Hand pointing at protection symbol

Distribute early, lower costs, and reduce liability: Section 27 Indemnity Insurance

Nov 9, 2022 3:19:19 PM

By Anthony O'Hanlon, Head of Customer Development at CLS Property Insight

Section 27 of the Trustee Act 1925 allows for the Administrator of an estate to “give notice by advertisement” that the Deceased has passed away. The notices are posted in the London Gazette and in a newspaper circulating within the local area of the Deceased. This provides an opportunity for any rightful beneficiaries to come forward and stake their claim.

Publishing such notices and allowing a two-month period for responses can limit the liability of the Personal Representative should individuals who believe they have an entitlement subsequently come forward. After this two-month period, and once the estate has been distributed, creditors will be unable to make a legal right of recovery from the Personal Representative or Administrator of the estate. It should be noted that if a proportion of the estate has not been distributed, the UK Department for Work & Pensions (DWP) may have a legal right of recovery after this period. But what if the Administrator and/or the beneficiaries wish to distribute the estate sooner and in a more cost-effective way?

Section 27 of the Trustee Act 1925 Indemnity Insurance enables the Administrator to distribute to the beneficiaries without having to wait for the results of an advertisement in the local newspaper or gazette, as well as not having to pay the cost of these advertisements.

Our Indemnity Insurance protects the Personal Representative in the event a creditor has a successful claim to the estate as a result
of the Personal Representative:

  • Distributing without placing a Section 27 Notice, meaning that the creditors can enforce against the Personal Representative at any time, or

  • Distributing before the expiry of a Section 27 Notice, meaning that a creditor could come forward within the remaining term to issue a claim against the Personal Representative, or

  • Distributing in accordance with the timescales afforded by the Section 27 Notice and where the policy offers protection for the beneficiaries who would hold an ongoing liability.

What is the cost of a Section 27 Indemnity Insurance policy?

The cost of Section 27 Insurance will vary depending on the size of the estate and the potential for unknown creditors to come forward, but it usually proves very cost-effective when viewed against the additional costs of advertising and the implicit delay in distribution.

Our insurance is designed to be significantly cheaper where best practice has been followed outside of the notice i.e. by the placement of a credit and liabilities search to identify any unknown creditors.

What are the benefits?

  • Allows for early distribution of funds from the estate, bypassing the need for notification of death and a two-month window of waiting.

  • Reduces the personal liability of the Personal Representative and beneficiaries after the distribution of the estate.

  • Reduces the overall cost of administrating the estate by removing the fees for notifications and any other associated costs that come with this.

  • Protects the Personal Representative against possible future costs.

What does Section 27 Indemnity Insurance cover?

Our Indemnity Insurance covers the legal liability of the Personal Representative and of the beneficiaries from the unknown creditor to the estate. It also covers any fees associated with processing the claim against the insured party.

Over recent months, we have focused on redeveloping our estate administration insurance products. We have hosted focus groups and have had many collaborative sessions with thought leaders which has allowed us to relaunch our estate administration insurance policies to fit in with the process that the Private Client Solicitor follows. We do not wish to promote and insure poor practice; instead, we are looking to offer services that wrap around and compliment the most diligent processes which in turn reduces the overall risk for all.

This can sometimes be challenging, particularly where the beneficiaries of the estate request early distribution. Our Section 27 Insurance provides a risk-free solution to the Private Client Solicitor where they are then able to fulfil the requests of their client with a diligent solution. The same goes for our Inheritance and Family Dependant Act Insurance, where the statutory time limits cannot be met following pressure of distributing early, and we can even provide cover where those time limits have been met but where cover is required in the event that a dependant has a future claim outside of these limitations (as seen by Bhusate v Patel & Others 2018). We can also offer Missing Will and Missing Beneficiary Insurance for known and unknown matters.

CLS Property Insight offers a wide suite of estate administration insurance and bond stitlolutions which could assist estate Executors, beneficiaries and/or Trustees, executry practitioners, and/or guardians with both the common and the more unusual circumstances that they may find themselves in when dealing with a Deceased’s estate or the assets of an adult with incapacity. With the need for a speedy and complete resolution of all probate matters, our products are designed to give both protection and peace of mind, coupled with a timely and cost-effective solution to problems that arise when dealing with these matters in the United Kingdom.

Chantelle Wren, Underwriting Associate Director at CLS Property Insight

This article is featured in the autumn 2022 edition of the quarterly news digest, Entitlement. Click the image below to download your free copy of Entitlement for more informative articles.

Click here to download your free copy of Entitlement.

Topics: Beneficiaries, Estate administration, Insurance, Personal Representatives, Protection