By Kevin Bonner, Insurance Lead at Estatesure
Distributing assets from an estate before the full administration is complete, or before all debts and taxes are settled can lead to issues.
- Creditors or tax authorities may demand payment after distribution, and beneficiaries could be asked to return funds.
- Claims may be made against the solicitor for negligent or premature distribution of the estate, leading to potential legal action.
- The estate could face significant financial challenges, especially if a mistake was made regarding the rightful beneficiaries or amounts owed.
Post Estate Distribution or Early Distribution Insurance cover indemnifies personal representatives, executors and beneficiaries should claimants come forward after the estate has been distributed.
Cover is provided in two sections:
Before Six Months. This indemnity covers special situations where beneficiaries received amounts from the estate before all potential claims were resolved under the Inheritance Act.
After Six Months. This area of the policy ensures if a claimant comes forwards six months after the estate has been distributed or any time after that in perpetuity, beneficiaries are indemnified.
Legal firms will need to take a view on the likelihood of claimants coming forward after distribution of the estate. Legally, a Gazette Notice and notification in local newspapers will ensure due diligence in notifying claimants. However, these days, people lose touch, travel abroad more often and read their local paper less. Legally this may be a best practice approach but practically it does leave the door open to potential claims on an estate long into the future.
Technology has also moved on. The ease of DNA testing now means it is easier than ever before for individuals to discover and tracegenetic relatives and birth parents. This could lead to claims years down the line. Indeed, at least one organisation specialises in DNA Testing in Wills, Inheritance, and Estate Disputes of this kind.
With no time limit on legal claims to an estate, legal firms would do well to indemnify themselves and their clients for the future with an inexpensive policy that backs off risk and protects all parties in perpetuity. Failure to do so can result in legal complications, financial loss, and emotional distress for the beneficiaries.
Originally Published on Todays Wills & Probate.