What protective measures can Personal Representatives take when administering an estate?

When a person passes away, their Personal Representatives become responsible for administering the estate. Personal Representatives are known as Executors when there is a Will and Administrators when there is no Will.

In summary, a Personal Representive must identify if there is a valid Will, establish the full extent of the estate, pay any taxes, liabilities and administration expenses before distributing the balance to the estate beneficiaries.

A Personal Representative faces unlimited personal financial liability if they mismanage an estate. This may lead to them incurring personal liability to settle debts from unknown creditors or personally pay a claimant who, despite not being an estate beneficiary, meets the legal criteria to qualify for financial provision being made for them.

Inheritance Act 1975 Claims

Surviving relatives and dependants may be entitled to bring a claim against the estate if they think that reasonable financial provision has not been made for them. A Personal Representative may be personally liable to settle such a claim if they distribute the estate before being alerted to the claim.

There are strict time deadlines within which these claims must be lodged with the Court and served on the Personal Representative. Once these deadlines have passed, Personal Representatives can safely distribute the estate without the risk of personal liability to settle an Inheritance Act 1975 claim.

Protection against unknown creditors

A Personal Representative may not always be aware of all the estate liabilities. If they distribute the estate and an unknown creditor subsequently comes to light, the Personal Representative would be personally liable to pay the creditor. The Personal Representative can obtain protection from this if they advertise the estate in the appropriate publications and allow two months to elapse from the date of the adverts.

Unknown Will

Personal Representatives should be satisfied that they are using the correct Will to administer the estate. A later Will (or Codicil) could appoint different executors or name different beneficiaries. If there is any suggestion that the deceased may have made a later Will, appropriate searches should be made.

Administering an estate using the wrong Will could result in the estate being distributed to beneficiaries who were not entitled to receive it. In this case, the correct beneficiaries can sue the Personal Representatives for recovery of the funds that they should have received from the estate.

Asset searches

A Personal Representative may not always have a complete picture of the deceased’s financial affairs.

It is important that they conduct comprehensive asset searches to help identify any assets or accounts which might have otherwise been overlooked and establish the correct value of the estate.

Bankruptcy searches

Before advancing any funds to beneficiaries, Personal Representatives should consider whether a bankruptcy search is required. If a beneficiary is bankrupt on the date of death, their legacy belongs to their bankruptcy trustee who will use the money to pay the beneficiary’s creditors. If an executor fails to run an official bankruptcy search and mistakenly pays the legacy to the beneficiary, they will be held personally liable to repay the full amount to the trustee.

Missing beneficiary insurance

Personal Representatives must take reasonable steps to identify and locate beneficiaries entitled to receive an interest in the estate. This can often present difficulties if the deceased’s family history is unclear or contact has been lost with other family members over the years. If an entitled beneficiary is overlooked and the estate is distributed incorrectly, the Personal Representatives may be exposed to personal liability.

Tracing enquiries should be made, and missing beneficiary insurance may be appropriate. Putting such insurance in place can then protect the Personal Representatives in the event that the funds have been distributed and an unknown beneficiary then comes forward.

How Pinney Talfourd can help

Our expert Private Client Team is able to advise Personal Representatives on all aspects of their role. We understand that no two estates are the same and tailor our advice to the circumstances of each case. Crucially, we can help identify risk and ensure appropriate legally protective measures are put in place so that Personal Representatives are not exposed to personal liability during the complex process of administering an estate.

If you would like to discuss this further with a member of our Private Client team, you can contact your local office on 0800 011 1195.