The task of administering an estate is a detailed and often demanding responsibility, whether one is appointed as an Executor under a will or as a Personal Representative (PR) dealing with an intestate estate. At its core, the PR is entrusted with a duty: ensuring that after all the assets have been gathered and the liabilities addressed, the distribution of the remaining funds are made legally and correctly to all those entitled to a share. This final act of distribution is the result of the PR’s work, but it also carries significant personal risk if not executed with absolute diligence. The complexity of family structures, can turn this seemingly straightforward task into a tense legal obstacle, highlighting the necessity of specialised tools like Missing Beneficiary Indemnity (MBI) insurance.
The Challenge of the Missing Beneficiary (If Unknown)
One of the most challenging and problematic areas for a PR is the potential for an unknown, but legally entitled, relative to exist. In an age of dispersed families and complex lineage, simply relying on known relatives may not be enough to satisfy the legal requirements of a complete and accurate distribution.
The crucial risk for the PR stems from the fact that an estate distribution is generally final. If the PR distributes the estate based on the known family tree, they can be held personally liable if an unknown relative – a closer or additional beneficiary – comes forward after the distribution and makes a legal claim to the estate for their entitled share. Such a claim can force the PR to attempt to recover funds from the distributed beneficiaries, a process that is often costly, stressful, and leaves the PR to personally absorb the shortfall of legal costs.
MBI Insurance: The Essential Safeguard
This is precisely where (MBI) insurance steps in as an essential safeguard for estate administration. A PR can obtain an MBI insurance policy to protect three key parties:
- The Estate: By ensuring the matter is closed and distribution can proceed.
- The Known Beneficiaries: By protecting their distributed shares from future claim attempts.
- The Personal Representative (PR): By protecting them personally from future claims and the associated legal defence costs.
The policy will cover the legal costs of defending a claim made by a previously unknown or missing beneficiary. Crucially, if the claimant is successful and proves their legal entitlement, the policy will then pay the beneficiary their entitled share of the estate.
The Estate pays a single, one-off premium, which is a legitimate expense against the estate funds and the policy is issued. Once this non-cancellable policy is in place, the distribution of the estate to the known beneficiaries can take place with peace of mind, knowing that a financial safety net is secured for any eventualities. This transforms a potential future liability into an immediate expense.
Dealing with the Missing Beneficiary (If Untraced)
Another common hurdle that PRs face is where they are aware of a legitimate beneficiary to the estate, but are unable to confirm their current whereabouts. While the beneficiary’s entitlement is known, their absence stalls the entire distribution process, causing frustrating and often costly delays for the other beneficiaries.
Again, MBI insurance can be a helpful tool. By demonstrating that all reasonable steps have been taken to locate the untraced individual, the PR can obtain an MBI policy. This allows the estate funds – or the untraced beneficiary’s share – to be distributed or held, while the MBI policy covers the risk should the beneficiary resurface later. This is a logical solution that ensures the estate can be distributed to the other beneficiaries without causing further delays.
What Checks need to be done before Obtaining a Quote?
Insurance companies who provide MBI cover are underwriting a significant financial risk and as such, they require demonstrable evidence that the PR has exercised maximum due diligence before a policy can be issued. They require confirmation that all reasonable steps have been taken to mitigate the risk before referring it for an insurer to consider. The key requirements fall into two categories:
- For Unknown Beneficiaries: To protect the PR from unknown claimant, the insurers require a full genealogical report and supporting family tree from a professional and reputable firm. This report must comprehensively detail the deceased’s family history and confirm, with supporting documentation, the extent of the beneficiary class after a thorough search.
- For Untraced Beneficiaries: They will require evidence that all reasonable steps have been taken to locate the beneficiary and that all avenues for tracing them have been exhaustively pursued. This includes detailed searches of public records, tracing databases, and other resources.
This is where specialised heir-tracing firms, such as Fraser and Fraser, become an invaluable partner. They can assist in ensuring all relevant professional searches and checks have been done to establish the extent of the beneficiaries and to locate anyone who has not previously responded. If a beneficiary is simply confirmed as untraceable, they will provide a comprehensive report confirming the exhaustive searches that have been conducted. Furthermore, specialist firms can assist the PR in obtaining competitive quotations from a minimum of two insurance companies who specialise in MBI cover, streamlining the process.
If you are currently dealing with an estate with either missing beneficiaries or potentially unknown beneficiaries, professional assistance is the essential first step to obtaining an MBI insurance policy and proceeding with the distribution of the estate. Do not hesitate to contact Fraser and Fraser, we can provide the professional tracing and genealogical research service necessary to move forward and obtain an MBI insurance policy for peace of mind.
Simply email us at privateclient@fraserandfraser.co.uk or call 020 7832 1400.
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