What property doesn't form part of the estate?

PRs have an obligation to gather in all of the property in the deceased estate, but they must not interfere with property that does not belong to them.

Common assets falling outside of the estate include:

Joint tenancies / property held in trust

Under s3(4) of the AEA 1925, if an interest in land or personalty ceases on death, then it will not pass to the estate. This includes property owned as a beneficial life tenant, as well as a beneficial joint tenant (ownership of an asset with undivided shares). You cannot pass a joint tenancy in a will, you must sever the agreement while living and replace it with a tenancy in common (divided shares). It's critical that PRs understand how property was held before treating it as part of their remit.

Proceeds of life insurance policies

Life insurance can often be the largest payment made to an estate, especially if the deceased is young, the main breadwinner and left dependents. If no other arrangements are made, the payment is made to the deceased's estate on death. However, it's more common to write the policy into trust, this sets up a trust for the beneficiary into which the payment is made directly. This means the funds never touch the deceased's estate and the beneficiary can access them more quickly and with tax advantages.

Pension scheme lump sum

Private pension schemes have a date in which the holder can start taking regular payments. If they die before this date they may be entitled to a lump sum:

• Non-discretionary lump sum - means the deceased is absolutely entitled to the lump sum if they die before drawing their pension. This may be paid to their estate or if a nomination has been made, to a named beneficiary.
• Discretionary payments - often deceased have no right to a lump sum, but the pension trustees can use their discretion. Most pensions are trusts and this is an example of discretionary power. In practise they will almost always pay out the lump sum, and usually to the next of kin, which is often laid out in the holder's letter of wishes.

Donatio mortis causa ('deathbed gifts')

In order to be valid, they must satisfy:

• Contemplation of death - death must be a realistic outcome within a relatively short timeframe from a specific, identified cause; and
• The gift only takes effect if the donor dies - the gift is made conditional on death, i.e. unlike a lifetime gift, it is revocable. This could be ascertained from context and what was said at the time (e.g. "if anything happens to me, I want you to have my watch..."); and
• Delivery of the gift - the gift has to be delivered to the donee (actual or constructive delivery). Land and online stocks can still be delivered this way, e.g. as long as the land certificate and passwords are transferred respectively.