Personal Representatives (also termed ‘Executors’ or ‘Administrators’) have certain responsibilities when administering an estate. One of these responsibilities is to ensure that all debts are settled prior to the distribution of the estate to the beneficiaries.
Section 27 of the Trustee Act 1925 provides a means for Personal Representatives to be protected against liability from unclaimed creditors.
How is this Protection Provided?
Personal Representatives should provide notice that they will soon be distributing the estate. It is recommended that notice is provided via statutory advertisements in the London Gazette and also the newspaper local to where the deceased resided prior to death. It may also be advisable to place notices in a newspaper local to where the deceased owned a business, for example.
Once the advertisements are placed, creditors have a period of 2 months to contact the Personal Representatives regarding claims against the estate. Personal Representatives should refrain from distributing the estate to the beneficiaries during this time. Should any creditors come forward following the expiration of the period of 2 months, they are unable to hold the Personal Representatives liable to the debt.
What Protection is not Provided?
Section 27 Notices do not provide protection to beneficiaries, which means that the creditor can claim the amount owing to them from the beneficiaries even if Section 27 Notices have been placed and the 2 month period has expired.
It is also important to note that placing Section 27 Notices does not prevent individuals from making a claim against the estate under the Inheritance (Provision for Family and Dependants) Act 1975 if they feel that they have not been adequately provided for under the Will or in accordance with the Intestacy rules.
Section 27 Notices do not protect Personal Representatives in respect of all unpaid debts. If it can be proven that the Personal Representatives were aware of an unpaid debt when the estate was distributed, they will be liable for this debt.
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