VI. EXAMPLE ILLUSTRATING THE WRITING-UP OF TRUST BOOKS GENERALLY. A. B. & CO. Income Capital 1910 s d s d Dec. 31 To Balance . . 5,000 o o 1911 May i Income A/c, transfer . . 83 6 8 Income Capital 1911 s d s d May i By Cash.. .. 5,00000 Do. Interest 83 6 8 PER CENT. CONSOLS. Income Capital 19" s d s d May iTo English Government Stocks, &c., transfer . . 1,112 12 6 Income Account . . 650 Income Capital 1911 s d s d Jan. 5 By Cash, Divi- dend . . 650 20 Cash, Pro- ceeds .. 1,112 12 6 ARGENTINE GOVERNMENT. Income Capital 1911 s d s d May i To Stocks of for- eign countries, transfer . . 6,000 o o Income A/c 62 10 o Income Capital 1911 s d s d April i By Cash, Divi- dends . . 62 10 o 20 Cash, Pro- ceeds . . 6,000 o o GOODWILL. 1911 May i To Estate Account sd 500 o o 1911 April i By Cash, Proceeds sd 500 o o MACHINERY, &c 1911 May i To Estate Account s d . . 6,000 o o 1911 April i By Cash, Proceeds sd . . 6,000 o o FURNITURE. 1911 May i To Estate Account sd 300 o o 1911 April 20 By Cash, Proceeds sd 300 o o CHAPTER VI. EXAMPLE ILLUSTRATING THE WRITING-UP 67 OF TRUST BOOKS GENERALLY. PENNSYLVANIA SHARES. i9i i May i To Foreign Property sd .. 1,150 o o 1911 May i By Cash, Proceeds .. 1,150 s d INCOME ACCOUNT. 1911 May i To Estate Account sd 152 i 8 152 1911 s d May i By A. B. & Co 83 68 Consols .. .. 650 Argentine Govern- ment 62 10 o 152 i 8 H. LEGACY IN TRUST. 1911 May i By Estate Account sd . 5,000 o o K. SHARE OF RESIDUE. 1911 May i To Cash . . sd .. 8,032 7 i 1911 sd May i By Estate A/c, J-share . . 8,032 7 i M. SHARE OF RESIDUE. 1911 May i To Cash . . sd . . 8,032 7 i 1911 s d May i By Estate A/c, ^-share . . 8,032 7 i Each Asset Account would have the Probate Value inserted by way of memo., for convenience of reference. F 2 68 CHAPTER VI. EXAMPLE ILLUSTRATING A LEGACY IX TRUST. Example (i) Illustrating a Legacy in Trust, The circumstances in a similar estate being as above, on May i 1911 the trustees paid the settlement estate duty (p. 40) and made the following investments : ;i,ooo L. & N. W. Railway 4 per cent. Debenture Stock at 120 ... 1,200 o o ;i,9oo lent on mortgage at 4 per cent, to X ... 1,900 o o ^2,000 Consols at 80 1,600 o o and the following dividends, &c., were received : 1911. July i. L. & X. W. Railway, interest ^20 o o ,, 5. Consols, dividend ... ... 12 10 o Oct. 5. ,, ,, ... ... 12 10 o Nov. i. X., interest 38 o o 1912. Jan. i. L. iV X. W. Railway, interest 20 o o ,, 5. Consols, dividend ... 12 10 o H. died 3ist December, leaving surviving her R.. aged 22, T., aged 20, and W., aged 19. R. was paid off on the 3ist January, ^"1,000 of the Consols being sold at 90 and ,250 L. & N. W. Railway at 115 for the purpose. Write- up the books and draw Balance Sheet at 3ist January preparatory to payment of R. All cash may be taken ,i> U-ing paid to the bank and all payments made by cheque. CHAPTER VI. EXAMPLE ILLUSTRATING \ LE ACY 69 IN TRUST. ( 'ASH A' orxT. IQII May i July i To Balance L. & N. W. R., Int 5,000 20 s M S^1 S "z 2^ : II .- en *o JE B. S? ^^ i 8 1 9 c3^8 * S ' H^ J E" o < o II X | . S *** ." 21 s, ' jj vo 1 ' 1 lj --| 1 : : j| ' IJ c : o n S c . -S ^ M u 1 " 1 e o o u -< !! Ji if |l"r 1 o ac jg IS r2 .-5 SE ya a o - M M . M * tt ^ f* C4 ~ S S I 4 "^c M J, CHAP. VI. EXAMPLE ILLUSTRATING A LEGACY -N TRUST. 71 1' c^ 88 ll 8 O * -1- I! w cri>n 00 II oS o^ Si S -o oo o II I I I I | o\ g So U M So M I ^ | g -^T3 1 w u I" I 8 M Q to H O v^j o 00 0\ H-H P* M - 1 N STS s" : " M * "^ isT-g i s - 1 5 1 II 1 o! : g| < : o l : |5 ^ s : 2S^S c | c/5 <'g2'c "" c SlolS || ^ ^"S * M g C us ^o " ffi^ 5; V is tf '*| I 72 CHAP. VI. EXAMPLE ILLUSTRATING A LEGACY IN TRUST. IT "* Hs O co in lu count Surplus on sale and revalua- tion . . s d | 1912 s d Julys By Cash, 9.000 Stock 9,450 o o Balance, 9,000 Stock at 105 . . . . 9,450 o o July 5 To Balance . 900 o o 18,900 o o 9,450 o o 18,900 o o CASH. 1912 s d July 5 To Balance .. .. 620 o o Consols, 9,000 Stock at 105 . . 9,450 o o 10,070 o o 78 CHAPTER VI. EXAMPLE ILLUSTRATING A LEGACY IN TRUST. and after paying M. the amount due to him, the balances will be :- Dr. Cr. s d s d S. (dec.) Legacy in Trust Account ... 9 ? 76o o o Consols 9>45o o o Cash ,10,070 o o Less M. ... 9*760 o o 310 o o ^9,760 o o ^9,760 o o It might be thought unnecessary to value the whole of the Consols, and in the case given it is not absolutely necessary to do so, as M. takes one-half of the only investment; but where there are several assets and the legatee is paid by the sale of some of them, it becomes necessary to take the market value of all, in order to give him his just share. The account has, therefore, been drawn on the principle which is applicable universally. CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. 79 Example (i) illustrating an Intestacy. Suppose the facts to have been as follows : X. dies intestate on 3oth June 1911, leaving a widow, a mother, and two brothers. His estate consists of : s d Cash in the House ... 10 o o Cash at the Bank ... 100 o o Due from Y. on Mortgage at 4 per cent. ... ... 1,000 o o ; 10,000 2^ per cent. Consols, valued at par ... 10,000 o o 10 Freehold Houses, valued at ... 10,000 o o ^10,000 Russian Government 4 per cent. Bonds, valued at par 10,000 o o He owes ^1,000, and the funeral costs .110. The first matter calling for attention, from an accountant's point of view, is the payment of the Estate Duty. An account will be rendered to Somerset House on Form No. A 3 some- what as follows : ACCOUNT No. i. * d Stocks or Funds of the United Kingdom ^10,000 Consols ... ... 10,000 o o Stocks, &c., of Foreign Countries ^10,000 Russian Government Bonds 10,000 o o Cash in the House 10 o o Cash at the Bankers 100 o o Money out on Mortgage 1,000 o o j2I,IIO O O 8o CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. SCHEDULE No. i. Parti. Debts due from the Deceased .1,000 o o Part 2. Funeral Expenses 110 o o ACCOUNT No. 5. Real Estate ... ... - ,10,000 o o It will be seen that the net value of the estate is : s d Personal ... 20,000 o o Real ... ... ... ... ... ... ... 10,000 o o Total ^"30,000 o o and the estate thus falls into the scale of ^20,000 to ^40,000, i.e., the duty is 6 per cent. After payment of duty it becomes : s d s d Personal Estate 20,000 o o Less Duty 6 per cent. ... 1,200 o o 18,800 o o Real Estate 10,000 o o Less Duty 6 per cent. ... 600 o o 9,400 o o Total ' ^28,200 o o We next come to the matter of the distribution of the estate. This is governed by the Statutes of Distribution (p. 27) as amended by the Intestates Act, 1890 (see post). This latter CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. 8 1 Act only applies where all the following circumstances exist, viz., that the deceased : (1) Died intestate; and (2) Died after ist September 1890; and (3) Left a widow ; and (4) Left no issue. By this Act the widow is first to have .500, and this 500 is to be charged rateably against the Real and Personal Estate, the value of the former being 20 years' purchase of the annual value for income-tax purposes ; and the latter, the value as determined for the purpose of Estate Duty, less debts and funeral and testamentary (sic) expenses. The Act of 1890 was passed at a time when there was not any Estate Duty- payable on Real Estate ; but presumably this would have to be taken into account now, and would form a deduction from the value of the Realty for this purpose. Deducting this, the Personal Estate becomes reduced to : s d 18,800 o o Less ths (or rds) of 500 333 o o 18,467 o o and the Real Estate to : ' s d 9,400 o o Less $$jths (or rd) of ^500 167 o o 82 CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. These balances have now to be distributed (subject to the payment of Legacy and Succession Duty) and fall as follows : Personal Estate s d s d Widow, one-half share 9*233 10 o Less Duty at i per cent.... ... 92 6 8 9>*4 l 3 4 Mother, one-third of remaining half share 3&77 16 8 Less Duty at i per cent. ... 30 15 6 3-> 47 i 2 Brother, Do. ... 3,077 16 8 Less Duty at 5 per cent. ... 153 17 8 2,923 19 o Brother, Do. ... 2,923 19 o 18,036 2 6 Duty ... 430 17 6 ,18,467 o o Real Estate * d s d \\ idow, a life interest in one-third worth (say) ... ... ... 2,000 o o Less Duty at i per cent. ... 20 o o 1,980 o o Eldest brother, the whole of the estate 9> 2 33 o o Less above amount 2,000 o o 7,233 o o Less Duty at 5 per cent. ... 361 13 o 6,871 7 o 8,851 7 o Duty ... ... ... 381 13 o ^9,233 o o Since the Land Traiisfrr Act. 1897, the whole of the Real and Personal Estate passes to the legal personal representa- tive in this case to the widow, as administratrix. With CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. 83 respect to the Real Estate, it is a matter for a solicitor to arrange the transfer to the proper party ; presumably, it will be transferred to him subject to a charge for the widow's .167, and her life interest. The duty upon it may be paid in one sum or by instalments. With respect to the Personal Estate, however, a portion would have to be sold for immediate payment of duties, and supposing, for the sake of simplicity, that the assets realised the valuations, the following account would be rendered to the beneficiaries : Dr. Ax ACCOUNT OF THE ESTATE OF THE LATE MR. X. Cr. Payments To Debts due at the death Funeral Expenses . . Estate Duty . . Balance To Widow, proportion of Balance To Widow, $ share 9,233 Less Duty at i% 92 s d .. I,OOO O no o o .. I,2OO O ..18,800 o o Receipts By Cash in the House Cash at the Bank Mortgage due at the death Stocks of the United Kingdom Stocks of Foreign Countries By Balance I 10 IOO 1,000 10,000 10,000 s d O o o o o O O 21,110 o o 500 333 o o ..18,467 o o 21,110 ' 18,800 By Balance 18,800 o o 10 6 8 18,800 18,467 - Mother rd of $ share .. .. 3,077 Less Duty at i% 30 Brother Jrd of \ share . . . . 3,077 Less Duty at 5% 153 9> I 4 I 3 4 16 8 15 6 3,047 I 2 16 8 17 8 Brother ^rd of J share, less Duty 2,923 19 o Duty.. 18,036 2 6 .. -430 17 6 18,467 o o 16,467 O G 2 84 CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. If we now examine the accounts we shall see what principles have been involved in the working out of the example : (a) The Estate Duty. \Ye notice that the entire net estate has been aggregated "(p- 37) a d duty paid thereon according to the graduated scale laid down in the Act. It is important to know this scale, as the rate of duty varies from i per cent, if the estate does not exceed .500, up to 15 per cent, if it exceeds 1,000,000. It must further be observed that the duty is payable out of the estate without regard to who are the persons beneficially entitled. (b) The Distribution of the Estate. The Real Estate descends in a different manner from the Personal Estate. As accountants, we are scarcely expected to know more than the elementary fact that the Real Estate descends to the eldest son, but for the purpose of our example we are compelled to take a deceased who had not left issue, otherwise the Intestates Act would not have applied. The widow, it will be seen, takes ^500 first, and it is important to notice how this is borne as between the real and personal representatives. Turning to the Personal Estate we see that after this .500 the widow takes one-half, and we may establish a universal rule as to the widow's share, viz., that it is always : If there be issue, one-third. If t! lie, .500 and half the balance. CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. 85 In the former case the remaining two-thirds goes to the issue equally per stirpes, and in the latter case the remaining half goes to the next-of-kin, according to their relationship to the deceased. It may be remarked that though a mother shares with brothers and sisters, a father would take the whole one-half to the exclusion of brothers and sisters. (c) The Legacy and Succession Duty. The principal point to notice here is that this duty varies according to the relationship which the beneficiary bears to the deceased, and is borne by each beneficiary accordingly. This (the Legacy Duty table) is another important thing for students to learn. It will be noticed that the widow and mother pay i per cent., the brothers, &c., pay 5 per cent., strangers in blood and others paying 10 per cent, (see p. 52). 86 CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. Example (2) Illustrating an Intestacy. Jno. Smith died intestate on 4th April 1911, leaving the following assets and liabilities : s d Cash 300 o o Furniture realised 1,400 o o Pictures, Jewels, &c. 500 o o Leasehold Property 200 o o Property in British Colony (net amount after payment of Estate Duty) ... 1,000 o o Capital in business ... 4,000 o o Investments ... ... ... ... 3>5O Debts owing by the deceased ... ... ... 150 o o The funeral expenses amounted to ^50, and the expenses of administration to .125. The deceased left a widow and one brother ; the latter administered the estate. The duties payable in the British Colony are at the same rate as in this country. Prepare Estate Account, and show distribution of the estate. It first becomes necessary to ascertain the amount of estate duty payable (485), which is obtained as follows (following (say) Account A 3) : ACCOUNT No. i. (Say) Stocks, &c., of the United Kingdom s d Investments 35 Cash in the house 300 o o Household Goods, &c. (^1,400 and ,500) 1,000 o o Deceased's share in Real and Personal Property as a partner in the Firm of 4,000 o o Leasehold Property 200 o o ,0,000 o o CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. 87 SCHEDULE Xo. i. PART I. An Account of the DC bis tvciug from the deceased. Sundry persons for goods purchased, &c I 5 PART 2. Funeral Expenses of the deceased. Messrs Funeral Furnishers ... 50 o o Total of Parts i and 2 ^200 o o ACCOUNT Xo. 2. Personal Property situate abroad which is not saleable or transferable in the United Kingdom. Sundry property, specifying it ... ,1,000 o o SUMMARY OF AFFIDAVIT. Table for determining Rate of Duty. Table for determining Amount of Estate Duty and Interest. Account No. i, net .. .. 9,700 o o Estate Duty on net Personal 2 .. .. 1,000 o o Estate at 5 per cent 535 o o Deduct Duty payable in British 10,700 o o possession, 5 per cent, on The appropriate rate of Duty is 5 per cent. Net Duty . . . . 485 o o Add 3 per cent, per annum interest from date of death to date ot delivery of affidavit Total Duty and Interest . . * This figure is dependent upon certain reciprocal arrangements with the Colony in question. An account for payment of legacy duty on the residue would then have to be furnished on Form No. 3 : Cash in the house ... 300 Furniture, Plate, Linen, c. ... 1,900 o o Investments, say Consols ... 3>5 Property in British Colony ... 1,000 o o Capital in Business 4,000 o o Leasehold Property 200 o o Total of Property ^.'10,900 o o 88 CHAPTER VI. EXAMPLE ILLUSTRATING AN INTESTACY. Payments. Probate 485 o Funeral Expenses 50 o o Expenses attending Executorship (say) 225 o o Debts on simple contract due at the 150 o o death Net Residue Deduct any portion of the Residue not liable to Duty, &c., viz. Widow 500 o o and balance of 9,490 ... 4,745 o o 910 o o 9,990 o o 5> 2 45 Residue on which Duty is chargeable ^4,745 The F, state Account furnished to the beneficiaries would be : An Account of the Estate of the late A. B. from 4th April 1911 (the date Dr. of his death) to Cr. s d 50 q o 150 o o 485 o o To Funeral Expenses . . . Debts due at death . . Estate Duty .. Expenses of Administration 225 o o Amount due to Widow as per Intestates' Estates Act, 1890, A. li. having died in- testate without issue . . 500 o o Balance Widow $ share. . .. 4,745 Brother i do. 4.745 Ltis Duty 5 % 237 4,508 Legacy Duty .. .. 237 9.490 o o 10,900 o o s By Cash in the house. . . 300 o Furniture .. .. . 1,400 o Pictures, Jewels, &c. . 500 o Leasehold Property . 200 o Property in British Colony 1,000 o Capital in business . 4,000 o Investments . . . 3,500 o 10,900 o o CHAPTER VI. EXAMPLE ILLUSTRATING AX INTESTACY. 89 Notes on the \\orking. In calculating the duty payable, the duty payable in the colony is to be deducted from the duty on the total estate (p. 43). " Capital in business " is evidently in a partnership, or the assets and liabilities would be put under their respective heads instead of the balance appearing as " capital." As to the ^500 due to widow, see the Intestates' Estates Act (P- 27). It will be noticed that the widow does not pay Legacy Duty, as the Estate is less than ,15,000 (p. 51). 90 CHAPTER VI. EXAMPLE ILLUSTRATING THE PRINCIPLE OF APPORTIONMENT. Example illustrating the principle of Apportionment. John Gay died 28th February 1911. His property com- prised : (1) A private freehold residence, let on lease at ^150 a year, payable half-yearly on 28th May and 28th November. (2) Loan on mortgage of ,7,300 at 4 per cent, per annum, interest payable half-yearly 23rd February and 23rd August. (3) Fifty ;ioo shares in the White House Mine Company, Lim., which declared a dividend, payable on the ist June 1911, of 6 per share, free of income tax, for the year ended 3ist March 1911. Open Ledger Accounts for each of the above and also a Capital and an Income Account, and show how the following transactions should be dealt with in those accounts : (1) Interest on mortgage due 23rd February, received 3oth March. (2) Rent due 28th May, received 30th May. (3) Dividend received ist June. (4) Interest on mortgage becoming din- 231-4 1 August. CHAPTER VI. EXAMPLE ILLUSTRATING THE PRINCIPLE pi OF APPORTIONMENT. 1911. Feb. 28 Sundries Dr. To Estate Account ... 7A%5 J o o Freehold House, valued for Estate Duty at Freehold House, quarter year's rent to 28th February 37 10 o A., Loan on Mortgage, for amount of Mortgage 7>3oo o o A., Loan on Mortgage, for half- year's Interest thereon to 23rd February ... ... ... ... 146 o o A., Loan on Mortgage, for 5 days' Interest theron to 28th Febru- ary (say) 200 White House Mine Co., Lim., value for Estate Duty of 50 Shares Mar. 30 Cash ... ... ... ... Dr. 146 o o To A., Loan on Mortgage... 146 o o Interest on Mortgage to 23rd Feb. May 28 Freehold House Dr. 37 10 o To Income Account ... 37 10 o Quarter year's rent to date. May 30 Cash Dr. 75 o o To Freehold House ... 75 o o Half-year's rent to 28th May. June i White House Mine Co., Lim Dr. 300 o o To Sundries : Estate Account, n months' divi- dend to 28th February 275 o o Income Account, i month's divi- dend to 3ist March 25 o o 92 CHAPTER VI. EXAMPLE ILLUSTRATING THE PRINCIPLE OF APPORTIONMENT. June i Cash Dr. 300 o o To White House Mine Co., Lim 300 o o 12 months' dividend to 3ist March. Aug. 23 A., Loan on Mortgage ... Dr. 144 o o To Income Account ... 144 o o Interest from 28th Feb. to 23rd Aug. Dr. ESTATE ACCOUNT. Cr. 19" s d 191 Aug. 22 To Amount carried Feb. 28 By Freehold Hpuse, down . . . . 7,760 10 o 7,760 10 o rent due at death 37 10 o A., Loanonm'tgage 7,300 o o Do. do. 146 o o Do. do. 200 June i White House Mine Co., Lim 275 o o 7,760 10 o Aug. 23 By Amount brought down 7,760 10 o Dr. FREEHOLD HOUSE. Cr. Income Capital s d s d 1911 Feb. 28 To Value for Estate Duty * Estate A/c . . 37 10 o May 28 Income A/c 37 10 o 1911 May 30 By Cash Income Capital s d s d 75 o o Dr. A. LOAN ON MORTGAGE. Cr. 1911 ?eb. 28 Aug. 23 To Estate A/c Do. Income Capital s d s d 146 o o 7,300 o o Do. 200 . Income A/c 144 o o 1911 March 30 By Cash Income Capital s d s d 146 o o CHAPTER VI. EXAMPLE ILLUSTRATING THK PRINCIPLE 93 OF APPORTIONMENT. Dr. CASH ACCOUNT. Cr. 1911 s d Mar. 30 To A., Loan on Mortgage, Interest . . . . 146 o o May 30 Freehold House, Rent 75 o o June i ,, White House Mine Co., Dividend ..300 o o 521 o o Aug 23 To Amount brought down 521 o o 1911 s d Aug. 23 By Amount carried down 521 o o Dr. INCOME ACCOUNT. 521 o o Cr. ign s d Aug. 23 To Amount carried down 206 10 o 206 10 o 1911 s d May 28 By Freehold House . . 37 10 o June i White House Mine Co 25 o o Aug.23 A., Loan on Mortgage 144 o o 206 10 o Aug. 23 By Amount brought down 206 10 o Dr. WHITE HOUSE MINE COMPANY, LIM. Cr. Income Capital 19" s d s d Feb. 28 To Value for Estate Duty of 50 Shares June i Estate A/c . . 275 o o Income A/c . . 25 o o 1911 June i By Cash .. Income Capital s d s d 300 o o BALANCE SHEET, 23rd August 1911. Residue and Trust Fund* s d Amount of Estate realised, per Estate Account 7,760 10 o Income Account . . . 206 10 o 7,967 o o A ssets sd sd A., Loan on Mortgage 7,300 o o Interest thereon 146 o o 7.446 o o Cash in hand 52100 Unrealised Estate at Value for Estate Duty : Freehold House White House Mine Shares . . 7,967 o o 94 CHAPTER VI. EXAMPLE ILLUSTRATING THE PRINCIPLE OF APPORTIONMENT. Notes on the Working. The items have been all journalised for the purpose of setting them out clearly and neatly. In executorship practice this is most unusual, it being considered desirable to have full particulars in each account in the Ledger. The appor- tioned mortgage interest has been estimated, and no notice has been taken of income tax, as, in view of time allowed for working the papers, such details can scarcely be expected to be worked out. CHAPTER VI. EXAMPLE ILLUSTRATING A PROFIT ON 95 CAPITAL ACCOUNT. Example illustrating a Profit on Capital Account. The Balance Sheet of the estate of B. X., deceased, on 3oth June 1911 was as follows : Capital Income Account, Balance ,50,000 IOO 50,100 33>333 of 2^ per cent. Consols . . 27,000 Freehold Property 3,000 20,000 3 per cent, of Corporation Stock at par 20,000 Mrs. B.X., Income 100 50,100 The trustees on the 3ist July sold Consols at 85 per cent, to produce ^4,006 45., of which 6 AS. was for payment of broker's commission and expenses, and the ,4,000 for an advance to H. R. M. at 4 per cent, on mortgage. Set out and show the accounts affected by these transac- tions, and make the entries required for recording them by transfer from one account to another, without the intervention of a Transfer Journal. We must first ascertain the nominal amount of the Consols sold, which is (say) ^4,700. The accounts which would be affected are : (i) 2^ PER CENT. CONSOLS. 1911 s d June 30 To Balance, 33,333 Stock at 81 per cent. . .27,000 o o July 31 Profit on realisation of 4,700 Stock- Realised . . 4,000 o c Costat8i% 3,80700 193 o o July 31 To Balance . . 1911 s d July 31 By Cash, proceeds of 4, 700 Stk. 4,006 4 o Less Com. 640 4,000 o o Balance, 28,633 Stk. at cost .. .. 23,193 o o 27,193 o o 96 CHAPTER VI. EXAMPLE ILLUSTRATING A PROFIT ON CAPITAL ACCOUNT. (2) ESTATE ACCOUNT. 1911 s d June 30 By Balance . . 50,000 o o July 31 Consols, profit on realisation 193 o o 50,193 o o Note on the Working. It will be observed that the brokerage on the sale of the Consols is to be deducted from the gross amount realised, and that the balance of Consols held is to be carried down at the original price, and the difference is an increase or decrease of capital. CHAPTER VI. EXAMPLE ILLUSTRATING CASE OF 97 ADVANCES DURING LIFETIME OF TESTATOR. J:\iun pic illustrating a case wJiere there have been payments to beneficiaries for advancement during the lifetime of the testator. Edward Harrison by his will bequeathed his residuary estate for the benefit of his three children in the following proportions, viz., | to A., f to B., and f to C. ; but directed that the advances made in his lifetime of ^18,000 to A., 1 2,000 to B., and ^9,000 to C., should be brought into account and taken as part of their shares payable to them, and also directed that one- ha If of the whole share of each child should be invested in trust. The residuary estate amounted to ^240,000. What are the sums payable to each child, and what sums are to be invested? This is largely a question of arithmetic, but there is one very important point in it. The amount to divide is not ^240,000, but the advances must be added to the ,240,000 and the total must be divided thus : Residue 240,000 Advance to A 18,000 B 12,000 C 9><*> C. 62,000 279,000 i 24,000 279,000 98 CHAPTER VI. THE ACTUAL WORKING OF A QUESTION. The estate would then be disposed of as follows : To be To be paid Invested. in Casb. A. 's share 124,000 Less Advance ... 18,000 106,000 ,62,000 44,000 B.'s share 93,000 Less Advance ... 12,000 81,000 46,500 34,500 C.'s share ... ... 62,000 Less Advance ... 9,000 53,000 31,000 22,000 240,000 i39>5 100,500 It was held in Re Gilbert (1908), following Re Har greaves, that interest on advances was not to be taken into account till the date of death. The usual rate is 3 per cent. The Actual forking of a Question. I have no doubt that one difficulty which presents itself to candidates is as to the exact manner in which an account question should be dealt with at the examination, and with the hope of giving some assistance on this point I will take, as an example, the following question asked at the Institute Examina- tion in June 1911 : John Smith died 3oth June 1910 possessed of the following estate : Valued for Probate. Cash at bank ... ... ... ,10,000 o o Cash in house ... ... ... ... ... 523 15 2 20,000 2^ per cent. Consols at 80 (ex div.) 16,000 o o Leasehold house 2,000 o o Household furniture and effects 750 o o Other investments (cum div.) ... ... 116,000 o o The debts at death were 5,310. CHAPTER VI. THE ACTUAL WORKING OF A QUESTION. 99 By his will, dated ist June 1909, John Smith left his estate as follows : (a) ^500 each (free of duty) to his executors (A., a stranger in blood, and B., his eldest son). (b) 1,000 annuity to his sister C. (free of duty), payable quarterly, first payment to be made three months after date of death. (c) The residue of his estate in equal shares to his three sons, B., D., and E. (children of a deceased son to take -per stir-pes], with the stipulation that the sum of ^'5,000 advanced to his son D. on ist May 1909 must be brought into " hotchpot." Son. E. died ist January 1910, leaving two children, F. and G. The executors proved the will, and on 3oth September 1910 paid the estate duty. On ist October the Consols were sold at 81, and the household furniture was sold for ~oo. The dividends (less income-tax) on the Consols, due 5th July and 5th October, were duly received and banked. By 3ist December 1910 the executors had made the following payments : Funeral expenses, ^75 ; tombstone, ^'25 ; debts due at death, ^5,310; executorship expenses (including first instalment of duty payable on C.'s annuity), ^720; executors' legacies and duties thereon, and two quarterly payments of annuity (less income-tax). In the meantime, ^'2,040 had been received as interests and dividends on "other investments," of which ^1,000 had accrued due at the date of death. Write up the executors' Cash Bock, prepare the following accounts : Estate Account on 3 ist December 1910 ; Income Account for six months ended 3ist December 1910; Balance Sheet on 3ist December 1910; H 2 TOO CHAPTER VI. THE ACTUAL WORKING OF A QUESTION. and give a statement showing the amount due to each of the residuary legatees, assuming that the annuitant died on ist January 1911, the leasehold and investments realised the amounts stated, and there were no further receipts or expenses except the necessary legacy duties. Following the usual practice, we turn to the end of the question first to see what we have to do. We find there is a Cash Account to prepare, but, running our eye over the figures given, we see that there is not any figure stated for duty, so we must first ascertain this. As we are not asked to give the affidavit any rough method of ascertaining the duty will answer, but by all means put the paper in with your answers to show how you get your figure, in order that, if it does not agree with the examiner's, he may see in a moment what the difference is, whether a clerical error or one of principle. Our rough note might then read : Total per print i45> 2 73 '5 2 (Being ranged, the figures can be added on the question sheet without taking the time to re- write them.) Add Consols div., as they are ex div j 12 5 Tax 7 5 10 117 14 2 (There being only one dividend, make the amount exact. If there were a number you might save time by putting them gross, with a note to that effect.) 145,391 9 4 Deduct Debts /5>3'o o o Funeral txpui^s ... 75 o o 5>3 8 5 o o ^140,006 9 4 Duty 9 per cent. ,12,600 11 8 Three months' interest at 3 per cent ^94 10 i CHAPTER VI. THE ACTUAL WORKING OF A QUESTION. 1OI The next thing is to carefully read the whole question, and note the information /// the most com-cnicut place. Thus the sale of Consols and furniture may be noted against the schedule of assets; the date that legacies. &-.. were paid may be noted against the items (a) and (/>) ; the dividend on "other invest- ments" against the ; IT 6,000; the fact that leasehold invest- ments realised the amount stated (presumably on December 31). At the same time, the pen should be put through the items which have been noted, so as to avoid re-reading them. The informa- tion is thus in a concrete form to work at, and, taking the figures from the commencement of the question, we may construct the Cash Account. 102 CHAPTER VI. THE ACTUAL WORKING OF A QUESTION, O C O O O 0000 ~ :/. O C O C 0000 O ? ^^l, 10 ! " S s^> * ~ * 5 tx 2 0000 s$ ..-Jjj i "c? ,i| : e :: j %- s 1^ - (3 4 S S(2 2, oft &g >, 3 3 "8 i 11 2 f 1 111 4) .S ^- I J I I u J O *J ."ti *i rt bo 111 1 3 is. -si 'H ^ a ill 8 E. = lit 2 si 113 rup S.S.Z CHAPTER VI. THE ACTUAL WORKING OF A QUESTION. 103 I do not attach great weight to order of date. It seems to me more important to take an investment at date of death, and follow it till sale, seeing that all dividends due have been accounted for. Moreover, it would be a heavy task, if there were several investments, to get the income in exact order of date. The Income Account and Estate Account may now be easily posted up, and (to save writing) might appear : INCOME ACCOUNT. igio Dec. 31 To Total per C. B. . . Estate Account transfer . . : s 6 d 9 5 igiO Dec. 31 By Total as per C. B. 1,164 s d 4 2 ,164 4 2 ^ 1,164 4 2 _l^^ 1O4 CHAPTER VI. THE ACTUAL WORKING OF A QUESTION. Tfl 8 2 * I o 5? ? : : PO OO 00 s s> (2 - CHAPTER VI. EXAMPLE ILLUSTRATING M ALLHUSEN 105 V. WHITTELL." Example illustrating the -principle laid down in " All/iusen v. Whittell" (1867), viz., that debts, funeral expenses, testamentary expenses, and immediate legacies are payable rateablv out of capital and the first year's income. Assume an estate as follows : A. dies ist January 1909, leaving an estate consisting of ^'5,000 Spanish Government 4 per cent. Bonds @ 90 ,4,500 5,000 Turkish ,, 4 ,, ,, ,, 104 5,200 5,000 B. Brewery Company, Lim., 5 per cent. Debentures ,, 100 5,000 the income being left to the widow for life with remainder to son. The widow dies 3oth June 1911. The Cash Account may be taken to be : 106 CHAPTER VI. -- EXAMPLE ILLUSTRATING " ALLHUSEN V. WHITTELL. TJOOOOOOOOO e/lOOOOOOOOO 8882 ~ Funeral Expenses Debts ..... Estate Duty, &c. 4,000 Consols, cost . Legacies ..... M. Loan on Mortgage N. Do. do. . Widow, on Account . Do. do. . EC * M *~ S *_~ 2 ~ ff- -^o ' c 2 N - : T30000000000 0000 000 00 O 00 O O O cflOOOOOOOOOO 0000 000 00 O 00 O u-> u-> u-> m u-> ir> n OO O 5 5 C |:::::.::: ,:: ::: :::::: . li : 3 : ; :::: ::: :: : :: : : 3- :%~ :g~ -. : ; : : : : : : : : : : : : : 1:|I:|I:|: :::::::::::: i&f&ii&i 4444 444 |- 4 |- 4 x u 2 ! i r I i i *-\A& ' " h OQ u g-- its o o ALLHUSEN 107 -50000 00 ! ^3 ^3 (3 - : : :% : || ^ '. '1 h Government an Governmen wery Co., Lim. nds due at the "5 a, -"" u w to rt 3 m S 1 ll rt rt o P 1 ' S < H 5 Jj-g .uo - g 3 2 c ^ c/}WfflQ 1 7, . m * * * 8 OH w * 'c 8*6 3 o o O i. o 5 1 ^0000 to 0^0 II rt w II S w <^j O O O O 10 "& 8 " u - 5|| : : : : I ; _S * * S *S i <*3 4) .1 1 o o : 1 ::! tuo ^ | : : : j|| 1 - ^ o *3 .3 h - -l!j8> 7 c (jQ WJ c^ z s K a a M o CO ^ 8,. " '> M (U M ^ z M 3 *$ .2 ^ sc . WM " s O o (A O I08 CHAPTER VI. EXAMPLE ILLUSTRATING " ALLHUSEN V. WH1TTELL." -300 in O O *>s,a \ 1-s' T> O in O 73 O O en o o ^88 15 2 j= eu o o o o 1 a o S> O o o o 000 000 000 odd odd *~~ ~ -- -1 1 - CHAPTER VI. EXAMPLE ILLUSTRATING " ALLHUSEN 109 V. WHITTELL." c o w. ^ Q % V.' in (J ^ 1 I 5j C8 -+J ^00 O II S " 'rt t/i s* o3 ^ Sol en ri a E .<= eu 1 4 5 CJ H < 14* K CQ r * -v (H IH o r"* H M M H /H c^ M O ^ M ^ ^ ao <0 O S ^1 1^1 O u *c o K O T3 K en w < en o H i 3 v^.8 W lO IT) 1 ^< o^ n m 1 N ca C 00 S3 "CO II O 1 X O O ^ _ ^fj 'X JZ 1 <-' I) ll : : : : r c ^ c SJ ^ 3 = tn"" g 13 r^^ ^ . < ^ Iti ^ 5 CQ w O ^^ . i *-"(-) l- ft ft O * M M .. Ot rt* ^ M rt* o\ C % M sz-s f. o M !3 D fc -3 Q * T3 fc * ^ 1. -? Si 521 T3 W 0_ Cash Income Account So 6 -3 , s . * * i s" s 5 ^ g- " 2 " S I"I - a o ^tj 2* | < S 1 ^ 1 M 1 II ^ II 13 00 en 00 :::::: : ~ S> ..a a c o s, : i : * .I a a r^owCoCO 2 e tr o : 1 8 1 8 a B? 1 s ~ ,jgj=j oj^gcoco o > c 8 a C o^o ^BoB -S Q ^? fll'il 1 . 1 1 "i 1 ^ l^r l-HCQuI^ ^ | Js" a * a 6 s n a * B H M t s a t M s ^ ^ 3 ? 8^ . M % ^ ^ M^ fll M* C3 s Q Q ^ H T3 000 00 8 o rt ^ 1 1 M *c " 1 " ! 10 5" 1 o o > | v: H H * o o ^ 8^^ g 1 ^ * ?8 2^ &s Is Q Q > 112 CHAPTER VI. EXAMPLE ILLUSTRATING " ALLHUSEN V. WHITTELL.' -5 O O O O O & o o o o o :I1 'l . C *< 'M I T3 O O a: O O 1 .; n 3 V. WHITTELL." In Cover on ' ' Capital and Income " it is stated that this case of Allhusen v. Whittell is founded on decisions in Amphlett v. Parke (1827) and Holgate v. Jennings (1857), and has been held to apply although all the debts, expenses, and legacies were actually paid within the year, and the year's income greatly exceeded 5 per cent, on the Capital : Lambert v. Lambert (1874). It is further stated that the rule is incon- sistent with that in Caldecott v. Caldecott (1842), and that as there is often considerable difficulty in applying it, it is not always followed. It will be noticed that unless the debts or legacies are pro- portionately very heavy the proportion thereof payable out of income can only be very small. 114 CHAPTER VI. EXAMPLE ILLUSTRATING Example illustrating the principle laid down in " Re Moore " (1885). In this case ^8,000 had been invested on mortgage. The interest fell into arrear and the property only realised ,7,900, the arrears of interest being ,536. It was held that the fund must be apportioned between the tenant- for -life and, remainderman in the proportion which the arrears of interest bore to the original principal sum. CHAPTER VI. -- EXAMPLE ILLUSTRATING " RE MOORE. 11$ 73 1 O T3 o *! oo oo" tc lx ocT S< Q m : O 00 , : i S? ^ ^ 3- 1 c? dc 1-1 ' *j ! ' 1 1 -3 ^J * . . *- ' CXQ & O ^ ^ o ^ > rt tx^J *C " "S ' * ***+<* * pn O -, n >-> ^ 5 g T3 tfj i K < T3 U) ^ 5 tx 85, ocT oo" ; .0 . ;; s."|" 1 i : c tj ll s- : gjjS fl u *J -!- QJ o c ^^^ y ill g. e" I 2 Il6 CHAPTER VI. EXAMPLE ILLUSTRATING " RE MOORE.' coo o II en II Ix ao" || o e > c 5 j *-^ o u 1 $ ci t ^. :of 7,505 : 1 1 : 1 * 13 m *3 < 3 S tt ( 3 ? n 4 ^ ToCash . Balance CHAPTER VI. EXAMPLE ILLUSTRATING RE FOSTER. 121 The amount due to the life-tenant out of the 7,005 in this case, under the ruling in Re Atkinson, as follows, would be S4 of 7,005 or 2,180 in addition to which she 34^ ' YJOJ would have had 500. 122 CHAPTER VI. EXAMPLE ILLUSTRATING "RE ATKINSON." Example illustrating the principle laid down by the Court of Appeal in " Re Atkinson; Barbers' Company v. Grose-Smith " (1904). The testator died in 1861, leaving his estate to A. for life with residue to B. In 1864 part of the estate (29,000) was invested on mortgage. In January 1889 the interest began to fall into arrear, and in May 1889 the trustees entered into possession. The rents did not equal the interest. In 1898 part of the property was sold for 4,600. At the date of the action there was 22,000 due for capital and ,9,000 for arrears of interest, and the application was to determine how the 4.600 should be divided. Kekewich, J., directed it to be apportioned between capital and income in the proportion which the amount of interest in arrear bore to the principal due following his former decision in Re Alston (1901). This decision was affirmed by the Court of Appeal. CHAPTER VI. EXAMPLE II. I.I > I RATING "RE ATKINSON." 123 3 o T3 00 o en n o 'in ^ t m c vo t *2 "3 I M M M 0~ 1J.I ^||fc:: 2|Sg w 8g-S J s en ^ ^" >5 M 0\ <" ' *T S. ' * li|H IJll!:: S s | J gjj "o <"" oj 1 1 CJG QH 5 1 "" W"^(S >-. CQ fi o C CQ s a * s s s - 00 H 00 oo eg 1 oT M Jg M T3 00 o TJ [T 00 o K ^ O 8 <3 5^5 to w eT s J & I 5 T3 -d o en in o Si O 1 6" o 10" 1=1 : |g<3. . . "ocf * <|^ ^ SJ jj| ; 1 en "*^c '. OJ 3 C O^o gaff* 5^^ ".s s c o^^c S J -S J a ^^as^^ g 3|l^l 1 o o o H h s H 2 S S g 124 CHAPTER VI. EXAMPLE ILLUSTRATING " RE ATKINSON. O O m o o o M~ O o o o i T3 O O in O O ii O 00 O C O II lllill j J < CHAPTER VI. EXAMPLE ILLUSTRATING ATKINSON." RE 125 o I in o o ll o ** s gig w * M i 1 O M <-rt 0. jn T *? 1 ' " . 8 | | : ll 5 %%'* * M 21 2 S I *| i. a Balance . . >, PQ >, 1 1 T3 tfi <+? IS t^ M M s tJ 'c5 : : D< >i 1 O s Ol s 7 Q 1 si rt rt OP3 1 126 CHAPTER VI. EXAMPLE ILLUSTRATING " RE A similar apportionment on a final sale would close the Interest Suspense Account, by writing off the amount irrecover- able and similarly close the Loan on Mortgage Account, leaving a credit to Estate Account and Life Tenant, and a debit to Cash (or investments). In commenting on this case in an article 24th December 1904, The Law Times suggested that it did not appear that any distinction had been drawn between rents and interest. They thought that there was a difference j that interest paid to him might fairly be retained by a mortgagor, as it could hardly be said to be part of the security, but that rents are part of the security. They are doubtful whether the life-tenant should not have been ordered to bring into account rents received. The Court, however, decided that he should not, approving Re Moore and overruling Re Foster. CHAPTER VI. EXAMPLE ILLUSTRATING HOWE V. 127 LORD DARTMOUTH." Example illustrating the rule in " Howe v. Lord Dartmouth " (1802), viz., that where a testator bequeaths his personal estate, or tJie residue thereof, to several -persons in succession, and the subject of the bequest is of a wasting or reversionary nature, it must be considered as converted into Consols. Put more fully, the rule was thus described by Baggallay, L.J., in Macdonald v. Irvine (1878) : " Where there is a residuary bequest of personal estate to " be enjoyed by several persons in succession, a Court of " Equity, in the absence of any evidence of a contrary inten- " tion, will assume that it was the intention of the testator " that his legatees should enjoy the same thing in succession, " and as the only means of giving effect to such intention, will " direct the conversion into permanent investments of a " recognised character of all such parts of the estate as are " of a wasting or reversionary character, and also such other " existing investments as are not of the recognised character, " and are consequently deemed to be more or less hazardous." The principle of the rule in Howe v. Lord Dartmouth was carried a little further in Dimes v. Scott (1828) and Brown v. Gallatly (1867). These decisions were to the effect that where unauthorised investments (not necessarily either wasting or reversionary) were improperly retained the life-tenant was entitled as from the date of the death to an income equal to the dividend on Consols, which would have been produced by conversion of the unauthorised investment one year after the death and reinvestment of the proceeds in Consols. Assume a testator, who died ist January 1904, to leave (inter alia) ^5,000 5 per cent. Debenture stock of the X. Y. Z. Brewery Company, Lim. Value for Probate par. Value ist January 1905, 99 per cent. Value of Consols ist January 1905, 90 per cent. 128 CHAPTER VI. EXAMPLE ILLUSTRATING " HOWE V. LORD DARTMOUTH." C 000 I! T3 en ooo o II tn ' S fits prt o "sfj Cu ^ w s S 06 > 6 ^ - QQ X Q< H] ^ CQ * PQ l | co co * J^ | ILgd M tr O M . M .2? ^ U X 00 en C U O ^ J 8 PQ 10 N T3 0000 C >< < tx tx co CO 1 ^*- J^ C tfy l/l ^*- O C^ C 1*1*1 Hl^I o |sj o| ll 1 hi M s i' b - 5, w CHAPTER VI. EXAMPLE ILLUSTRATING " HOWE V. 129 LORD DARTMOUTH." In Hum, v. Richardson (1862) the value \vas takni as at the date of the death, instead of one year from the death. T3 O 00 J-. O 00 M HI CO Jo ~a"c -3 00 r. 00 o o * & & 1 in ! 6 $ E-l O i 2^5; Q c o (A. O 130 CHAPTER VI. EXAMPLE ILLUSTRATING " HOWE V. LORD DARTMOUTH." It must be understood that the life-tenant is entitled to the interest on the investments representing the accumulations of income. CHAPTER VI. " HOWE V. LORD DARTMOUTH," &C. 131 GENERAL NOTES. Consols are still taken as the standard, notwithstanding the increased range of authorised securities (Re Duckworth, 1891). As to the result where a testator leaves non-trustee invest- ments to one for life, with remainder to others, it is clear, as stated in Re C hay tor ; C hay tor v. Horn (1905), that a power to 'postpone conversion is not sufficient to give the tenant-for-life the whole of the interest earned (whether the property is of a wasting character or not). The difference between the various cases seems to be that if the non-trustee investments are retained under -poiccr in the will the life-tenant is entitled to 3 per cent, (formerly 4 per cent.) interest, but if retained without power he is only entitled to interest on Consols. In Chaytor v. Horn it was considered that Bulkeley v. Stephens (1864) was inconsistent with other authorities, and it was accordingly not followed. In Re Bates; Hodgson v. Bates (1907) there was a mere -power to retain non-trustee investments. Kekewich, J., said this was a new point. In all other cases there had been some- thing else. (Here the power was by a codicil.) In Re Sheldon, North. J., had given all the income to the life-tenant * Porter v. Baddeley (1877) was different, as there the securities were wasting. He held that the tenant-for-life was entitled to all the income. In Re Wilson/ Moore v. Wilson (1907) where the testator died leaving non-trustee investments with a power to continue * It is, however, considered that this case may now be disregarded. K 2 13^ CHAPTER VI. " HOWE V. LORD DARTMOUTH," &C. GENERAL NOTES. existing investments but no trust for conversion, the life-tenant was held by Swinfen-Eady, J., to be entitled to all the income. Re Clia vtor was distinguished, as in that case there was a trust for conversion. His Lordship considered the case was undis- tinguishable from In re Sheldon ; Nixon v. Sheldon (1888) and /// /v Hates ; Hodgson v. Bates. The point was again raised in Re Nicholson; Eade v. Nicholson (1909). There was power to retain and no trust for conversion. Warrington, J., held, following Gray v. Siggers and In re Bates, in preference to Porter v. Baddeley, that the life-tenant was entitled to the whole income. He said " it was " not possible to hold that the testator meant his estate to be " converted." He further stated that in Re Wilson counsel had referred to the fact that in Porter v. Baddeley the securities were wasting, and that Swinfen-Eady, J., had said, " Why " should there be any distinction between hazardous and " wasting securities on this point," and he (Warrington. J.) agreed with him. Applying to the case of Chaytor v. Horn the same figures as those where we have the investment in the X. Y. Z. Brewery ( 'ompany, Lim., the only difference would be that the life-tenant would have 3 per cent, on .4,950 (148) each year, and the balance (102) would be accumulated as capital. It was held in Re Pearce; Crutchley v. Wells (1909), that when an executor assents to a legacy the title of the legatee relates back to the death, and he takes the benefit of any profit, &c., in the meantime. CHAPTER VI. ARREARS OF CUMULATIVE PREFERENCE 133 DIVIDEND. Arrears of Dividend on Cumulative Preference Shares. A:\ interesting question arises as to the rights of the parties where arrears of dividend are paid on cumulative preference shai\s. Assume a testator to die 3ist December 1908, leaving preference shares with several years' arrears of dividend on them, and that the said arrears are paid off in 1910 out of the profits of 1909. Is the amount capital or income? The answer to the question turns on the Apportionment Act, 1870, Section 2 : From and after the passing of this Act, all rents, annuities, dividends, and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) shall, like interest on money lent, be considered as accruing from day to day, and shall be apportion - able in respect of time accordingly. And Section 5 : . . . and all such divisible revenue shall, for the purposes of this Act, be deemed to have accrued by equal daily increment during and within the period for or in respect of which the payment of the same revenue shall be declared or expressed to be made. . . . There was considerable correspondence on the point in The Accountant in 1908. The nearest case I have been able to trace is that of Re Taylor; Mat he son v. Taylor, heard by Buckley , J., in 1905. In that case bonds of the Mexican National Railroad Company were included in a settlement made in 1899. The 134 CHAPTER VI. ARREARS OF CUMULATIVE PREFERENCE DIVIDEND. income was to be to H. G. T. (who died 1902) for life, then for W. T. for life, with remainder to X. The bonds carried cumulative interest at 6 per cent., payable " as and when earned " out of any net earnings . . . and if in any year the 11 net earnings . . . shall not be sufficient . . . any " deficiency . . . shall be paid . . . as and when " there shall be any net earnings available. . . ." The interest was in arrear in 1899, and nothing was paid up to 1902, when the bonds were sold. The Court directed that the whole proceeds were capital. They said no fund was in existence out of which to pay the interest, consequently there could not be said to be any " arrears." Buckley, J., said :-- " It seems to me that there was no interest payable at all as income of a year in which there was no fund available for its payment. Suppose that in the year 1904 there was no fund available, and the tenant-for-life died on 3ist December 1904. There was no income, I apprehend, payable to that tenant for-life, because the obligation is to pay out of a fund, and there was no such fund. If in the year 1905 a fund came into existence, the interest calculated for the year 1904 would become payable, I agree, but it would be income of the year 1905, and not income of the year 1904; and if a second tenant-for-life were in enjoy- ment of the property for 1905, that tenant-for-life, and not the previous tenant-for-life's estate, would, it seems to me, take that interest. It all turns on this : There is no obligation in the instrument to pay interest, there is only an obligation to pay interest out cf a fund, and there is no obligation to pay unless there is such a fund." CHAPTER VI. ARREARS OF CUMULATIVE PREFERENCE 135 DIVIDEND. These words are, of course, only obiter dicta, and if one might argue on the basis of not being bound by the case, I suggest that the words (quoted) in Section 5 would give the dividends to the remainderman. In my experience the usual expression of the directors is that the dividend is for ' ' the years 1905 and 1906," or " for the 18 months up to 3oth June 1908," &c. It has been argued that directors could not declare- a dividend in 1910 (out of 1909 profits) " for the year 1906," because, since there were no profits in 1906, there was nothing legally due, and that five years' arrears of dividend is 25 per cent, for the current year. I must confess that, had I my choice, I would rather act as advocate for the view that the dividend had accrued in those back years, and that our case was to be distinguished from Re Taylor ; Matheson v. Taylor. The position thus appears to be clearly different from that of interest charged on property (e.g., mortgage), and payable apart from any question of whether there is profit or not. 136 CHAPTER VI. EXAMPLE ILLUSTRATING " RE CHESTERFIELD." Exam-pie illustrating the decision in " Re Chesterfield " (1883), as amended bv " Re Goodenough " (1895). Here it was held that, where a reversionary interest is retained under a power in the will, the amount realised by its conversion must be divided between capital and income on the following basis. So much of the amount is capital as would, if accumu- lated at compound interest at 3 per cent., produce the amount actually realised on the date of realisation. The balance is income. Assume a reversionary interest, valued at ist January 1907 at .500, but which unexpectedly falls in on 3ist December 1910, and realises ^1,125. The accounts would be as follow : CHAPTER VI. EXAMPLK 1 1 I I S rRATING " UK CHESTERFIELD." 137 -a o o o T5 || (A j a> o o || Q **& & 8 **? ?| c? Ci H 15 ~rt 1 > 42 1 * B *s I rt u M CO m" m | & l ^5 S T3 o boon w , a) o o o o 1 O O >o in II . 00- : II : : *" 8 1 li '. 1 o o M "^"rt "g j 3'JjE -v _2 ^2 rfl ^ >f^ t5? W W J H ^M 5, ! CTl -i S\t3 H a M s 4 Q 138 CHAPTER VI. EXAMPLE ILLUSTRATING " RE CHESTERFIELD." C cr. | I n g l| X H Q K CJ - c g ) ^ 2 t-t : 1 1 Ijj CHAPTER VI. ANNUITIES EXAMPLE ILLUSTRATING 139 " RE GRANT." I. x ample illustrating il Re Grant" (1883), where legacies aud diumitics ice re left icith residue to A. for life and remainder to h\ The estate was insufficient to pay the legacies and annuities, but if Government annuities had been purchased there would have been enough to pay the legacies and leave a small surplus. It was held that the tenant-for-life was not entitled to have tin- i -state so administered. The income must be applied so far as possible to pay the annuities, and then the capital must be resorted to-year by year. (It was morally certain that the capital would last long enough.) The result was that the life- tenant got nothing. It would thus not be needful to have both a Capital and an Income Account in such a case. We should simply have 140 CHAPTER VI. ANNUITIES EXAMPLE ILLUSTRATING " RE GRANT." -so co o "=00 - X 00 at J5 <-> I 5 3- I I ^i ^3 - o ** VM : 1: : !& S i2 * ll ^ T s = I I I "c ^ tti -s 1 ,5,5 o . v 5; u . o D I if * 1 ll 03 Cjffl P '- ffl* * a" " a a s * H M * M - 1-1 JS P 8* 2 ^^ H ' " - 2 z * O 1 H H H -I -I "1 INVESTMEN ^ u c\ c o> ^ - CO *-* fl3 O O 00 tfi CO o o II I -coo oo IT. 00 :| w *M i i -1 III ^ - y i i r i 1 : 1 . ' 5 r i - - .=5 4) >s | i -g f'"= 6 3 ! | 8 = u . u g| oj 8 1 Is 5 1 o U . .". S ,2. .. o- '-" ' fr" _~ o- - ' *s N 5 4 *l "4 "4 CHAPTER VI. ANNUITIES. 14! and SD un from year to year the capital gradually diminishing. In Re Dais so ii ; Arathoon v. Dawson (1906), a testator died owing an annuity to A. He left his estate to B. for life with remainder to C. The Judge directed the life interest and the reversion to be valued, and each payment of the annuity to be apportioned accordingly. This case was, however, disapproved in Re Henry ; Gordon v. Gordon (1907). In this case the testator was similarly liable -for an annuity, and the tenant-for-life advanced money to buy out the annuitant. He was held entitled to be repaid the amount out of capital. Kekewich, J., said that in Re Bacon (1893) he tried to follow Chitty, J., in Re Mufet. Both these were cases where the testator had died leaving his estate liable for an annuity created in his lifetime. In Re Bacon, Kekewich. J., said he was somewhat surprised at not finding the point cleared up beyond doubt by decided cases, but he thought the real reason was that the acknowledged rights of both annuitants and beneficiaries did not require judicial decision. The working out of this would thus simply involve a debit to the Estate Account as in the case of any other liability. There appears to be a clear distinction in principle between an annuity bequeathed and one for which the testator was absolutely liable. Annuities. Where a testator dies liable for an annuity the whole amount is a charge against capital. 142 CHAPTER VI. ANNUITIES. Where, however, the testator has bequeathed an annuity some difficulty may arise. It seems clear that, where a sum of money is to be invested in an annuity the annuitant is entitled to the value of the annuity instead of taking annual payments. Where legacies and annuities were left with residue to A. for life and remainder to B., it was held that the annuities must be paid out of income so far as possible, and then capital must be resorted to year by year. (Re Grant, 1883.) See example above. Where there was a bequest of three annuities and " subject to the aforesaid annuities," an absolute bequest of residue, and the income of the estate was insufficient to pay the annuities in full, it was held that the annuities were a charge on capital. (Re Howarth; Howarth v. Makinson, 1909.) Where there was a bequest of legacies, then an annuity, with a direction to set aside a sum to meet the same (resorting to the capital, if necessary), and the estate was sufficient to provide the value of the annuity, but not sufficient to provide a fund to produce it, it was held (referring to Wright v. Callender, 1852) that the annuity was to be valued as at the date of the death, and the amount either paid to the annuitant or invested in the purchase of an annuity, and the pecuniary legacies were to be paid in full. (In re Cottrell; Buckland v. Bedmgfield, 1910.) Strachan's " Law of Trust Accounts " says that the follow- ing methods of adjustment between life-owner and remainder- man of life annuiti. s charged on the capital and income of the trust estate have been followed, or suggested : CHAPTER VI. ANNUITIES. 143 (1) Ascertain what sum with simple interest from the testator's death will meet each instalment of the annuity as it accrues, charge the sum so arrived at to capital, and the balance of the instalment to income. (Re Perkins, 1907.) (2) Adjust the annuity according to the respective values of the interests of the life-owner and remainderman in the trust estate. (Re Daws on, 1906.) If the annuity is given by will its value is ascertainable as at the testator's death. Thus, suppose an annuity of .100 is charged on capital and income : the life interest in the fund is valued, say, at ^1,000, the reversion at ,4,000 : the life-owner will contribute one-fifth and the reversioner four-fifths of each instalment of the annuity. (3) Raise each instalment of the annuity as it becomes payable out of the capital of the fund by sale, or mortgage (Re Bacon, 1893), the life-owner contributing his share, if by sale, by loss of income on the capital withdrawn ; and if by mortgage, by keeping down the interest on it according to the usual rule. (4) Life-owner (if one) to find the capital for each instalment due, taking a charge for it, and keeping down the interest on the charge. (Re Harrison, 1889.) He considers method (i) the best. It will be noticed that (though it is not easy to draw one rule as to the mode of treatment) the fact of an annuity being paid qua annuity, or the annuitant drawing the cash, must not affect the position as between tenant-for-life and remainderman ; in other words, the wording of the will must be looked at and an adjustment made to produce the effect intended by the bequest. 144 CHAPTER VI. - ANNUITIES. The cases were reviewed by Parker, J., in Re Poyser; London v. Poyser (1910), where the testator was liable for an annuity of ^250. He held that Allhusen v. Whittell was applicable, and the decisions of Re Dawson and Re Perkins were preferable to Re Henry and Re Bacon. He also agreed with Eady, J. (in Re Dawson) that the method of apportionment is in the discretion of the Court; and " Joyce, J., found the same thing in Re Thompson (1908)." Therefore, as in Re Perkins, he directed each instalment to be treated separately and simple interest at 3^ per cent, to be used. In this connection may be mentioned the case of Re Robbins; Robbins v. Legge (Court of Appeal, 1907). The testator, who died nth October 1905, directed by his will the purchase of a Government annuity of .400 per annum for his wife. She died 2yth October 1905, and her legal personal representative claimed from the estate the sum which would at the date of the testator's death have purchased the annuity. The widow had never elected to have the value of the annuity in cash. It was argued, on the one hand, that the right was to have the annuity purchased at the end of a year after the testator's death, that being the period which is allowed to an executor for the purpose nf distri I niting the testator's estate ; that, in order to claim the capital sum, the annuitant should survive that period ; that if ;i Government annuity had been purchased, it would only have run from the date of purchase ; and that consequently the widow not entitled to anything. On the other hand, it was argued that the annuity began from the death ; all authorities pointed to that. CHAPTER VI. ANNUITIES. 145 The Court gave judgment for the whole sum claimed, affirming the decision of Swinfen-Eady, J. Cozens- Hardy, M.R., said there was now no doubt that the effect of a direction to apply a definite sum of money in the purchase of a life annuity was to be regarded as a legacy of the definite sum vesting in the intended annuitant on the testator's death. It was difficult to see how any distinction could fairly be drawn between a gift of a definite sum to purchase an annuity, and a gift of so much money as is requisite to purchase a definite annuity. It was well settled that a simple gift of an annuity was a gift of the annuity commencing from the death of the testator. That was the practice of the Court in valuing an annuity in case an estate was deficient. A gift was to be implied of the annuity from the death till purchase. The representative of the widow was entitled accordingly. CHAPTER VII. Estate of the late James Alexander. Pro forma Accounts. , PARTICULARS OF ESTATE AND WILL OF JAMES ALEXANDER. i. James Alexander died 3oth September 1910, appointing Wm. Ashworth his Executor, hut he refused to act. (Note that this involves the appointment of an Administrator cum testamento annex o see p. 8.) His Estate consisted of 2. ,4,000 2\ per cent. Consols, valued at 85 per cent. (The transfer books at the Bank of England being closed about a month before dividend day it must be noted that the valuation is ex the October dividend, and this must be taken into account.) 3. ^1,000 3 per cent. Local Loans Stock, valued at 90 per cent. (See Note to No. 2.) 4. ^4,000 4 per cent. Cordoba Government Stock, valued at 22 \ per cent. 5. ;i,ooo 5 per cent. Argentine Government Stock, valued at 100 per cent. CHAPTER VII. ESTATE OF THE LATE JAMES ALEXANDER. '47 6. Household Furniture, valued at .350. 7. A Business, the Balance Sheet of which was as follows : Creditors . . ^1000 Machinery ... 1,000 Capital ... 10,000 Stock ... ... 5>ooo Debtors 3,000 Bank 2.000 ;ll,000 11,000 (The goodwill of the business was valued for Probate at 1,000.) 8. His interest in the firm of Alexander, Brutus & Co., whose Balance Sheet was as follows : Creditors ... 10,000 Capital : Alexander 1,000 Brutus 10,000 11,000 21,000 Land 2,000 Buildings ... 8,000 Machinery 1,000 Stock 5,000 Debtors 3,000 Bank 2,000 2I,OOO (Observe the different manner of dealing with the amounts in the case of a partnership as distinguished from the case where a person is sole proprietor of a business. See also Example B., p. 48.) 9. Leasehold Property bringing in ,500 per annum, 24th June and 25th December, with .200 per annum, payable thereout on the same days. The lease expired 2pth September 1905, and was valued at .500. (This involves the application of the rule in Howe v. Lord Dartmouth see p. 25, and Ledger Folio 30.) L 2 148 CHAPTER VII. ESTATE OF THE LATE 10. A Reversion to the sum of 10,000 on the happening of a certain event. This was estimated to be of the value of ,5,000, but unexpectedly fell in on 3oth September 1911. (It is decided not to pay duty on this till it falls in. Observe the application of the principle dealt with on p. 43. The total estate is 39,907 ios., and the rate on which duty is to be paid on all except the 5,000 is therefore 6 per cent. When the Reversion falls in the Estate is to be taken as ,34,907 ios. +10,000, and the 10,000 is to be paid upon at 7 per cent.) This asset involves the application of the principle of Howe v. Lord Dartmouth. ii. 100 i Shares of the Big Diamond Mines, Limited, valued at ,10 per share. 12. 100 "5 Shares of the Manchester Shipping Co., Limited, valued at 5 per share. I 3- -h Share of the s-s. " Mary Ann," valued at ;ioo. (Observe the difference between " Shares of Ships " and Shares in a Shipping Company.) 14. Cash in the Bank, 200. 15. Cash in the House, 5. 16. A Freehold House, valued at 1,000, and bringing in per quarter. There was due by him for household debts ... 100 The funeral cost 100 JAMES ALEXANDER. 149 17. Eleven months ago he had given his wife ,3,000. (To be aggregated, see p. 38, though the Estate does not pay the Duty on it.) 18. His father died on October ist, leaving his who estate (.10,500) to him. (See the case of Re John Scott, Junr., (dec.), p. n.) THE DIRECTIONS IN THE WILL WERE AS FOLLOWS : 19. 200 per annum to widow. She dies 3ist December. 20. One-half of the residue to son. He to bring into account an advance of 9,073 125. 3d. made many years previously. This would not bear duty. 21. Income of other one-half of residue to niece for life, with remainder to her children. 22. Legacy of 100 to W. Anderson (a stranger in blood), who predeceased testator. (This Legacy would lapse see p. n.) 23. Legacy of 100 to John Baldwin (his grandfather's brother). 24. His horse, " Black Bess," and 100 (free of duty) out of the 500 due to him from James Smiles to James Heap. At the date of the death of the testator the horse had been disposed of, and the amount due by Smiles had been repaid. (The former Legacy is adeemed, but the latter is payable see p. n.) 25. Power was given to retain the assets beyond twelve months, except wasting or reversionary property. 150 CHAPTER VII. ESTATE OF THE LATE AFFIDAVIT FOR INLAND REVENUE (FORM A. 3). ACCOUNT No. i. Real Property in England and Personal Property in the United Kingdom. Stocks or Funds of the United Kingdom 2^ per cent. Consols ...... 4^000 at 85 3,400 o o NOTE. The price is to be the average at which business has been done, or, if no business done, J above the lower price. Thus with business done at 84, 85 and 86, the price should be 85, but if no business done, but a quotation of 84-85, the price must be taken as 84$. yw \s Stocks, Funds, or Bonds of Foreign Countries or British Dependencies and Colonies transferable in the United Kingdom Cordoba Government ... ... 4,000 at 22^ 9OO o Argentine 1,000 at 100 1,000 o Proprietary Shares or Debentures of Public Com- panies Big Diamond Mines, Lim., iooi Shares at 10 I,OOO o Manchester Shipping Co., Lim., 100 5 ,, 5 5 00 o Dividends and Interest declared and accrued due (The expression " accrued " is rather misleading, since, as a rule, any accrued dividend or interest would be included in the price.) ai per cent. Consols yrs. Dividend due 5th Oct. 25 o o Local Loans ,, ,, 7 10 o Cash in the House 3 2 5" IO o o o at Bankers . ... 200 o (J 2,000 o o Book Debts 3,000 o o Household Goods valued at . . . ... jjvnTW JCQ o o Stock in Trade (and Machinery) JJ 6,000 Carried forward JAMES ALEXANDER. 151 Brought forward ... Goodwill of Business ... ... ... 1,000 o o Ships and Shares of Ships ... 100 o o Deceased's Share in the Real and Personal Property as a Partner in the Firm of Alexander, Brutus & Co. (The evidence required is a Balance Sheet signed by the surviving Partner or Partners)... 1,000 o o Leasehold Property 500 o o Rents of Real and Leasehold Estate due prior to death- Freehold actually due 15 o o Apportionment of Rents of Leasehold 125 o o Deceased's Interest (describing Reversion) ... 5,000 o o Estate of Alexander, Senr., who died ist Oct., viz. : Total Estate 10,500 Less Duty (say) ... ' 420 10,080 10,080 o o 37,107 10 o ACCOUNT No. i (continued}. Second Part Real Property in England. Real Property 1,000 o o SCHEDULE No. i. Part i. An Account of Debts, &c. Name and Address. Description of Debt. Amount. Business Debts 1.000 o o Household 100 o o (Specifying same in each case ) 1,100 o o Part 2. An Account of the Funeral Expenses. X. Y. Z. &Co 100 o o Total of i and 2 .. .. 1,200 o o 152 CHAPTER VII. ESTATE OF THE LATE SUMMARY OF AFFIDAVIT. First Table for determining Rate of Duty. Personal. Real. I. Personal Property Account i 35,90710 o VI. Real 5 1,000 o o Total 35,907 10 o 1,000 o o X. A dd Property aggregable 3,000 o o 38,907 10 O l)OOO O O Carry Real into Personal column . . 1,000 o o 39,907 10 o XV. Appropriate Rate 6 per cent. Second Table for determining value on which Estate Duty is now payable. Personal. Real. Brought down . . . . 35,907 10 o 1,000 o o XIX. Deduct Interest in expectancy, Duty on which is elected to be paid when the amount falls in . . 5,000 o o Balance 30,90710 o 1,000 o o Third Table for determining Amotint of Estate Duty. A. Estate Duty on Personal Estate 30,907 IDS. at 6 per cent 1,854 9 o 3 per cent, thereon 3oth Sept. to 3ist Der 13 18 2 Total 1,868 7 2 B. Estate Duty on Real Estate i, ooo at 6 per cent. (No Interest till 12 months) .. .. 60 o o 1,928 7 2 THE PAYMENT OF SETTLEMENT ESTATE DUTY. Settlement Estate Duty (p. 40) is payable on the net amount settled and at 2 per cent. say ^290. The son must bring into account the advancement (p. 149). Thus, whriv an Estate- amounting to ^"10,000 is left, half to A. JAMES ALEXANDER. 153 and half in trust for B., and B. has to bring into account an advancement of ,5,000, the Settlement Estate Duty payable would only be on ,2,500, viz. : Total Estate (^10,000+^5,000) ^15,000 One-half 7>5oo Due to A 7>S In trust for B. 7>5 Less Advanced 5,ooo In trust for B. and duty payable on ... Total Assets OPENING THE LEDGER. As previously mentioned (p. 60) accountants differ in opinion as to whether the Ledger should be opened with the assets at their Probate values or not. It has been argued that, if they are so entered, an Executor might be charged with the value if not realised. Such a contention appears quite untenable. An Executor is surely chargeable only for a breach of trust, and would be chargeable whether the fact were entered in the books or not. In my view it is a question of expediency, and one strong argument in favour of using the figures as a matter of account is that it then becomes impossible for any asset or liability to be overlooked on a division. The previous example was worked on the basis of putting Probate values as a memo, only. The present one is dealt with by the other method. 154 CHAPTER VII. ESTATE OF THE LATE Adopting this view, the opening entries to be made are as follows : A Dr. to 1 Consols Account . . and a Cr. to *Stocks, &c., of United Kingdom . . 3,400 2 Local Loans Account . . * Do. do. . . 900 3 Cordoba Government Account *Stocks of Foreign Countries . . 900 4 Argentine * Do. do. .. 1,000 5 Big Diamond Mines, Lim. ^Proprietary Shares, &c. .. .. 1,000 6 Manchester Shipping Co., Lim. * Do. do. .. .. 500 7 & 8 The Cash and Bank balances will be entered in the Cash Book and posted direct to Estate Account. 9 Business Account and a Cr. to Stock-in-Trade 6,000 10 Do. H Book Debts 3,000 ii Do. H Estate Account (for Bank balance of Business Account) 2,000 12 Debts due at the death . - Business Account i ,000 13 Business Account H Goodwill Account 1,000 M Household Furniture Estate Account 350 15 s.s. " Mary Ann " * Ships and Shares of Ships . IOO 16 A. B. &Co. H Testator's Interest in the firm of A. B. &Co. 1,000 i? Leasehold Property II Estate Account 500 18 Reversion H Do. 5,000 19 Estate of Alexander, Senr n Do. 10,080 20 Freehold House . . Do. I,OCO * See footnote on p. 65. These Accounts are convenient for collecting the items under appropriate heads (particularly in large estates), but the transactions may, of course, be taken direct to the Estate Account. The following Ledger Accounts show the closing of the Ledger and the resulting Balance Sheet at 3ist December 1903 (p. 37 of Ledger), when the Widow dies and the share of the Son is to be ascertained and paid out. Note that the whole of the .Investments require to be revalued in order to arrive at the correct value of the share ; further, income must be apportioned to date. The Leasehold and Freehold may be taken to be of the value shown in the books. The Consols and Local Loans would be taken at their market price. JAMES ALEXANDER. 155 OOO 000 ONOOO 00 O OlxOOO OO O O3OOQO 2 S ll ra- a o ' '^ = * ' 5 - "~* S ' ' ''S'^ c ? PS ' ** QJ .i (/3 *^3 ta2 tfft J K C3 en I ffl" g s a o^> o .. o Q W T3 OOO OOO O OO O ^ u] 000 000 O 00 g ^ " " w ^ H h o ^ M W X - N 8 ' 1 : 1 :: s ^ o ooo O 00 - . . ^ - IS 5 5 h l - ^ : sl82 ; l '56 CHAPTER VII. ESTATE OF THE LATE O oo en vo o o o 000 000 000 N 6 -. i O O Q 'So 8 C T3 C ;^ C so- !.r us 8 ^Sffi "j^=2 ! /56 T5 <^ fi ^ll ^>|^^S-5"a>S S R ?S1 L?^iiai JAMES ALEXANDER. 157 FO. INDEX TO TRUST LEDGER.. 1. Estate Account. 2. Stocks or Funds of the United Kingdom. 3. Foreign Countries. 4. Proprietary Shares or Debentures of Public Companies. 5. Ships and Shares of Ships. 6. Household Furniture. 7. Testator's Interest in the Firm of Alexander, Brutus & Co. 8. Stock in Trade. 9. Book Debts. 10. Goodwill. 11. Rents of Deceased's Real and Leasehold Properties due at the death. 12. Dividends and Interest due at the death. 13. Debts on Simple Contract due at the death. 14. Estate Duty and Expenses. 15. Pecuniary Legacies. 16. Legacy Duty. 17. Funeral Expenses. 18. Expenses attending Executorship. 19. Niece Legacy in Trust Account. igA. A., Share of Residue Account. 20. Son Share of Residue Account. 21. 2^ per cent. Consols. 22. 3 per cent. Local Loans. 22A. Lancashire & Yorkshire Railway. 22B. Midland Railway. 22C. W. Loan on Mortgage. 23. Cordoba Government. 24. Argentine Government. 25. Big Diamond Mines, Limited. 26. Manchester Shipping Co., Limited. 27. S.S. " Mary Ann." 28. Business Account. 29. Alexander, Brutus & Co. 30. Leasehold Property. 31. Reversion. 32. Estate of Mr. Alexander, Senr. 33. Freehold House. 34. Income Account. 35. Niece Income Account. 36. Widow Income Account. The above shows the usual order of the Ledger Accounts,viz.: I. The Estate Account. II. Impersonal Asset Accounts. III. ,, Liability Accounts. IV. Residuary Legatees' Accounts. V. Investment Accounts. VI. Income Accounts. CHAPTER VII. ESTATE OF THE LATE -300000000 (flOOCOOOOO o o o o &88 > o 9LS g* .... % C iSSa -3 O en O i6o CHAPTER VII. ESTATE OF THE LATE t o o 0) i" : 1 6 : in -g CJ oa QJ 3 d>j 6 sj CJ |< pq =y CQ (A in in' "1 -^ c3 PC m M Cfi* * ca" C/3 k^ u. 3 |- 2 M 3s ^i 2 /3 i "w "^ Ed ^S X 1/3 O in o 2 o H O O in o H TJ o v M w M o m l l| 162 CHAPTER VII. ESTATE OF THE LATE T3 CO o o o ll ee. - ll i t/5 noo ro II *? O M Q B Q M Q ' I M O d o o o t/) B -3 M N **? jo u ^8&?, 8 Q ^1| c? 3 M " H s H N & s-? QQ w N * O N " OlM M B I 1 1 s .1 * " | 1 ' ex ll 1 S ? |l| i- w u E2 H H ' ll "^ O **> ro fo * l| JAMES ALEXANDER. .63 o o o o 88 o o o o as ^5 M ^ C 7 , CQ o . co 1 O co co I : il - : 3 ' fi S : w ^ c V 1. ll (2- O co ^ 55 cfo O CO CO I JAMES ALEXANDER. 2 I *< o o o o Q O S S'o : g'o >< S ^ 2 OQ ui o si S 5 I 1 v i66 CHAPTER VII. ESTATE OF THE LATE w a c o 7 1 u: o i d 1 i * | | M - - MM 00 oil 00 S- S- & ^ ^ 5 SI ts 1 1 : { 4 S| ~ d * el I o > Jl g a m * DBA GOVERNI* 2 " s M * INE GOVERN\ N coo o (/) T3 in o g 5 00 ^ as c? i O q M i^ *-rf M 2S w " 23 ,- v o o o || | "| - . . o o o C Z o o o LB i :: fj ' ?JllJj {jjjj jjll^l rfiil^l l^o'llS w QQ wl 3 s* '? ' $ k 0* o^ -' o X Jj (/) Q & i i JAMES ALEXANDER. ,6 7 8 * S COM o^ R s -o . g ' 3 T3 00 4) -*OO 8 _ gl o" ^ o =8 tS 1 .2 g 2 .c PJ i68 CHAPTER VII. ESTATE OF THE LATE -a o o C 1 g O 00 jl -8 I ? ^ , J M" S c\ *+ II "" ^ II ^? II J? : M MM in 1 ' ~ g Q : ) si ' pq t 5 S ro M 5 $8 y G -3000 I T3 00 w o o o yj 00 ^111 8J 8 II li -' 1 S? t^J ! OO Oi M 2 M 11 1 ' l: 1: 1 -s a A : V C *rt j:l > J e K |l| | M o Q . W . H oR- o ft ^j "1 l JAMES ALEXANDER. .69 T3 .. ! M M OO VO oo OO II Is 11 1 ' " 13 o o in o '* R 5 ^ s g: ^ 00 ! : ^ 00 ^1 G J3 I 1 |j s " 0& R "1 1 T 13 o o o o II tft O O O O II T ^J ,^ o o o o II vj U ^1 i M fO : : : o : .JS . J . Q; . -w 13 II g g > EU o Jo s a . ^ PU "-> Q CO K Q T3 P -o o o H ffl j; O O O O O O 0 ir> o O t^O^O N ro f#) ^ 3 ^+5 10 tH CO H 1:1:11: i l . ' 8 i ' & * %2 .jjj t ro > ^ '"rt ' O ^ | Illg^l ' 4 lii^III 1 -g*g^ s i - E2 M V.' O ro co o f Q' oft Ojid citi c/)Q Q b CHAPTER VII. ESTATE OF THE LATE M -w O CO ! Wl T <> cf G " : M M : 8 5 ~ ;j 1 1^ 4 6 g go o Q ^ * H * M V5 c ^ * " M " fc ?^ ffi 2*^ ff g C M o M -, TJ o T3 "^ IT. g U3 g 1 4 1 H tn w M S m O O O ^ I oc is 1 s ^ 3 .is 3 3 1 -i 11 < H! * 11 t 4) c e Jjlj JAMES ALEXANDER. -3000 OOOOOOOOOOO tfOOjo MQVOOOOOOOO *+* Tt- i-. o >H f tx c* o oo o o o txtx 2" 73 *? (A d mft unt, i Year's Annuity 1 | n M i 0\0 S M Q 172 CHAPTER VII. ESTATE OF THE LATE I e/> OOOOOOO pjNOi-itnS 1 o ^ s c . I g ' 1 : > s > 5 fi 3 5 1.1 3 1 o "il o 1 8 -s * Q 8 Q S o J J h o This figure agrees with that shoicn by the Residuary A ccount 29,215 8 4 O HI ro O O Q S -e M Ml 1 - in . : t in* : ^ a rt if) < ^ i rf S i I i H OT Z fi JAMES ALEXANDER. 173 The Payment of Legacy Duty on the Residue (Form No. 3). The Residuary Account may be assumed to be rendered and the duty paid on ist January. No. i No. 2 .Property Sold) (Property not Stocks or Funds of the United Kingdom : Consols and Local Loans 3,600 890 Stocks or Funds of Foreign Countries : Cordoba and Argentine Governments 1,000 . 1,050 Proprietary Shares, &c. : Big Diamond Mines and Manchester Shipping Co., Lim. 1,000 600 Dividends to date of Death : Per Ledger Folio 12 Cash in the House ... Cash at the Bank Book Debts ... Furniture Stock-in-Trade Goodwill Ships and Shares of Ships ... . ... Deceased, Interest as a Partner Leasehold directed to be sold ... Real Property do. Rents to date of Death (Ledger n) Other Property : Estate of Alexander, Senr. ... Insert total of Col. i in Col. 2 Total of Property 4,490 o o 2,050 o o i ,600 o o 139 3 4 5 2,200 3,000 o 300 o o 5,100 o 1,000 75 1,000 430 O O 1,000 140 o 10,080 ?6 68n 3 4 ... ... ^32.609 3 4 174 CHAPTER VII. - ESTATE OF THE LATE Total of property brought forward ... ^32,609 3 4 Payments. Estate and Settlement Estate Duty ... ^2,204 9 o Funeral Expenses ... ... ... 100 o o Expenses attending Executorship ... 100 o o Debts due at the Death ... ... 1,100 o o Pecuniary Legacies ... ... ... 200 o o Legacy Duty ... ... ... 10 o o 37*4 9 Net amount ... 28,894 14 4 Rents to date of this Account ... ... 90 o o (Leasehold ^75 ; Freehold 15) Dividends and Interest do. ... 294 12 2 (Ledger 34 ^314 123. 2d., except Rents 20 29,279 6 6 Payments out of Income. Interest on Estate Duty ... ... ^13 18 2 Widow Annuity ... ... ... 50 o o 63 18 2 *Note that this amount is verified by the amount shown by the Balance Sheet (Ledger Folio 37) to have been realised. As in Example D (p. 54) the payment of Duty would be dealt with on Form No. i, 14,752 145. 2d. (half of ,29,215 8s. 4d.+29o), the son's share, being paid upon at i per cent., and 14,462 145. 2d., the niece's share, being paid on at 5 per cent. The Ledger would be as follows. The balances are brought forward and the same Ledger folios are used. Let it now be assumed that the Cash Account continues as below till 5th October, when the niece dies, leaving two sons, A. (of age), and B. (an infant). JAMES ALEXANDER. '75 o w 000 O txO 00 O O O O fO 00 O O O O JO 00 m VO O O t I i a ----- - .-,---. ~J W ....i. * . O , . . 0,0 -- o I g a s ^o ^ TJ-* 000000000000000000 O.'* ^ ^ woo ooooooopoooooooooo fVI O lOtxu^txuotxiotxOw^iovjioOioinu^O Q tx H^ ^M N M gtxtXtX.X^M M ^ g JX ^C s ' .. s ; ^_ _ js s H *S- I w : : J2 "^ '^ : ''- : : : ' : * * : : S W U I 1 i 1 o : : r. : M ^ * uucj re^fep-^s***; 1 ?^ a 1 " S !! M ^^^$Z>G^-% 2 r q.^ 30 -." v. . . sro C0 ^ ' c D< "3^ tj aj"aj 3^ S o.-^: o~: o A < ^ O ^b < ducted on pay no Legacy Du I 7 6 CHAPTER VII. ESTATE OF THE LATE o o en O > Cfl CD - i coo in O O 0-0 a o o o o 0000 *"- O in I K e H CO C O O O O in O O O O s M- ft JAMES ALEXANDER. 177 O o o o o , ;? |] % 6 r> ON c I ^ o 8J H * i 7 8 I CHAPTER VII. ESTATE OF THE LATE 22S I &&& /"> >r> u-j m T3 O i O O O S ? 2 2 !i 1 ii - 11=1 1 . s - I i~ : ? c $ ^ a oo C^l U5 00 10 ^c/)^ ?. C U S S -2 ^ H S c 8 "- 1 f, PII UQ 25 < 5 a * * :> M ^^ a IKSH1KK o^ j tJb CL "ojs a; U.< C/5 T3 C Z 0) C NCASHIRE AND \ ^ 1 1 1 N 10 t C o o ^ 5-0 ^ q; 10 fO tv IV Pu Cz |1| : 1 :? 1 of 01 PI J i* 0) > O G " ^ ',"!r .^ _ rr Sf 5^*' :: Sc = I tpilii ra>^ illi JAMES ALEXANDER. isjfs i\\ I! ! 179 o o o o S * o o o o rt (U.S! O - O > ill! ll D. - - si5 ?& i 0"> fij Illi ^ a *>M a *"" ^ .2 2. ;^s" o. *- = H 3 * o M ii u,' 8 M U j ^ rt U | O 3 1 M "a TJ c/5 O tn II ^ :%ll g i c u. : K sLi N 2 i8o CHAPTER VII. ESTATE OF THE LATE f tr. o o II *"" O 7 lo o | j g vj V.' ' oi ro **** <0 ^ 1 s. g 1 aJ UM < ^^ 2 : | | Q o = ^ c ~ a c z g o ^ " ai < 8 6 5 iS i 2" j f u &i c3S *^ ?C t ^^^ c[ u ^ 1 1 u ?? 1 p p |2 - ^ (2 - .- ^ < o"- i *' ^ " C JAMES ALEXANDER. 181 000 000 5-.. -c o en O .3 S > I 8 -t oooooooo oooooooo M" & l82 CHAPTER VII. ESTATE OF THE LATE JAMES ALEXANDER. T3 O (/) O 13 C 3c C c. o X ^ c -S 00 O O C O O O O OjroOOOOOOOO -3 j., O . --J QJ u oirhj ^ jfe I ::: = - C i APPENDIX I. Probate Duty -payable in the case of a Person dying on or before ist August 1894. THE duties under the Customs and Inland Revenue Act, 1 88 1. were payable only on personal estate, and were as follows : Where the value of the estate did not exceed ,100 ... ... ... Nil. Where the value of the estate exceeded ^1 for every ,50 .100, but did not exceed .500 ... or part of .50. Where the value of the estate exceeded ;i 55. for every ,500 but did not exceed "1,000 . . . 50 or part of 50. Where the value of the estate exceeded ^3 for every .100 1,000 ... or part of i oo. (1881. sec. 27.) In arriving at the value of the estate, debts and funeral expenses were allowed as a deduction, provided that the debts were payable out of the property included in the affidavit, and were not either (a) Voluntary debts payable on the death of the deceased, or (b) Payable under any instrument not bond fide delivered to the donee three months before the death, or 184 APPENDIX I. -- PROBATE DUTY. (c) Debts in respect of which any other person or any real estate of the deceased was primarily liable. (1881, Section 28.)* Where, however, the whole personal estate of a person dying on or after ist June 1881 without deduction of debts, &c. (except as below), exceeded .100 but did not exceed ,300, an option was given to pay a fixed duty of 305. thereon instead of the scale duty on the net estate. (Section 33.) By the Act of 1910, Section 61, unpaid purchase money of any of the property passing may be deducted. If this option was exercised the 305. also covered legacy or succession duty on the property. (Section 36.) Care should be taken to examine the figures before deciding on adopting this mode of payment. Thus an estate of .400 gross, with liabilities ,200, making .200 net left to a child, &c., should pay under the scale viz., i per cent, on .200 (,2) and i per cent. Legacy Duty; but if left to a nephew it would be better to pay as a small estate on the .400 gross (505.), as otherwise the duty would be Estate duty, i per cent, on ,200. ... ... ^2 o o Legacy duty, 5 per cent, on ^200 ...... 10 o o If it subsequently proved that the estate was over the value, then the correct scale duty was payable without any allowance for the 305. already paid. But by the Revenue Act 1903, if the fixed duty has been paid it may be taken into account and allowed for. * By the Act of 1910, Section 57, a debt incurred for the extinction of an interest in expectancy in any property passing is not to be deducted. APPENDIX I. PROBATE DUTY. 185 By Section 38 the same rates of duty, but called " Account Duty," were payable by the donees of certain property of which a testator dying on or after ist June 1881 had disposed during his lifetime, viz. : (a) Any donatio mortis causa or any voluntary gift not bond -fide made three months (but see below) before death. This would strictly make any gift within that period chargeable, but it is understood that where deceased had been in the habit of making annual gifts they are not charged though made within the period . (b) Any property of the deceased which he had voluntarily caused to be transferred to himself and another jointly, so that the beneficial interest passed on his death to such other person. (c) Any property passing under a disposition of the deceased whereby a life or other interest was retained by him. Sections 31 and 32 made provision for the payment of further duty, or the repayment of duty over-paid, as the case might be, where the estate was found to be of a different value from that at which it was originally returned. By the Customs and Inland Revenue Act 1889, which applies to probates, &c., granted on or after ist June 1889 (i) In the above subsection (a) 12 months was to be read for 3, and the property chargeable was to include property taken under any gift, whenever made, where bond -fide possession had not been assumed by the donee immediately upon the gift and retained to the entire exclusion of the donor. 1 86 APPENDIX I. PROBATE DUTY. And by the 1910 Act, Section 59, the period is 3 years instead of 12 months, except that the section does not apply if the transfer was made before the 3oth April 1908, or was made for charitable or public purposes. In the case of Attorney-General v. Earl Grey (1898) it was held by the Court of Appeal that where any interest is reserved duty is payable on the whole property, and not only on such part of the estate as produces that interest. (2) In the above subsection (b) the expression " transferred " was to be deemed to include a purchase or invest- ment of a similar character. (3) The subsection (c) was made rather wider. (4) Duty was also to be payable on money received under a policy of assurance on tru.- life of the deceased for the benefit of a third party, but kept up by himself. If the deceased paid only a portion of the premium then the donee was only to pay on a like portion of the insurance- moiu-y. The Act of 1889 was an attempt to graduate the duty by the introduction of an "estate" duty in respect of estates over ^10.000 in value. This "estate" duty must not be confounded with the present duty of the same name, the present one being in place of the probate duty, account duty, and estate duty of 1889. By this Act of 1889, where the personal estate exceeded ; 1 0,000 there was to be paid, in addition to probate duty, an estate duty of ^i per hundred or part thereof. Similarly, where the property included in an " account " exceeded ,10,000 a further like duty was payable. There were also provisions APPENDIX I. LEGACY AND SUCCESSION DUTY 187 PRIOR TO 1909. in tin' Act similar to those in the Act of 1881 (above), pro- vidhii; for the adjustment of duty where the estate had been impiv.pt rly paid on in the first instance. Legacy and Succession Ditty /vnv/A/V hi the case of a person dying before 3o/// April 1909. Tiif rates of Legacy and Succession Duty under the Acts of 1815 (55 Geo. III. cap 184) and 1888 (51 Vic. cap. 8) wt n as follows : . On Real Estate, if the Deceased died before ist On Apportioned Value of Real Estate where Deceased died Description of the Residuary Legatee, or next-of- kin, to be in the following words of the Act if Estate Duty under 57 & 58 Viet., c. 30, has been paid upon the property, and on Personal on or after ist July 1888, and Estate Duty under 57 & 58 Viet., c. 30, has not been paid Estate upon the pro- pert V Children of the deceased, and their descen-. dants, or the father or mother, or any lineal 1 ancestor of the deceased, or the husbands or i per cent. 1 IGS. per cent. wives of any such persons Brothers and sifters of the deceased, and their 1 descendants, or the husbands or wives of any 3 . 4 ios. such persons . . ) Brothers and sisters of the father or mother of ) the deceased, and their descendants, or the j- 5 6 ios. husbands or wives of any such persons } Brothers and sisters of a grandfather, or grand- ) mother of the deceased, and their descendants, 6 7 ios. or the husbands or wives of any such persons ) Any person in any other degree of collateral \ consanguinity, or strangers in blood to the - 10 11 ios. deceased ) The husband or wife of the deceased was not subject to the duties on legacies, annuities, and residues. Relations of the husband or wife of the deceased are chargeable with duty at the rate of 10 per cent., or 11 ios. per cent., as the case may be, unless themselves related in blood to the deceased. OBSERVE. Interest at the rate of 4 per cent, per annum was chargeable upon all legacy duty in arrear, under the provisions of the 31 & 32 Viet. cp. 124, s. 9, but by the Finance Act 1896, interest on arrears of duty is to be at the rate of 3 per cent. *Persons otherwise chargeable with duty at the rate of i per cent, are exempt in respect of any legacy, residue, or share of residue pa> able out of, or consisting of any estate or effects according to the value whereof duty shall have been paid on the affidavit or inventory, in conformity with the Act 44 Viet., cap. 12, or where estate duty under 57 & 58 Viet., cap. 30, has been paid upon the value of the property, and the same passes under the deceased's will or intestacy. APPENDIX II. EXTRACTS FROM STATUTES, &c. Rents and Periodical Payments. 33 & 34 VICT., CHAPTER 35. An Act for the better Apportionment of Rents and other Periodical Payments. [ist August 1870.] Whereas rents and some other periodical payments are not at common law apportionable (like interest on money lent) in respect of time, and for remedy of some of the mischiefs and inconveniences thereby arising divers statutes have been passed in the eleventh year of the reign of his late Majesty King George the Second (chapter nineteen), and in the session of Parliament holden in the fourth and fifth years of his late Majesty King William the Fourth (chapter twenty-two), and in the session of Parliament held in the sixth and seventh years of his late Majesty King William the Fourth (chapter seventy-one), and in the session of Parliament held in the fourteenth and fifteenth years of her present Majesty (chapter twenty-five), and in the session of Parliament held in the twenty-third and twenty-fourth years of her present Majesty (chapter one hundred and fifty-four) : And whereas it is expedient to make provision for the remedy of all such mischiefs and inconveniences : Be it therefore enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : APPENDIX II. APPORTIONMENT ACT, 1870. 189 i. This Act may be cited for all purposes as "The Apportionment Act, 1870." 2. From and after the passing of this Act all rents, annuities, divi- dends, and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) shall, like interest on money lent, be considered as accruing from day to dav, and shall be apportionable in respect of time accordingly. 3- The apportioned part of any such rent, annuity, dividend, or other payment shall be payable or recoverable in the case of a con- tinuing rent, annuity, or other such payment when the entire portion of which such apportioned part shall form part shall become due and. payable, and not before, and in the case of a rent, annuity, or other such payment determined by re-entry, death, or otherwise when the next entire portion of the same would have been payable' if the same had not so determined, and not before. 4. All persons and their respective heirs, executors, administrators, and assigns, and also the executors, administrators, and assigns respec- tively of persons whose interests determine with their own deaths, shall have such or the same remedies at law and in equity for recovering such apportioned parts as aforesaid when payable (allowing propor- tionate parts of all just allowances) as they respectively would have had for recovering such entire portions as aforesaid if entitled thereto respectively ; provided that persons liable to pay rents reserved out of or charged on lands or other hereditaments of any tenure, and the same lands or other hereditaments, shall not be resorted to for any such apportioned part forming part of an entire or continuing rent as afore- said specifically, but the entire or continuing rent, including such apportioned part, shall be recovered and received by the heir or other person who, if the rent had not been apportionable under this Act, or otherwise, would have been entitled to such entire or continuing rent, and such apportioned part shall be recoverable from such heir or other person by the executors or other parties entitled under this Act to the same by action at law or suit in equity. 190 APPENDIX II. APPORTIONMENT ACT, I 870. 5. In the construction of this Art The word " rents " includes rent service, rentcharge, and rent seek, and also tithes and all periodical payments or renderings in lieu of or in the nature of rent or tithe. The word " annuities " includes salaries and pensions. The word " dividends " includes (besides dividends strictly so-called) all payments made by the name of dividend, bonus, or otherwise out of the revenue of trading or other public companies, divisible between all or any of the members of such respective companies, whether such payments shall be usually made or declared at any fixed times or otherwise; and all such divisible revenue shall, for the purposes of this Act, be deemed to have accrued by equal daily increment during and within the period for or in respect of which the payment of the same revenue shall be declared or expressed to be made, but the said word " dividend " does not include payments in the nature of a return or reimbursement of capital. 6. Nothing in this Act contained shall render apportionable any annual sums made payable in policies of assurance of any description. 7. The provisions of this Act shall not extend to any case in which it is or shall be expressly stipulated that no apportionment shall take place. APPENDIX II. CONVEYANCING ACT. I 88 I. 191 The Conveyancing and Law of Property Act, 1881. SECTION 43 AS TO MAINTENANCE. 43. (i) Where any property is held by trustees in trust for an infant, either for life or for any greater interest, and whether absolutely, or contingently on his attaining the age of twenty-one years, or on the occurrence of any event before his attaining that age, the trustees may, at their sole discretion, pay to the infant's parent or guardian, if any, or otherwise apply for or towards the infant's maintenance, education, or benefit, the income of that property, or any part thereof, whether there is any other fund applicable to the same purpose, or any person bound by law to provide for the infant's maintenance or education or not. (2) The trustees shall accumulate all the residue of that income in the way of compound interest, by investing the same and the resulting income thereof from time to time on securities on which they are by the settlement, if any, or by law, authorised to invest trust money, and shall hold these accumulations for the benefit of the person who ultimately becomes entitled to the property from which the same arises ; but so that the trustees may at any time, if they think fit, apply those accumulations, or any part thereof, as if the same were income arising in the then current year. (3) This section applies only if and as far as a contrary intention is not expressed in the instrument under which the interest of the infant arises, and shall have effect subject to the terms of that instrument and to the provisions therein contained. (4) This section applies whether that instrument comes into operation before or after the commencement of this Act. 192 APPENDIX ii. INTESTATES' ACT. 1890. Intestates' Estates Act, 1890. 53 & 54 VICT., CHAPTER 29. An Act to amend the Law by making better provision for the Widows of certain Intestates in the distribution of such Intestates' Property. [25th July 1890.] Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : i. The real and personal estates of every man who shall die intestate after the first day of September one thousand eight hundred and ninety leaving a widow but no issue shall, in all cases where the net value of such real and personal estates shall not exceed five hundred pounds, belong to his widow absolutely and exclusively. 2. Where the net value of the real and personal estates in the pre- ceding section mentioned shall exceed the sum of five hundred pounds the widow of such intestate shall be entitled to five hundred pounds part thereof absolutely and exclusively, and shall have a charge upon the whole of such real and personal estates for such five hundred pounds, with interest thereon from the date of the death of the intestate at 4 per cent, per annum until payment. 3. As between the real and personal representatives of such intestate, such charge shall be borne and paid in proportion to the values of the real and personal estates respectively. 4. The provision for the widow intended to be made by this Act shall be in addition and without prejudice to her interest and share in the residue of the real and personal estates of such intestate remaining after payment of the sum of five hundred pounds, in the same way as APPENDIX ii. INTESTATES' ACT, 1890. 193 if such residue had been the whole of such intestate's real and personal estates and this Act had not been passed. 5. The net value of such real estates as aforesaid shall for the pur- poses of this Act be estimated in the case of a fee simple upon the basis of twenty years' purchase of the annual value by the year at the date of the death of the intestate as determined by law for the purposes of property tax, less the gross amount of any mortgage of other prin- cipal sum charged thereon, and less the value of any annuity or other periodical payment chargeable thereon, to be valued according to the tables and rules in the Schedule annexed to the Statute sixteenth and seventeenth Victoria, chapter fifty-one, and in the case of an estate for a life or lives according to the said tables and rules. 6. The net value of such personal estate as aforesaid shall be ascer- tained by deducting from the gross value thereof all debts, funeral and testamentary expenses of the intestate, and all other lawful liabilities and charges to which the said personal estate shall be subject. 7. This Act may be cited as the Intestates' Estates Act, 1890. 8. This Act shall not extend to Scotland. Ip4 APPENDIX II. TRUSTEE ACT, 1893. The Trustee Act, 1893. PART II. VARIOUS POWERS AND DUTIES OK TRUSTEES. A-ppointment of New Trustees. 10. (i) Where a trustee, either original or substituted, and whether appointed by a Court or otherwise, is dead, or remains out of the United Kingdom for more than twelve months, or desires to be discharged from all or any of the trusts or powers reposed in or conferred on him, or refuses or is unfit to act therein, or is incapable of acting therein, then the person or persons nominated for the purpose of appointing new trustees by the instrument, if any, creating the trust, or if there is no such person, or no such person able and willing to act, then the surviving or continuing trustees or trustee for the time being, or the personal representatives of the last surviving or continuing trustee, may, by writing, appoint another person or other persons to be a trustee or trustees in the place of the trustee dead, remaining out of the United Kingdom, desiring to be discharged, refusing, or being unfit or being incapable, as aforesaid. (2) On the appointment of a new trustee for the whole or any part of trust property (a) the number of trustees may be increased ; and (6) a separate set of trustees may be appointed for any part of the trust property held on trusts distinct from those relating to any other part or parts of the trust property, notwithstanding that no hew trustees or trustee are or is to be appointed for other parts of the trust property, and any existing trustee may be appointed or remain one of such separate set of trustees ; or, if only one trustee was originally appointed, then one separate trustee may be so appointed for the first-mentioned part ; and (c) it shall not be obligatory to appoint more than one new trustee where only one trustee was originally appointed, or to fill up the APPENDIX II. TRUSTEE ACT, 1893. 195 original number of trustees where more than two trustees were originally appointed ; but, except where only one trustee was originally appointed, a trustee shall not be discharged under this section from his trust unless there will be at least two trustees to perform the trust. ii. (i) Where there are more than two trustees, if one of them by deed declares that he is desirous of being discharged from the trust, and if his co-trustees and such other person, if any, as is empowered to app cint trustees, by deed consent to the discharge of the trustee, and to the vesting in the co-trustees alone of the trust property, then the trustee desirous of being discharged shall be deemed to have retired from the trust, and shall, by the deed, be discharged therefrom under this Act, without any new trustee being appointed in his place. Various Powers and Liabilities. 17. (i) A trustee may appoint a solicitor to be his agent to receive and ^'ive a discharge for any money or valuable consideration or property receivable by the trustee under the trust, by permitting the solicitor to have the custody of, and to produce, a deed containing any such receipt as is referred to in Section 56 of the Conveyancing and Law -:-f Property Act, 1881 ; and a trustee shall not be chargeable with breach of trust by reason only of his having made or concurred in making any such appointment; and the producing of any such deed by the solicitor shall have the same validity and effect under the said section as if the person appointing the solicitor had not been a trustee. (2) A trustee may appoint a banker or solicitor to be his agent to receive and give a discharge for any money payable to the trustee under, or by virtue of, a policy of assurance, by permitting the banker or solicitor to have the custody of, and to produce the policy of assur- ance with a receipt signed by the trustee, and a trustee shall not be chargeable with a breach of trust by reason only of his having made or concurred in making any such appointment. (3) Nothing in this section shall exempt a trustee from any liability which he would have incurred if this Act had not been passed, in case he permits any such money, valuable consideration, or property to remain in the hands or under the control of the banker or solicitor for O 2 196 APPENDIX II. TRUSTEE ACT, 1893. a period longer than is reasonably necessary to enable the banker or solicitor (as the case may be) to pay or transfer the same to the trustee. (4) This section applies only where the money or valuable considera- tion or property is received after the twenty-fourth day of December one thousand eight hundred and eighty-eight. (5) Nothing in this section shall authorise a trustee to do anything which he is in express terms forbidden to do, or to omit anything which he is in express terms directed to do, by the instrument creating the trust. 18. (i) A trustee may insure against loss or damage by fire any building or other insurable property to any amount (including the amount of any insurance already on foot) not exceeding three equal fourth parts of the full value of such building or property, and pay the premiums for such insurance out of the income thereof or out of the income of any other property subject to the same trusts, without obtaining the consent of any person who may be entitled wholly or partly to such income. (2) This section does not apply to any building or property which a trustee is bound forthwith to conve^- absolutely to any beneficiary upon being requested to do so. 20. (i) The receipt in writing of any trustee for any money, securities, or other personal property or effects payable, transferable, or deliverable to him under any trust or power shall be a sufficient discharge for the same, and shall effectually exonerate the person paying, transferring, or delivering the same from seeing to the appli- cation or being answerable for any loss or misapplication thereof. 21. (i) An executor or administrator may pay or allow any debt cr claim on any evidence that he thinks sufficient. (2) An executor or administrator or two or more trustees, acting together, or a sole acting trustee where by the instrument, if any, creating the trust a sole trustee is authorised to execute the tru>t> and powers thereof, may, if and as he or they may think fit, accept any composition or any security, real or personal, for any debt or for any property, real or |>rr-m;il, claimed, and may allow APPENDIX II. TRUSTEE ACT, 1893. X 97 any time for payment for any debt, and may compromise, compound, abandon, submit to arbitration, or otherwise settle any debt, account, claim, or thing whatever relating to the testator's or intestate's estate or to the trust, and for any of those purposes may enter into, give, execute, and do such agreements, instruments of composition or arrange- ment, releases, and other things as to him or them seem expedient, without being responsible for any loss occasioned by any act or thing so done by him or them in good faith. 22. (i) Where a power or trust is given to or vested in two or more trustees jointly, then, unless the contrary is expressed in the instru- ment, if any, creating the power or trust, the same may be exercised or performed by the survivor or survivors of them for the time being. 23. A trustee acting or paying money in good faith under or in pursuance of any power of attorney shall not be liable for any such act or payment by reason of the fact that at the time of the payment or act the person who gave the power of attorney was dead or had done some act to avoid the power, if this fact was not known to the trustee at the time of his so acting or paying. Provided that nothing in this section shall affect the right of any person entitled to the money against the person to whom the payment is made, and that the person so entitled shall have the same remedy against the person to whom the payment is made as he would have had against the trustee. 24. A trustee shall, without prejudice to the provisions of the instrument, if any, creating the trust, be chargeable only for money and securities actually received by him, notwithstanding his signing any receipt for the sake of conformity, and shall be answerable and accountable only for his own acts, receipts, neglects, or defaults, and not for those of any other trustee, nor for any banker, broker, or other person with whom any trust moneys or securities may be deposited, nor for the insufficiency or deficiency of any securities, nor for any other loss, unless the same happens through his own wilful default; and may reimburse himself, or pay or discharge out of the trust premises, all expenses incurred in or about the execution of his trusts or powers. 198 APPENDIX II. TRUSTEE ACT, 1893. PART III. POWERS OF THE CotfRT. Payment into Court by Trustees. 42. (i) Trustees, or the majority of trustees, having in their hands or under their control money or securities belonging to a trust, may pay the same into the High Court ; and the same shall, subject to rules of Court, be dealt with according to the orders of the High Court. (2) The receipt or certificate of the proper officer shall be a sufficient discharge to trustees for the money or securities so paid into Court. (3) Where any moneys or securities are vested in any persons as trustees, and the majority are desirous of paying the same into Court, but the concurrence of the other or others cannot be obtained, the High Court may order the payment into Court to be made by the majority without the concurrence of the other or others ; and where any such moneys or securities are deposited with any banker, broker, or other depositary, the Court may order payment or delivery of the moneys or securities to the majority of the trustees for the purpose of payment into Court, and every transfer, payment, and delivery made in pursuance of any such order shall be valid and take effect as if the same had been made on the authority or by the act of all the persons entitled to the moneys and securities so transferred, paid, or delivered. Miscellaneous. 45. (i) Where a trustee commits a breach of trust at the instigation or request or with the consent in writing of a beneficiary, the High Court may, if it thinks fit, and notwithstanding that the beneficiary may be a married woman entitled for her separate use and restrained from anticipation, make such order as to the Court seems just, for impound- ing all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee or person claiming through him. (2) This section shall apply to breaches of trust committed as well before as after the passing of this Act, but shall not apply so as to prejudice any question in an action or other proceeding which was pending on the twenty-fourth day of December one thousand eight hundred and eighty-eight, and is pending at the commencement of this Act. APPENDIX II. JUDICIAL TRUSTEES ACT, 1896, 199 AND RULES. Judicial Trustees Act, 1896. 59 & 60 VICT.. CHAPTER 35. An Act to provide for the Appointment of Judicial Trustees and otherwise to amend the Law respecting the Administration of Trusts and the Liability of Trustees. [Mth August 1896.] Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : i. (i) Where application is made to the Court by or on behalf of the person creating or intending to create a trust, or by or on behalf of a trustee or beneficiary, the Court may, in its discretion, appoint a person (in this Act called a judicial trustee) to be a trustee of that trust, either jointly with any other person or as sole trustee, and, if sufficient cause is shown, in place of all or any existing trustees. (5) There may be paid to a judicial trustee out of the trust property such remuneration, not exceeding the prescribed limits, as the Court may assign in each case, subject to any rules under this Act respecting the application of such remuneration where the judicial trustee i= an official of the Court, and the remuneration so assigned to any judicial trustee shall, save as the Court may for special reasons otherwise order, cover all his work and personal outlay. (6) Once in every year the accounts of every trust of which a judicial trustee has been appointed shall be audited, and a report thereon made to the Court by the prescribed persons, and, in any case where the Court shall so direct, an inquiry into the administration by a judicial trustee of any trust, or into any dealing or transaction of a judicial trustee, shall be made in the prescribed manner. 200 APPENDIX II. JUDICIAL TRUSTEES ACT. 1896. AND RULES. 3. (i) If it appears to the Court that a trustee, whether appointed under this Act or not, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the passing of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed such breach, then the Court may relieve the trustee either wholly or partly from personal liability for the same. (2) This section shall come into operation at the passing of this Act. 4. (i) Rules may be made for carrying into effect this Act, and especially (1) For requiring judicial trustees, who are not officials of the Court, to give security for the due application of any trust property under their control : (2) Respecting the safety of the trust property, and the custody thereof : (3) Respecting the remuneration of judicial trustees and for fixing and regulating the fees to be taken under this Act so as to cover the expenses of the administration of this Act, and respecting the payment of such remuneration and fees out of the trust property, and, where the judicial trustee is an official of the Court. respecting the application of the remuneration and fees payable to him : (10) For preventing the employment by judicial trustees of other persons at the expense of the trust, except in cases of stri. i necessity : (n) For the filing and auditing of the accounts of any trust of \vhi.-h a judicial trustee has been appointed. 6. (4) This Act, except as by this Act other \\ i>r |mvided, shall come into operation on the first day of May one thousand eight hundred and ninety-seven. APPENDIX II. JUDICIAL TRUSTEES ACT. 1896, 2OI AND RULES. JUDICIAL TRUSTEE RULES. Rules under the Judicial Trustees Act, 1896. i. The following Rules may be cited as the Judicial Trustee Rules, 1897, and shall apply as far as practicable to all matters and proceed- ings under the Judicial Trustees Act, 1896 (in these Rules called the Act). Appointment of Judicial I rustee. 2. An application to the Court to appoint a judicial trustee shall be in the Chancery Division. 4. (i) Where an application is made for the appointment of a judicial trustee by originating summons, the applicant must, when he takes out the summons, supply for the use of the Court a written state- ment signed by him containing the following particulars so far as he can gain information with regard to them : (a) A short description of the trust and instrument by which it is, or is to be, created, and of the relation which the applicant bears to the trust ; (b) If a person is nominated as judicial trustee, the name and address of the person nominated, and short particulars of the reasons which lead to his nomination ; (c) If a person is nominated as judicial trustee, a statement whether it is proposed that the person nomiated should be remunerated or not ; (it) Short particulars of the trust property, with an approximate estimate of its income, and capital value; 2O2 APPENDIX II. JUDICIAL TRUSTEES ACT. 1896. AND RULES. (e) Short particulars of the incumbrances (if any) affecting the trust property ; (/) A statement whether it is proposed that the judicial trustee should bs a sole trustee or should act jointly with other trustees. (2) An affidavit by the applicant verifying the statement shall be sufficient -prinid facie evidence of the particulars contained in the statement. (3) Where the applicant cannot gain the information necessary for making the required statement on any point, he must mention the fact in his statement. Appointment of Official of Court to be Judicial Trustee. 7. (i) Where an official of the Court is appointed judicial trustee, the official solicitor of the Court shall (subject to the provisions herein- after contained in Rules 29, 30, and 31) be so appointed, unless, for special reasons, the Court directs that some other official of the Court should be so appointed. (2) Any official of the Court appointed to be a judicial trustee shall, on his ceasing to hold office, cease to be such a trustee without any formal resignation. (3) Where an official of the Court is judicial trustee, any trust pro- perty vested in or held by him, shall be vested in and held by him under his official title and not in his own name. (4) Where an official of the Court appointed to be a judicial trustee of a trust dies, or ceases to hold office, his successor in office shall, unless the Court otherwise directs, become judicial trustee of the trust without any order of the Court or formal appointment, and the trust property shall, without any conveyance, assignment, or transfer, in such a case become vested in the successor as it was vested in his predecessor in office. (5) For the purpose of the definition of "official of the Court, in Section 5 of the Act, any paid office in or connected with the Court shall be a prescribed office. APPENDIX II. --JUDICIAL TKTSTEES ACT, l8o'>. 2O$ AND RUI.l :>. Administration of the Trust. 8. (i) A judicial trustee must, unless in any case the Court considers that it is unnecessary, as soon as may be after his appointment, furnish the Court with a complete statement of the trust property, accompanied with an approximate estimate of the income and capital value of each item. (2) It shall be the duty of the judicial trustee to give such informa- tion to the Court as may be necessary for the purpose of keeping the statement of the trust property correct for the time being. 9. (i) A judicial trustee, if not an official of the Court, must give security to the Court for the due application of the trust property, unless the Court dispenses with security under this rule. (2) The Court may, on the appointment of a judicial trustee, or at any time during his continuance in office as judicial trustee, dispense with security on the application either of the person who is to be appointed or is judicial trustee, or of any person appearing to the Court to be interested in the trust, and shall do so where a judicial trustee is appointed on the application of a person creating or intend- ing to create a trust, and that person desires that security should be dispensed with, unless for special reasons the Court consider that security is in such a case necessary or desirable. (3) The security must be given, either by recognisance, bond, or otherwise, as the Court directs, and with such sureties as the Court approves. (4) If the Court is satisfied that sufficient provision is made for the safety of the capital of the trust property, the amount of the security shall, in ordinary cases, be an amount exceeding by 20 per centum the income of the trust property as estimated by the Court. (8) Where security is not dispensed with, the appointment of a person to be judicial trustee shall not take effect until he has given the security required by the Court under this rule. 204 APPENDIX II. JUDICIAL TRUSTEES ACT, 1896, AND RULES. (9) Any premium payable by a judicial trustee to an)' guarantee company on account of his security may, if the Court so directs, be paid out of the trust property. 10. (i) When a judicial trustee is appointed a separate account .'01 receipts and payments on behalf of the trust must be kept in the name of the trustees at some bank approved by the Court. (2) All title deeds and all certificates and other documents which are evidence of the title of the trustee to any of the trust property shall be deposited either with that bank or in such other custody as the Court directs. (3) The deeds or documents must be deposited in the names of the trustees, and the judicial trustee must give notice to the body or person with whom the deeds or documents are so deposited not to deliver any of them over to any person except on a request signed by the judicial trustee and countersigned by the officer of the Court, and also to allow any person authorised by the officer of the Court in writing to inspect them during business hours. (4) The judicial trustee must deposit with the Court a list of all deeds or documents deposited in any custody in pursuance of this rule, and must give information to the Court from time to time of any variation to be made in the list. (5) The judicial trustee must, if at any time directed by the Court, give an order to the bank at which the trust account is kept not to pay at any one time any .sum over a specified amount out of the trust account except on an order countersigned by the officer of the Court. (6) Any payments on account of the income of the trust property may be provided for by means of a standing order to the bank at which the trust account is kept. (8) Where an official of the Court is judicial trustee the Court may direct that, instead of a separate account of the receipts and payments on behalf of the trust being kept at some bank approved by the Court, all receipts on behalf of the trust may be dealt with, and all payments on behalf of the trust may be made, in such manner, and subject to APPENDIX II. JUDICIAL TRUSTEES ACT, 1896, 205 AND RULES. such regulations as to the accounts to be kept of the receipts and pay- ments and the procedure to be followed in dealing therewith as the Treasury direct. ii. A judicial trustee must pay all money coming into his hands on account of his trust without delay to the trust account at the bank, and if he keeps any such money in his hands for a longer time than the Court considers necessary, shall be liable to pay interest upon it at such rate not exceeding 5 per centum as the Court may fix for the time during which the money remains in his hands. Accounts and Audit. 14. (i) The Court shall give directions to a judicial trustee as to the date to which the accounts of the trust are to be made up in each year, and shall fix in each year the time after that date within which the accounts are to be delivered to it for audit. (2) The accounts shall in ordinary cases be audited by the officer of the Court, but the Court, if it considers that the accounts are likely to involve questions of difficulty, may refer them to a professional accountant for report, and order the payment to him of such amount in respect of his report as the Court may fix. 15. (i) The accounts of any trust of which there is a judicial trustee, with a note of any corrections made upon the audit, shall be filed as the Court directs. (2) The judicial trustee shall send a copy of the accounts, or, if the Court thinks fit, of a summary of the accounts, of the trust to such beneficiaries or other persons as the Court thinks proper. (3) The Court may, if it thinks fit, having regard to the nature of the relation of the applicant to the trust, allow any person applying to inspect the filed accounts so to inspect them on giving reasonable notice to the officer of the Court. 16. A judicial trustee shall, unless the Court otherwise directs, be allowed on the audit of his accounts deductions made on account of his remuneration and allowances under these rules and also on account of the fees paid by him under these rules, but shall not be allowed 206 APPENDIX II. JUDICIAL TRUSTEES ACT. 1896, AND RULES. any deduction on account of the expenses of professional assistance, or his own work, or personal outlay, unless the deduction has been authorised by the Court in pursuance of the Act, or the Court is satis- fied that the deduction is justified by the strict necessity of the case. Remuneration and Allowances. 17. u) \Yhere a judicial trustee is to be remunerated the remunera- tion to be paid to him shall be fixed by the Court, and may be altered by the Court from time to time. (2) In fixing the remuneration regard shall be had to the duties entailed upon the judicial trustee by the trust. (3) The Court may make, if it thinks fit, special allowances to judicial trustees for the following matters, to be paid out of the trust property (a) For the statement of trust property prepared by a judicial trustee on his appointment, an allowance not exceeding ten guineas ; (b) For realising and reinvesting trust property, where the property is realised for the purpose of reinvestment, an allowance not exceeding i- per centum on the amount realised and reinvested. (c) For realising or investing trust property in any other case, an allowance not exceeding i per centum on the amount realised or invested. (4) The Court may also in any year make a special allowance to a judicial trustee, if satisfied that in that year more trouble has been thrown upon the trustee by reason of exceptional circumstances than would ordinarily be involved in the administration of the trust. (5) Where a trustee is remunerated, any allowance under this rule may be paid in addition to his remuneration. (6) Any remuneration or allowance payable to a judicial trustee shall be paid or allowed to him at such times and in such manner as the Court directs. 18. Where an official of the Court is appointed to be a judicial trustee, any remuneration, allowances, or other payments payable to him on account of his services as trustee shall be paid, accounted for, and applied in such manner as the Treasury direct. APPENDIX II. JUDICIAL TRUSTEES ACT, 1896, 207 AND RULES. Removal and Suspension of Judicial Trustee. 20. (i) The Court may at any time, either without any application or on the application of any person appearing to the Court to be interested in the trust, suspend a judicial trustee, if the Court considers that it is expedient to do so in the interests of the trust, and a judicial trustee while suspended shall not have power to act as trustee. 21. (i) The Court may, either without any application or on the application of any person appearing to the Court to be interested in the trust, remove a judicial trustee if the Court considers that it is expedient to do so in the interests of the trust. Resignation and Discontinuance of Judicial Trustee. 23. (i) If a judicial trustee desires to be discharged from his trust he must give notice to the Court, stating at the same time what arrange- ments it is proposed to make with regard to the appointment of a successor.. (2) The Court shall give facilities for the appointment on a proper application of an official of the Court to be judicial trustee in place of a judicial trustee who desires to be discharged, in cases where no fit and proper person appears available for the office, or where the Court considers that' such an appointment is convenient or expedient in the interests of the trust. 24. (i) Where there is a judicial trustee of a trust the Court may at any time, on the application made by summons of any person appear- ing to the Court to be interested in the trust, order that there shall cease to be a judicial trustee of the trust, whether the person who is judicial trustee continues as trustee or not. Special Trusts. 25. (i) Any person who is an executor or administrator may be appointed a judicial trustee for the purpose of the collection and distribution of the estate of a deceased person in the same manner and subject to the same provisions as in the case of an ordinary trust. (2) Where an administrator has given an administration bond he need not give security as a judicial trustee under these Rules unless the Court directs that he is to do so. 2O8 APPENDIX II. COLONIAL STOCK ACT, 1900. Colonial Stock Act, 1900. 63 & 64 VICT., CHAPTER 62. An Act to amend the Colonial Stock Acts, 1877 and 1892, and the Trustee Act, 1893. [8th August 1900.] Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : i. For the purpose of enabling the Colonial Stock Acts, 1877 and 1892, to be applied to stock issued before the passing of this Act, it shall not be necessary that any prospectus, notice, stock certificate, coupon, dividend warrant, or other certificate or document issued before the passing of this Act in relation to the stock, should state the particulars required to be stated therein by Section ip of the Colonial Stock Act, 1877. 2. The securities in which a trustee may invest under the powers of the Trustee Act, 1893, shall include any colonial stock which is regis- tered in the United Kingdom in accordance with the provisions of the Colonial Stock Acts, 1877 and 1892, as amended by this Act, and with respect to which there have been observed such conditions (if any) as the Treasury may by order notified in the London Gazette prescribe. The restrictions mentioned in Section 2, Subsection (2), of the Trustee Act, 1893, with respect to the stocks therein referred to shall apply to Colonial Stock. The Treasury shall keep a list of any colonial stocks in respect of which the provisions of this Act are for the time being complied with, and shall publish the list in the London and Edinburgh Gazettes, and in such other manner as may give the public full information on the subjo t. 3. In the application of this \, \ t,, Siutland the word> Trusts (Scotland) Amendment Act, 1884," shall be substituted for the words, APPENDIX II. COLONIAL STOCK ACT, 1900. 209 " Trustee Act, 1893," where those words first occur in Section 2, and the restrictions mentioned at the end of the said section shall apply. 4. This Act may be cited as the Colonial Stock Act, 1900, and the Colonial Stock Acts, 1877 and 1892, and this Act may be cited collectively as the Colonial Stock Acts, 1877 to 1900. The Treasury Order has been issued in the following terms : i. The Colony shall provide by legislation for the payment out of the revenues of the Colony of any sums which may become payable to stockholders under any judgment, decree, rule, or order of a Court in the United Kingdom. 2. The Colony shall satisfy the Treasury that adequate funds (as and when required) will be made available in the United Kingdom to meet any such judgment, decree, rule, or order. 3. The Colonial Government shall place on record a formal expres- sion of their opinion that any colonial legislation which appears to the Imperial Government to alter any of the provisions affecting the stock to the injury of the stockholder, or to involve a departure from the original contract in regard to the stock, would properly be disallowed. From time to time the Treasury announce in the London Gazette stocks in respect of which the provisions have been complied with, and it may be said generally that most colonial stocks are now eligible as trust investments. MEMO. Section 19 of the Colonial Stock Act, 1877, enacts that where a colony provides for a register of its stock in the United Kingdom every prospectus and every stock certificate in respect thereof shall state that the revenues of the colony alone are liable in respect of the stock and the dividends thereon, and that the Consolidated Fund of the United Kingdom and the Commissioners of (His) Majesty's Treasury are not directly or indirectly liable. The 1892 Act provides that the above Section 19 shall not apply to any stock in respect to which the provisions of that section had not been observed before the passing of the Act. P 210 APPENDIX II. PUBLIC TRUSTEE ACT, 1906, AND RULES. Public Trustee Act, 1906. 6 EDWARD VII, CHAPTER 55. An Act to provide for the appointment of a Public Trustee and to amend the Law relating to the administration of Trusts. [2ist December 1906.] Be it enacted by the King's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : ESTABLISHMENT OF PUBLIC TRUSTEE. i. (i) There shall be established the office of public trustee. (2) The public trustee shall be a corporation sole under that name, with perpetual succession and an official seal, and may sue and be sued under the above name like any other corporation sole, but any instruments sealed by him shall not, by reason of his using a seal, be rendered liable to a higher stamp duty than if he were an individual. POWERS AND DUTIES OF PUBLIC TRUSTEE. 2 . (i) Subject to and in accordance with the provisions of this Act and rules made thereunder, the public trustee may, if he thinks fit (a) Act in the administration of estates of small value ; () Act as custodian trustee ; (c) Act as an ordinary trustee ; (d) He appointed to be a judicial trustee ; (e) Be appointed to be the administrator of the property of a convict under the Forfeiture Act, 1870. APPENDIX II. PUBLIC TRUSTEE ACT, 1906, JM AND RULES. (2) Subject to the provisions of this Act, and to the rules made there- under, the public trustee may act either alone or jointly with any person or body of persons in any capacity to which he may be appointed in pursuance cf this Act, and shall have all the same powers, duties, and liabilities, and be entitled to the same rights and immunities, and be subject to the control and orders of the Court, as a private trustee acting in the same capacity. (3) The public trustee may decline, either absolutely or except on the prescribed conditions, to accept any trust, but he shall not decline to accept any trust on the ground only of the small value of the trust property. (4) Ihe public trustee shall not accept any trust which involves the management or carrying on of any business, except in the cases in which he may be authorised to do so by rules made under this Act, nor any trust under a deed of arrangement for the benefit of creditors, nor the administration of any estate known or believed by him to be insolvent. (5) The public trustee shall not accept any trust exclusively for religious or charitable purposes, and nothing in this Act contained, or in the rules to be made under the powers in this Act contained, shall abridge or affect the powers or duties of the official trustee of charity lands or official trustees of charitable funds. (i) In the Administration of Small Estates. 3. (i) Any person who in the opinion of the public trustee would be entitled to apply to the Court for an order for the administration by the Court of an estate, the gross capital value whereof is proved to the satisfaction of the public trustee to be less than one thousand pounds, may apply to the public trustee to administer the estate, and, where any such application is made and it appears to the public trustee that the persons beneficially entitled are persons of small means, the public trustee shall administer the estate, unless he sees good reason for refusing to do so. P 2 212 APPENDIX II. PUBLIC TRUSTEE ACT, 1906, AND RULES. (2) On the public trustee undertaking, by declaration in writing signed and sealed by him, to administer the estate the trust property other than stock shall, by virtue of this Act, vest in him, and the right to transfer or call for the transfer of any stock forming part of the estate shall also vest in him, in like manner as if vesting orders had been made for the purpose by the High Court under the Trustee Act, 1893, and that Act shall apply accordingly. As from such vesting any trustee entitled under the trust to administer the estate shall be discharged from all liability attaching to the administration, except in respect of past acts : Provided that (a) The public trustee shall not exercise the right of himself trans- ferring the stock without the leave of the Court. (5) Where proceedings have been instituted in any Court for the administration of an estate, and by reason of the small value of the estate it appears to the Court that the estate can be more economically administered by the public trustee than by the Court, or that for any other reason it is expedient that the estate should be administered by the public trustee instead of the Court, the Court may order that the estate shall be administered by the public trustee, and thereupon (subject to any directions by the Court) this section shall apply as if the administration of the estate had been undertaken by the public trustee in pursuance of this section. (2) As Custodian Trustee. 4. (i) Subject to rules under this Act the public trustee may, if he consents to act as such, and whether or not the number of trustees has been reduced below the original number, be appointed to be custodian trustee of any trust (a) By order of the Court made on the application of any person on whose application the Court may order the appointment of a new trustee ; or (b) By the testator, settlor, or other creator of any trust ; or (c) By the person having power to appoint new trustees. APPENDIX II. IUBLIC TRUSTEE ACT, 1906, I j AND RULES. (2) Where the public trustee is appointed to be custodian trustee of any trust (a] The trust property shall be transferred to the custodian trustee as if he were sole trustee, and for that purpose vesting orders may, where necessary, be made under the Trustee Act, 1893 ; (b] The management of the trust property and the exercise of any power or discretion excrcisable by the trustees under the trust shall remain vested in the trustees other than the custodian trustee (which trustees are' hereinafter referred to as the managing trustees) : (c] As between the custodian trustee and the managing trustees, and subject and without prejudice to the rights of any other persons, the custodian trustee shall have the custody of all securities and documents of title relating to the trust property, but the managing trustees shall have free access thereto and be entitled to take copies thereof or extracts therefrom : (d] The custodian trustee shall concur in and perform all acts neces- sary to enable the managing trustees to exercise their powers of management or any other power or discretion vested in them (including the power to pay money or securities into Court), unless the matter in which he is requested to concur is a breach of trust, or involves a personal liability upon him in respect of calls or otherwise, but, unless he so concurs, the custodian trustee shall not be liable for any act or default on the part of the managing trustees or any of them : (e] All sums payable to or out of the income or capital of the trust property shall be paid to or by the custodian trustee : Provided that the custodian trustee may allow the dividends and other income derived from the trust property to be paid to the managing trustees or to such person as they direct, or into such bank to the credit of such person as they may direct, and in 2I.J. APPENDIX II. PUBLIC TRUSTEE ACT, 1906, AND RULES. such case shall be exonerated from seeing to the application thereof and shall not be answerable for any loss or misapplication thereof : (/) The Court may, on the application of either the custodian trustee, or any of the managing trustees, or of any beneficiary, and on proof to their satisfaction that it is the general wish of the bene- ficiaries, or that on other grounds it is expedient, to terminate the custodian trusteeship, make an order for that purpose, and the Court may thereupon make such vesting orders and give such directions as under the circumstances may seem to the Court to be necessary or expedient. (3) The provisions of this section shall apply in like manner as to the public trustee to any banking or insurance company or other body corporate entitled by rules made under this Act to act as custodian trustee, with power for such company or body corporate to charge and retain or pay out of the trust property fees not exceeding the fees chargeable by the public trustee as custodian trustee. (3) As an Ordinary Trustee. 5. (i) The public trustee may by that name, or any other sufficient description, be appointed to be trustee of any will or settlement t-r other instrument creating a trust or to perform any trust or duty belong- ing to a class which he is authorised by the rules made under this Act to accept, and may be so appointed whether the will or settlement or instrument creating the trust or duty was made or came into opera- tion before or after the passing of this Act, and either as an original or as a new trustee, or as an additional trustee, in the same cases, and in the same manner, and by the same persons or Court, as if he were a private trustee, with this addition, that, though the trustees originally appointed were two or more, ths public trustee may be appointed sole tiustee. (2) Where the public trustee has been appoinUd a trustee of any tru-t, a ; trustee may retire from the trust under and in accordance with Section n of the Trustee A(t, 18^3, notwithstanding that there APPENDTX IT. PUBLIC TRUSTEE ACT, 1906, 21$ AND RULES. are not more than two trustees, and without such consents as are required by that section. (3) The public trustee shall not be so appointed either as a new or additional trustee where the will, settlement, or other instrument creating the trust or duty contains a direction to the contrary, unless the Court otherwise order. LIABILITY : OFFICERS AND OFFICES : FEES. 7. (i) The Consolidated Fund of the United Kingdom shall be liable to make good all sums required to discharge any liability which the public trustee, if he were a private trustee, would be personally liable to discharge, except where the liability is one to which neither the public trustee nor any of his officers has in any way contributed, and which neither he nor any of his officers could by the exercise of reason- able diligence have averted, and in that case the public trustee shall not, nor shall the Consolidated Fund, be subject to any liability. (2) All sums payable in pursuance of this section out of the Con- solidated Fund shall be charged on and issued out of that fund or the growing produce thereof. 8. (i) The Lord Chancellor shall appoint a fit person to the office of public trustee, who shall hold office during pleasure, and receive such salary or fees, and be appointed on such terms, as the Treasury may determine. SUPPLEMENTAL PROVISIONS AS TO PUBLIC TRUSTEE. 10. (i) A person aggrieved by any act or omission or decision of the public trustee in relation to any trust may apply to the Court, and the Court may make such order in the matter as the Court thinks just. ii. (i) The public trustee shall not, nor shall any of his officers, act under this Act for reward, except as provided by this Act. (2) The public trustee may, subject to the rules made under this Act, employ for the purposes of any trust such solicitors, bankers, account- ants, and brokers, or other persons as he may consider necessary, and in determining the persons to be so employed in relation to any trust 2l6 APPENDIX II. PUBLIC TRUSTEE ACT, 1906, AND RULES. the public trustee shall have regard to the interests of the trust, but subject to this shall, whenever practicable, take into consideration the wishes of the creator of the trust and of the other trustees (if any), and of the beneficiaries, either expressed or as implied by the practice of the creator of the trust, or in the previous management of the trust. INVESTIGATION AND AUDIT OF TRUST ACCOUNTS. 13. (i) Subject to rules under this Act and unless the Court other- wise orders, the condition and accounts of any trust shall, on an application being made and notice thereof given in the prescribed manner by any trustee or beneficiary, be investigated and audited by such solicitor or public accountant as may be agreed on by the applicant and the trustee or, in default of agreement, by the public trustee or some person appointed by him : Provided that (except with the leave of the Court) such an investiga- tion or audit shall not be required within twelve months after any such previous investigation or audit, and that a trustee or beneficiary shall not be appointed under this section to make an investigation or audit. (2) The person making the investigation or audit (hereinafter called the auditor) shall have a right of access to the books, accounts, and vouchers of the trustees, and to any securities and documents of title held by them on account of the trust, and may require from them such information and explanation as may be necessary for the performance of his duties, and upon the completion of the investigation and audit shall forward to the applicant and to every trustee a copy of the accounts, together with a report thereon, and a certificate signed by him to the effect that the accounts exhibit a true view of the state of the affairs of the trust and that he has had the securities of the trust fund investments produced to and verified by him or (as the case may be) that such accounts are deficient in such respects as may be specified in such certificate. (3) Every beneficiary under the trust shall, subject to rules under this Act, be entitled at all reasonable times to inspect and take copies APPENDIX II. PUBLIC TRUSTEE ACT, 1906, 217 AND RULES. of the accounts, report, and certificate, and, at his own expense, to be furnished with copies thereof or extracts therefrom. (4) The auditor may be removed by order of the Court, and, if any auditor is removed, or resigns, or dies, or becomes bankrupt or incapable of acting before the investigation and audit is completed, a new auditor may be appointed in his place in like manner as the original auditor. (5) The remuneration of the auditor and the other expenses of the investigation and audit shall be such as may be prescribed by rules under this Act, and shall, unless the public trustee otherwise directs, be borne by the estate: and, in the event of the public trustee so directing, he may order that such expenses be borne by the applicant or by the trustees personally or partly by them and partly by the applicant. RULES, DEFINITIONS, SHORT TITLE, AND EXTENT. 1 6. This Act shall come into operation on the first day of January one thousand nine hundred and eight. 17. (i) This Act may be cited as the Public Trustee Act, 1906. (2) This Act shall not extend to Ireland or Scotland. The Public Trustee Rules, 1907. Trusteeships. -The public trustee may if he thinks fit [) Act as custodian trustee of a trust which involves the manage- ment or carrying on of any business but upon the conditions that (a) he shall not act in the management or carrying on of such business, and (b) he shall not hold any property of such a nature as will expose the holder thereof to any liability except under exceptional circumstances and when he is satisfied that he is fully indemnified or secured against loss ; and 2l8 APPENDIX II. PUBLIC TRUSTEE ACT, 1906, AND RULES. (2) Accept as ordinary trustee under exceptional circumstances a trust which involves the management or carrying on of any business, but upon the conditions that except with the consent of the Treasury he shall only carry on the same (a) for a short time not exceeding eighteen months, and (b] with a view to sale disposition or winding-up, and (c) if satisfied that the same can be carried on without risk of loss. 10. (i) An application to the public trustee to act as trustee 01 custodian trustee may be made (a) Where the appointment has been made by a testator by any trustee or beneficiary under the testamentary instrument ; and (b) In the case of the estate of an intestate by any person appear- ing to be beneficially interested in the estate ; and (c) In any case by the persons or any one of the persons having power under the Act to make the appointment. (2) It shall be the duty of any person appointed by a testator to be co-trustee with the public trustee, and not renouncing or disclaiming the trust, to give to the public trustee notice in writing of such appoint- ment as soon as practicable after the same has come to his knowledge. ii. (i) Any application under the last preceding rule shall be made in writing addressed to the public trustee at his office in London, or any branch office for the time being in existence, and may be left at or sent by post to any such office as aforesaid. (2) Upon receiving any such application the public trustee may require to be produced to him the trust instrument (if any), and may require to be supplied to him a copy of that instrument, and of any other document affecting the trust, and such particulars as to the nature and value of the trust property, and the liabilities (if any) attaching to -u h property, or the holder thereof, and the names and places of abode of any beneficiaries and trustees under the trust, and such other in formation relating to the trust as he may consider it desirable to obtain in any particular case. APPENDIX II. PUBLIC TRUSTEE ACT, 1906, 2IQ AND RULES. 12. As soon as may be after receiving any such application the public trustee shall take into consideration upon such evidence as may appear to him sufficient (a) The gross capital value of the trust property : (/;) The modi- nf invt stnient and the .ondition of the trust property : (<) The situation, tenure, and ( hararter of any land comprised in tlie trust property : (t- or an officer of the public trustee authorised in writing by him to act in that behalf either generally or in any particular case, provided that in any particular case the public trustee may authorise the payment of income by the person liable to pay the same direct to the pn n entitled to receive the same or to his bank. 27. (i) The income of the trust property may be paid to the person for the time being entitled to receive the same 1 , either through a bank or direct, and where such person is a married woman may be so paid notwithstanding any restraint on anticipation. (2) Where authority is given to any corporation or bank to pay any income to any person, the books of that corporation or bank showing the payment of that income in accordance with the authority shall be a sufficient discharge to the public trustee. (3) Where authority is given to any person to pay any income to the bank of the person entitled, the certificate of that bank stating the receipt of that income shall be a sufficient discharge to the public trustee. (4) Where any person is solely entitled to receive any income without any restraint on anticipation the public trustee may, on the request in writing of that person, authorise him for such period as the public trustee may think fit to collect or arrange for the collection of such income. During the continuance of any such authority such request in writing shall be a sufficient discharge to the public trustee in respect of such income. 28. The public trustee may, if the special circumstances of the case appear to him to render it desirable, pay to his co-trustee, or allow him to receive, the income of the trust property or any part thereof, on such co-trustee undertaking to apply it in manner directed by the trust. 222 APPENDIX II. PUBLIC TRUSTEE ACT, 1906, AND RULES. 32. (i) Upon an application in writing by or with the authority of any person interested in the trust property the public trustee (a) Shall permit the applicant or his solicitor or other authorised agent to inspect and take copies of any entry in any register relating to the trust or estate and (so far as the interest of the applicant in the trust property is or may be affected thereby) of any account, notice, or other document in the itistody of the public trustee. (/>) Shall at the expense of the applicant supply him or his solicitor or other authorised agent with a copy of any such entry, account, or document as aforesaid or of any extract therefrom. (c) Shall give to such applicant or his solicitor or other authorised agent such information respecting the trust or estate and the trust property as shall be reasonably requested in the applica- tion and shall be within the power of the public trustee. (2) Subject as aforesaid the public trustee shall observe strict secrecy in respect of every trust or estate in course of administration by him. Corporate Bodies as Custodian Trustees. 36. (i) The bodies corporate entitled to act as custodian trustee shall be any such incorporated banking or insurance or guarantee or trust ( mpany or friendly society, and any such body corporate established for charitable or philanthropic purposes as may be approved by the public trustee and the Treasury. (2) The public trustee may require payment by any applicant for such approval of a fee not exceeding ,10 IDS. (3) Such approval may be granted subject to such conditions as to the rendering by the body corporate, and verification, of prriodii ;il returns of business transacted, and fevs and any other emoluments rc ived, and otherwise, a> the Treasury may require either generally or in any particular case APPENDIX II. PUBLIC TRUSTEE ACT, 1906, 223 AND RULES. (4) Any such approval may at any time be withdrawn without reason assigned. Investigation and Audit of Trust Accounts. 37. Any application under Section 13 (i) of the Act shall be made to the public trustee, and notice thereof shall be given (a) if the applicant is a beneficiary, to every trustee; and (b) if the applicant is a trustee, to each co-trustee, and also to the person entitled to the receipt of the income of the trust property. 38. If within three months from the date of the receipt of the notice no solicitor or public accountant shall have been appointed by the applicant and the trustees to conduct the investigation and audit, there shall be deemed to be a default of agreement within the meaning of Section 13 (i) of the Act, and the applicant may apply to the public trustee accordingly. 39. The remuneration of the auditor and the other expenses of the investigation and audit shall be such as may be agreed on by the trustees and the person entitled to the receipt of the income of the trust property and the auditor, or (in default of such agreement) deter- mined by the public trustee, who shall, in determining the same, have regard to the estimated value of the trust property, the time occupied or likely to be occupied by the investigation and audit, and the other circumstances of the case. I N DEX. Account illustrating case where testator was in partnership and also had private business, 48, 147 i. ,, the payment of legacy duty, 52 ,, ,, ,, incidence of legacy duty, 54 ,, ,, ,, payment of estate duty, 46 ,, ,, complete estate. See Alexander. ,, ,, a legacy in trust, 68, 74 ,, an intestacy, 79, 86 ,, ,, legal decisions. See under respective names. ,, to render to beneficiaries, 57 ,, illustrating the opening of Trust Books generally, 60 ,. ,, ,, writing-up of Trust Books, 63 ,, ,, ,, a loss on a mortgage, 114, 118, 122 ,, an annuity, 139 ,, the principle of apportionment, 90, and see Howe v. Lord Dartmouth. a profit on Capital Account, 95 ,, ,, treatment of a reversion, 136 ,, advancement to beneficiaries during lifetime of testator, 97 ,, general hint as to working, 98 Account Duty, 38, 185 Ademption, i, 149 Administration, 7. See also Administrator. ,, cum testamento annexo, 8, 146 de bonis non, 8 ,, durante minore aetate, 8 ,, pendente lite, 8 ,, durante absentia, 8 ,, ,, dementia, 8 ad litem, 8 colligenda, 8 226 INDEX. Administrator, i ,, who will be appointed, 7 ,, powers. See Executor. Advancement, i, 149 Account for. See Accounts. Aggregation of estate in 1894, 37 Alexander (dec.), pro formd accounts of estate of, 146 Allhusen v. Whittdl, Example illustrating, 105 Annuity, 10, 141 ,, Example illustrating, 139 Duty on, 175 Apportionment, 12, et seq., and see Howe v. Lord Dartmouth. ,, Act 1870, 12, 178, 188 i, of income of specific legacy, 13 ,, none on change of investment, 14, 178 ,, Account. See Accounts. Arrears of duty, 187 Assets, Equitable. See Equitable Assets. Legal. See Legal Assets. Marshalling of. See Marshalling. Atkinson, Re; Barbers' Company v. Grose-Smith, Example illustrating, 122 Audit of Trust Accounts, 56 Bonus, whether capital or income, 14 Breach of trust, Liability of trustee for, 33 Business carried on, 27 ,, assets, Treatment of, 48, 147 ,, Private. See Partnership. Capita, per, i Change of investment, apportionment. See Apportionment. Chattels personal, 2 real, 2 Chesterfield's Trusts, In re, Example illustrating, 136, 180 Child, Legacy duty payable by, n Codicil, 2 INDEX. 227 Colonial assets, 43, 87 Stock Act, 208 Contributory mortgage. See Mortgage. Conveyancing Act 1881, 191 Corpus, 2 Customs and Inland Revenue Act 1881, 38, 183 1888, 187 1889, 38, 185, 186 Debts, rules of, priority for payment of, 9 ,, statute-barred, 9 Demonstrative legacy, 2, 10 Devise, 2 Devolution of office of executor. See Executor. Directors' fees received by executor, 26 Donatio mortis causa, 2 Duty. See Estate Duty, &c. Earl of Chesterfield's Trusts, In re. See Chesterfield. Equitable assets, 2 Estate duty, 36, et seq. Examples. See Account. Executor, Definition of, 3 ,, dc son tort, 3 who may be appointed, 6 ,, devolution of office, 6 ,, powers of, 6 ,, duties generally, 9 ,, liability of, for cash retained in hand, &c., 17 ,, carrying on business. See Business. ,, liability for breach of trust. See Breach of Trust. Finance Act 1894, 3^ et seq. 1896, 36 et seq. ,, 1900, 36 et seq. i. I 97. 36 ft seq. ,, (1909-10) 1910, 36 et seq. 228 INDEX. Foreign assets, 39, 43 Foster, Re ; Lloyd v. Carr, Example illustrating, 118 General legacy, 10 Goodenough, Re, Example illustrating, 136 Graduation of duty first attempted in 1889. See Estate Duty. ti M completely carried out in 1894, 37 Grant, Re, Example illustrating, 139 Hotchpot, 3 Howe v. Lord Dartmouth, Example illustrating, 127, 147, 148, 169, 180 >. ,, Rule in, 25 Husband, Legacy duty payable by, 51 Interest on duty, 42, 187 Interim dividend, Example illustrating, 167 Intestacy, Distribution of estate, 27 et seq. M ,, account. See Accounts. Intestates Act 1890, 27 etseq., 80, 192 Investments, authorised, 17 on mortgage, 23, 114, 118, 122 Judicial Trustee Act 1896 and Rules, 35, 199 Land Transfer Act 1897, 33 Lapse, 3, 149 Lease, 3, u Leasehold, 12 Legacy, 3, 10 duty, 51, 173, 187 ,, definition of, 3, 10 ,, payment of, 10 ,, demonstrative. See Demonstrative Legacy. general. See General Legacy. ,, specific. See Specific Legacy. ,, lapse of, ii to deceased child leaving children does not lapse, 11 charged on land, n INDEX. 22 9 Legacy duty, 51 ,, Act 1815 (55 Geo. III. cap. 184), 187 Legal assets, 3 Life-tenant, 3 Maintenance, 191 Marshalling assets, 9 Moore. Re, Example illustrating, 114 Mortgage, investment on. See Investment. ,, contributory, 24 ,, second, 24 Partnership, interest of testator in, Payment of duty on, 48, 147 ., ,, ,, difference as between same and private business, 48, 147 Personal chattels. See Chattels personal. Personalty, 3, 12 Pictures, &c., 44 Preference, 4, 9 ,, dividend, arrears of, 133 Probate, 4, 6 ,, In common form, 7 ,, in solemn form, 7 ,, duty, 36 ct seq., 183 Public Trustee Act 1906 and Rules, 210 Real chattels. See Chattels real. Realty, 4, 12 Remainderman, 4 Rents, 12 ,, Apportionment of, 12, 16 Renunciation of probate, 6 Residue, 4 Retainer, 4 Revenue Act 1903, 184 Reversion, Treatment of, 136, 180 230 INDEX. Reversionary assets. See Howe v. Lord Dartmouth. ,, ,, Payment of duty on, 43, 148 Second mortgage. See Mortgage. Settlement estate duty, 40, 152, 164 Shares usually personalty, 12 Ships and shipping companies, difference, 167-8 profits of, no apportionment, 13, 168 Small estates, 45 Specific bequest, apportionment of income, 13 legacy, 4, 10 ,, ,, apportionment of income. See Apportionment. Statute-barred debt. See Debt. Statutes. See under respective heads. Stirpes, Per, 5 Succession duty, 51 Tenant-for-life. See Life-tenant. Tort, Executor de son. See Executor de son tort. Trustee. See also Executor. ,, Definition of, 5 Act 1888, 33 ,, Investment Act 1889, 24 ,, Act 1893, 8, 17, 194 i, ,, (1893) Amendment Act 1894, 2 5 Valuation of stocks and shares, 150 Wasting assets. See Howe v. Lord Dartmouth. Wife, Legacy duty payable by, 51 Will, 5 30 YB 184 UNIVERSITY OF CALIFORNIA LIBRARY