Regulation 

Distributing the deceased’s estate

For NatWest bank it must have been a terrible shock to learn, a year after the death of their celebrity client for whose estate they were acting as executors, and just as they were about to distribute funds to his legatees and his personal charitable foundation, that Jimmy Savile had been a sexual predator.

The morning after the ITV programme that broke the news, was there an emergency meeting of the trust company executives? If so, once they had dealt with the damage to their reputation by association, they no doubt worked through an agenda along the following lines:

* Have we made any distribution yet? (If not, don’t.)

* Are there likely to be any claims arising against the estate? (Yes.)

* Are they likely to exceed the value of the estate? (Probably not: they were probably isolated incidents and difficult to prove.)

* Have we advertised for creditors? (Yes, of course. But it doesn’t protect us.)

* What do we do now?

Liability

This is clearly an extreme example and a high-profile case, but it is frequently the case that personal representatives, particularly lay executors, distribute funds to the wrong people and can find themselves personally liable as a result.

The PRs may have misunderstood (or ignored) the rules – for example on intestacy – or not met claims of which they were aware.

Or it could be that they did not protect themselves against the possibility of claims of which they did not have notice or failed to make sufficient reserve to pay outstanding tax.

And, as with Savile, there may be claims, not of creditors, but relating to personal injury. How can the PRs protect themselves if they have no idea of what is in store?

The old saying that ‘ignorance of the law is no defence’ applies, and even where PRs wish to deal with the administration of the estate themselves, they ought to be encouraged to have a probate specialist look at the will and accounts before distribution, as they can be personally liable even if they have received no benefit under the estate and acted honestly throughout.

Claims

Failing to meet claims of which PRs have notice is difficult to excuse, but one can sympathise with PRs wanting to distribute when they think all claims have been paid. And there is a procedure under the Trustee Act by which the PRs can advertise for creditors setting a time limit for claims to be made. But it is important to be clear what this does and does not cover:

* It covers creditors who do not claim within the timescale, but not property or trust disputes, or, for example, unascertained or contingent claims.

* It does not cover claims which have yet to arise, for example against Lloyds Names, or in respect of leases.

* If the same person is both the only beneficiary and the only PR, there is no point in advertising, as creditors could still claim against the PR as beneficiary.

Unascertained or contingent claims are the real problem.

The following procedures have been developed to protect PRs:

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