There are several risks personal representatives should protect themselves against before making a distribution to any beneficiaries who may be entitled to the estate.
It is important to leave a reserve to deal with any outstanding tax liabilities. For larger estates, with a value over £325,000, inheritance tax liabilities mean it often pays to distribute the estate’s assets only after receiving confirmation from HRMC that there are no further duties to be paid. If you are able to use a Tell us Once service then HMRC will write to you to explain what tax they need to collect or repay.
Even if inheritance tax is not due on the estate, it is necessary to complete inheritance tax forms as part of the application for a grant of probate.
The risk is that personal representatives remain liable for any unpaid debts of the deceased once they have distributed assets to the beneficiaries. This continues to be the case even if they did not know about the debts at the time when they distributed the assets. In order to avoid this risk, it is possible to use 'statutory advertising' to contact any potential creditors to let them know that you intend to distribute the assets, and requires creditors to contact you to let you know of the debt.
Statutory advertising requires a notice to be placed in the London Gazette and in the local newspaper of any land in the estate. The advert must require any interested parties to inform the personal representative within a minimum of two months of the advertisement being posted. After this time, it is not possible to bring a claim against the personal representative. This applies not only to private creditors, but also to any Family Provision claims.
Family provision claims
If the personal representative is distributing the estate within 6 months of the grant being issued, there is a chance of being sued personally if they have not taken into account the possibility of a claim by a relative who feels they should have benefited from the estate.
It is possible for someone to make a Family Provision claim if they fall within a statutory list of relationships with the deceased, and they can show that the deceased failed to make reasonable financial provision for them. The relationships are:
- wife or husband of the deceased
- ex-wife or ex-husband of the deceased who hasn't remarried
- a civil partner of the deceased
- a former civil partner of the deceased, who hasn't remarried or entered a new civil partnership
- a cohabitant of the deceased
- a child of the deceased
- someone treated as a child of the family of the deceased
- someone who was being financially supported by the deceased immediately before the death
The personal representative can avoid liability from these claims by considering whether any claim from one of the above categories is possible, waiting 6 months after the grant was issued, or through the use of statutory advertising as detailed above.
If any bequests are made to a class of beneficiaries (e.g. ‘to all my grandchildren’) the personal representative must be careful to establish the full extent of the class before distributing any of the assets of the estate. If it is not possible to trace potential beneficiaries, it may be necessary to apply to the court to remove the personal representative’s personal liability. If there are any doubts about the scope of a class it is highly recommended that you contact us on 0800 634 9494 or a solicitor for more information.