And why it is important to manage the risk that is taken on.
As we continue to move with the trend for online and paperless banking, it is becoming increasingly difficult for Personal Representatives (“PRs”) to ensure that all creditors of a deceased’s estate have been identified. Online credit accounts, store cards and other forms of digital credit are popular for their convenience and accessibility; however they can be problematic for those tasked with their detection and closure.
Similarly, missing beneficiaries can create an equally difficult problem for PRs, particularly in intestacy situations (when someone dies without a Will) or perhaps with protracted family structures.
There are two steps by which PRs can protect themselves from the unknown:
Certainty Will Search
Certainty is the UK’s National Will Register and Will search service. A Certainty Will search seeks to ensure that the correct Will is being administered, therefore ensuring that the correct beneficiaries are identified from the outset. Equally, it can establish if there is most likely not a Will in an assumed intestacy situation. Certainty search their databases for registered Wills as a standard and dependent on your instructions can go on to conduct national searches for Wills that have not been registered as well as making a ‘missing Will’ entry on a national notice board.
Section 27 Notice
A section 27 Notice (under s.27 of the Trustee Act 1925) enables PRs to ensure they are protected from liability against any claims from creditors and/or beneficiaries that they have no knowledge of at the time that the estate in question is to be distributed. In short, the PRs can place a Notice in The Gazette (the official public record) and in local and national newspapers notifying the details of the estate and their intention to distribute the assets, requesting that anyone believing they have a reasonable claim to contact the PRs.
After a two month period, the PRs may assume that no further creditors or beneficiaries are to come forward, thereby allowing them to safely proceed with distributing the assets accordingly to those that they have notice of.
Why should PRs take these steps?
Without a section 27 Notice being placed, if a creditor or beneficiary subsequently comes forward after the estate has been distributed the PRs may have some personal liability for an unidentified debt. Though it is not a legal requirement for the PRs to place a Notice in accordance with section 27, this is the only way to avoid personal liability for such a claim.
It is possible for PRs to rely on Credit Liability Contingency Insurance which provides protection should any creditors and/or beneficiaries make a successful claim. However, the disadvantage to this option is that premiums can be incredibly high particularly in regards to high-value estates. Notwithstanding, some insurers may impose a condition on the policy that PRs must have placed a Notice in compliance with s.27 of the Trustee Act 1925 prior to the commencement of the policy in any event.
Therefore, it really is important that PRs should adopt a belt and braces approach to managing the risk they take on.
If you require further professional advice concerning this or indeed any other matter dealt with by the Wills, Trusts & Probate team, please do not hesitate to contact Paddy Appleton on 01832 273506 or Henry Anstey on 01733 882800.
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