Trust & Probate Insurance
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Early Distribution (Inheritance Act 1975) Insurance
No Section 27 Notice Insurance

Missing Beneficiary Insurance

Creditor Liability Contingency Insurance
Key benefits
What the policy covers
Facts to consider
Creditor Liability Contingency Insurance

The policy provides protection to the trustee or personal representative against a claimant proving or attempting to prove a legal right of recovery for a liability from the estate where, despite notice being given, the claim is allowable outside the statutory protection period and recovery cannot be made from the beneficiaries to whom funds have been distributed.

While notice given under Section 27 of the Trustee Act 1925 will, after the expiry of two months, provide a trustee or personal representative with protection against subsequent claims from creditors generally, if the personal representative nevertheless has knowledge of a situation or circumstance which could give rise to a claim on the deceased’s estate in the future, he or she may be considered to have had constructive notice and feel that appropriate steps should prudently be taken to safeguard their position.

A professional personal representative may be expected to have knowledge of matters which, whilst not necessarily identifiable or quantifiable at the time, could give rise to claims in the future.

The possibility of a currently unspecified but suspected liability for which the estate may be responsible may lead a trustee or personal representative to retain a proportion of the estate as a contingency fund and, in some cases, this may keep assets tied up for years until executors are able to satisfy themselves that the threat has expired.

If the assets of the estate have been dispersed and it is no longer possible to obtain reimbursement of monies paid to beneficiaries, the trustees or personal representatives may find themselves personally liable to the claimant.


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Key benefits
  • Facilitates distribution of some or all of the residuary estate following satisfaction of all currently ascertainable claims while avoiding any potential personal liability for later claims
  • Upon payment of a one-off premium cover is provided in perpetuity
  • Allows beneficiaries to receive some or all of their full entitlement sooner than might otherwise be the case
  • May facilitate earlier winding-up, thereby saving administration costs

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What the policy covers

  • The amount of the personal representatives’ legal liability to a subsequent claimant (who is not a beneficiary) on the deceased’s estate
  • Costs incurred with the consent of the Insurer in defending any action brought by the claimant against the personal representative
  • Any other costs and expenses incurred with the prior consent of the Insurer


Note:
It may also be advisable to consider unknown missing beneficiary cover if there is a possibility that not all beneficiaries have been identified.


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Facts to consider

Although the personal representative can only take into account matters which are within his or her knowledge when dealing with settlement of claims, in a case where, for example, the deceased had formerly been engaged in the provision of financial advice, was a non-executive director or a partner in an unlimited liability partnership, the personal representative would have to be mindful of the fact that there may remain a long-term contingent liability in respect of some types of claim. These could relate to, for example, personal pension or insurance policy mis-selling brought by former clients of the deceased.

If the Trustee or personal representative becomes aware that, for instance, a party may have had grounds for an action for professional negli­gence against the deceased, they should also be aware that the claimant could pursue that claim against the estate. Such circumstances may well constitute constructive notice of a claim on the estate, despite particulars not being given within the time limit provided for in the Section 27 notices, purely because they came, or should have come, within the knowledge of the Trustee or personal representative.

There may be no control over the continued existence of effective and valid Directors’ and Officers’ Liability or Professional Indemnity Insurances – any excess under such policies would remain payable and run-off cover would not normally provide cover for more than six years following the death of the deceased.



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