Early Distribution (Inheritance Act 1975) Insurance

The policy facilitates distribution by the personal representative of some or all of the residuary estate to identified beneficiaries following grant of representation despite the provisions of the Inheritance (Provision for Family and Dependants) Act 1975 (the Act). The personal representative is protected against any personal loss in the event of a claim under the provisions of the Act where, as a result of the early distribution, claimants have become unable to obtain their due entitlement from the estate.

The Act contains provisions enabling the Courts to order financial provision out of the estate of a deceased person for his or her family and dependants where they have been omitted from an inheritance or insufficient provision has been made, provided the claim is made within six months of the grant of representation.

It is important to recognise that claimants have a further four months after they have applied to the court to serve papers on the personal representatives; there is therefore a potential period of up to TEN MONTHS for the personal representatives to become aware of a claim under the Act. The Court also has the discretionary power to permit applications after the six-month period, so the potential period for a claim arising against the personal representatives may be in excess of even the ten months referred to above.

Professional personal representatives, for example solicitors, legal executives and accountants, are often rightly reluctant to agree to distribute any of the residuary estate of the deceased to identified beneficiaries before the ten months have elapsed following the grant of representation unless they are totally satisfied that there is no-one who could bring a claim under the provisions of the Act during that period.

In many instances the absence of personal knowledge of the circumstances of the deceased’s life and family means that a professional personal representative cannot realistically know whether anyone would be entitled to bring about a claim. Even if the other family members have confirmed that there is no knowledge of such a person, it will still often be prudent to treat such confirmation cautiously.

Key Benefits

• Allows early release of funds to beneficiaries after grant of representation – in the current economic climate this may be of importance to beneficiaries
• Removes the risk to personal representatives of personal liability in the event of a successful claim under the Act after distribution of the estate
• Facilitates earlier winding-up, saving administration costs

What The Policy Covers

• Any monies owed to the claimant out of the estate not recoverable from the net estate or the beneficiaries to whom it has been distributed and for which the personal representative would otherwise become personally liable
• 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