Chapter 13: Protection of Personal Representatives

Question 1

When will PRs be personally liable to unpaid beneficiaries or creditors?

Answer 1

They are personally liable, even the beneficiaries or creditors are not known when a distribution is made, unless they comply with s27 Trustee Act 1925.

Question 2

How can PRs protect themselves against claims from unknown beneficiaries/creditors?

Answer 2

S27 Trustee Act 1925 - PRs can protect themselves from liability by:

1. Placing adverts in the London Gazette,
2. A local newspaper (local to the area in which any land forming part of the estate is situated), and
3. Any other appropriate newspaper (e.g., a trade journal in a situation where the deceased had run a business)

Requesting any person interested to contact the PRs’ solicitor within a minimum of 2 months.

Question 3

What searches should PRs conduct?

Answer 3

Searches for land held for creditors, and for bankruptcy declarations against the deceased + beneficiaries (to protect against the trustee in bankruptcy).

Question 4

What options do PRs have if they cannot find a known beneficiary or creditor?

Answer 4

1. Make payment owed to beneficiary/creditor into court + distribute the rest of the estate
2. Distribute everything with an indemnity from the beneficiaries,
3. Seek a Benjamin Order
4. Purchase insurance

Question 5

Why is distributing everything with an indemnity from the beneficiaries a risky choice?

Answer 5

Carries some risk for the PRs as the indemnity may prove to be worthless if the beneficiary who gave it has no funds

Question 6

What is a Benjamin Order?

Answer 6

Court order giving PRs leave to distribute the estate based on an assumption set out in the order - e.g., that the missing beneficiary should be treated as having died before the deceased.

Full enquiries are first required for this.
This gives full protection for the PRs.

Question 7

Why is purchasing insurance a better option than applying to court for a Benjamin Order?

Answer 7

Full enquiries may still be required first.

Likely to be cheaper + quicker than applying to court.

Question 8

What claim can be brought under the Inheritance (Provision for Family and Dependants) Act 1975?

Answer 8

A person may apply to the court to set aside the terms of a will or vary an intestacy on the grounds that reasonable financial provision hasn’t been made for them.

Question 9

How can PRs protect themselves against a claim under the Inheritance (Provision for Family and Dependants) Act 1975?

Answer 9

They should wait to distribute the estate until 6 months have passed from the issue of the grant

Question 10

What are future and contingent liabilities?

Answer 10

Include situations in which the deceased had acted as a guarantor on a loan or there is a possibility of legal proceedings against the estate

Question 11

How can PRs protect themselves from. future + contingent liabilities?

Answer 11

1. Estimate and set aside the appropriate amount,
2. Seek indemnity from the beneficiaries (carries risk)
3. Arrange insurance + distribute the entire estate, or
4. Apply to the court for directions as to what to do.

Question 12

When will liability for failed PETs or CLTs by the deceased arise?

Answer 12

If the IHT due is still unpaid after 12 months.

Question 13

When will HMRC not pursue the PRs for IHT liabilities relating to failed PETs and CLTs?

Answer 13

If they remain unpaid by the recipient(s), if the PRs have made fullest enquiries and have obtained a certificate of discharge.