Personal Representatives – Protection and Relief from Liability
Personal representatives are exposed to liability in several situations. In this short article I will describe how personal representatives can protect themselves from liability.
Claims of unknown beneficiaries/creditors
A personal representative can face a claim from an unknown beneficiary or creditor after the distribution of an estate. To protect themselves personal representatives should always consider the statutory protection afforded to them by section 27 of the Trustees Act 1925 by giving notice of their intention to distribute the estate, requiring any person interested to send in particulars of their claim to them within the stated time, being not less than 2 months from the appearance of the advertisement.
It is imperative however for the personal representatives to understand that whilst the steps have a measure of protection they do not relieve them from the necessity of making all relevant searches.
Claims by missing beneficiaries/creditors
A section 27 notice is of no protection where personal representatives are aware of the existence of claimants who are known but missing. To distribute the estate knowing of this situation will be a breach of duty and the personal representatives need to take all steps to safeguard their position.
- 1. They must carry out all relevant searches, trace the missing beneficiary.2. If they are still unable to find the beneficiary they may be able to utilise one of a number of a further options:
- a. Pay the amount due to the missing beneficiary or creditor into court under the provisions of the Trustee Act 1925 and then distribute the rest of the estate.b. Apply to the court to obtain a Benjamin Order enabling them to distribute the estate on the terms set out in that order.
- c. Obtain an indemnity from the beneficiaries benefitting from a distribution to reimburse them should the missing beneficiary subsequently turn up and demand their entitlement.
- d. Effect insurance cover against the risk of the missing beneficiary or creditor subsequently appearing and making a claim.
- e. Finally, if all efforts to trace the beneficiary have failed, it may be possible for solicitors to rely on the provisions of the solicitors accounts rules which permits a withdrawal from a client account of a sum that does not exceed £500.00 and payment of that sum to a charity of the solicitors choice.
Inheritance (provision for family and defendants) Act 1975
In relation to claims under the Act, personal representatives are protected if they have refrained from distributing the estate for six months after the issue of the Grant.
Future and contingent liabilities
Where personal representatives know of a future liability, they receive no protection under Section 27 of the Trustees Act 1925. They should therefore set aside a fund to meet that future and contingent liability.
Relief from liability
There will be occasions where personal representatives have made an error and are liable to the estate and the beneficiaries. In such circumstances there are some reliefs from the liability that may be available to them:
- a. An executor may be able to rely on an express provision in the deceased Will providing protection against liability for lost cause while they acted in good faith.
- b. Generally, if a beneficiary or a creditor acquiesce in a breach by the personal representatives, the court will relieve those personal representatives of any liability.
- c. Personal representatives can also be relieved of liability by the court under Section 61 of the Trustee Act 1925 if they are found to have acted honestly and reasonably and ought fairly to be excused for the breach.
- d. The Limitation Act 1980 gives beneficiaries 12 years from the date of accrual to pursue a share or interest in the estate. This entitles personal representatives to defend such claims brought out of time on grounds that they are statuary barred.
Personal representatives have no reason to be liable for losses to the estate or to beneficiaries. It is possible to take steps to protect themselves and to obtain relief from liability.
John is the senior member of the firm’s Contentious Trusts and Probate team at Forbes Solicitors. John is an experienced probate litigation solicitor and has a proven track record of successfully resolving disputes. Designated a “rising star” by the Legal 500.
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