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Preventing the proverbial pitfalls: making it clear for Personal Representatives

As we know, the task of acting as an Executor of a Will or Administrator of an intestate estate can be an exceedingly onerous task. 

There are many hidden pitfalls when it comes to administering a deceased’s estate whether it appears straightforward or not, Personal Representatives (PRs) should act with due diligence and care. 

Often, PRs are unaware that taking up the role as an Executor or similar does not exonerate them from any errors they may make; in fact it makes them personally liable if anything goes wrong – that is of course, unless they have appointed a solicitor to undertake the administration on their behalf.  

Lay PRs frequently inadvertently fall into proverbial pits, not realising they are in a pit until it is too late for them to climb out without there being some personal cost. 

In this article we cover off five of the most common pitfalls lay PRs fall into especially when there is limited evidence and/or knowledge of the deceased’s lifetime affairs or the beneficiaries.

The first pitfall: If a PR administers a Will which later turns out to be invalid as it had been revoked by a Will made at a later date and the beneficiaries of the valid Will differ; the PR will be liable for putting the rightful beneficiaries of the estate in the position they would have been had the correct Will been administered.  If there is any doubt as to whether or not there may be a Will in a suspected intestacy or where a more recent Will may have been executed, a Certainty “Will Search Protect” search should be undertaken by the PRs.  This search checks various sources, places notices and adverts and provides an insurance quotation for the PRs.  Probate professionals should always recommend that PRs take out insurance where they do not have in-depth knowledge of the deceased’s lifetime affairs to protect themselves.

The second pitfall: With the increasing use of paperless on-line accounts, a Landmark Financial Assets Trace search supports the reconciliation of both active and inactive assets and debts, in one combined report, ensuring that the deceased’s full assets are accounted for. 

The search covers over 200 financial institutions, including the Experian Unclaimed Asset Register, and identifies personal pensions, life policies, occupational pensions, unit trusts, investment trusts, investment bonds, National Savings & Investments, Building Societies and Banks dormant accounts, FTSE100 shares; also Wills registered with the officially-recognised national wills register.  In a recent estate an endowment policy was found with a value of £44,000 on the Unclaimed Assets Register.  The deceased’s house had been cleared when he moved into care with dementia during his lifetime.  There was no evidence of this asset amongst his papers.  If a search had not been undertaken it is possible these funds would have gone unclaimed by the PRs.

The third pitfall: Recommend that the PRs take advice if the estate is insolvent or partially insolvent.  It is possible that it is best to leave the administration of the estate to the primary creditor. 

The fourth pitfall: If PRs do not properly check for and discharge the debts of an estate and they distribute the estate assets to the beneficiaries and a creditor subsequently comes out of the woodwork, the PRs will be personally liable to settle whatever is due to that creditor.  It is therefore important to recommend that PRs should place Trustee Act Notices to check for any unknown creditors in a paper local where the deceased owned property and in the London Gazette.  Subsequent to the expiration of a two month notice period, the PRs will be protected from their personal liability to settle claims by previously unknown creditors if they have distributed the estate.

The fifth pitfall: Distributing to a bankrupt beneficiary. If PRs do not check whether or not a beneficiary is bankrupt and distribute funds to that beneficiary they can become liable to the trustee in bankruptcy for the value of the distribution.  As such, shortly before distributing any sums, recommendations should be made for PRs to undertake bankruptcy searches for each beneficiary.

There are many other more complicated traps and pitfalls in estate administrations and professional advice should always be sought in order for PRs to protect themselves, especially if they are not the only beneficiary of an estate. 

Author: Caroline Alexander, Senior Associate (FCILEx), Michelmores