Jeff de-Rhune outlines some key risks that personal representatives and their advisors face and how insurance might help.
PERSONAL REPRESENTATIVES (PRs) are under a duty to collect, gather in and administer according to the law all the real and personal estate of the deceased. In many cases, this might be a straightforward exercise. The chances are, however, that readers will have been involved in at least one estate where it has not always been
First things first: is the estate testate or intestate? This sounds like a simple question, but if there is a will, are the PRs sure it is the deceased’s last will? If the estate seems intestate, but friends or relatives claim that there’s a will somewhere, what can be done? A missing will indemnity could help by enabling the executors to prove the existing will, or the next of kin to extract letters of administration knowing that if a will (or later will) turns up after the estate has been distributed, the ‘old’ PRs will be indemnified in respect of any sums due to new beneficiaries named in that will.
So, once we know whether we’re proceeding as per the terms of a will or on intestacy, what about collecting, gathering in and administering? A typical estate will own at least a few stocks and shares and these will need valuing and, usually, selling. It’s not so unusual for share certificates to go missing. The company registrars will
usually request an indemnity from the PRs before a new share certificate can be issued. If the holding is modest, the PRs might be happy to give such an indemnity themselves. Where the holding is substantial, however, the registrars will usually ask for an acceptable insurer to join in the indemnity by countersigning it.
Similar considerations apply with regard to life assurance policy documents. Sums assured are usually at least in the tens of thousands of pounds, if not greater. As with share certificates, should the policy documents go astray, the life company might request an indemnity before paying out. The PRs can obtain insurance to indemnify the life company for loss incurred as a result of paying out the proceeds of the life policy without the production of the original policy documents. This can avoid the need for the PRs to provide an indemnity direct to the life company and thereby incurring further potential personal liability.
If there is a will, are its terms clear? If there are any poorly drafted or vague clauses, a trustee indemnity policy can protect the executors from potential liability that might arise as a result of any uncertainty over the precise terms of the will.
When preparing for distribution, have the statutory section 27 notices been placed? If not, consider insuring against unknown creditors coming forward at a later date. Likewise, are the PRs sure that there are no potential Inheritance Act claims?
Insurance could expedite matters and offer peace of mind against any such potential unknown claims.
Moving on to distribute the estate, do the PRs know who, and where, all the beneficiaries are? Once they have taken all reasonable steps necessary to locate missing heirs and have drawn a blank, a missing beneficiary indemnity could help. Cover is available where there are known beneficiaries who can’t be found, or where
a genealogist’s report indicates there are no known missing heirs but cover is required just for peace of mind, prior to distribution.
These types of insurance covers will often last in perpetuity and the beneficiaries of an estate can be indemnified as well as the PRs. Escalator clauses can be included to reflect potential interest on a beneficiary’s share of an estate, in the event of a claim. Underwriters will always try to provide a bespoke solution for other problems that
crop up when distributing estates and trusts – cover can often be offered to fit the particular circumstances of a case, no matter how unusual.