Beware the Bankrupt Beneficiary!
Are you dealing with an administration of an estate of someone who has died in the role as an executor or administrator? One of the requirements that you must follow is that you need to ensure that any beneficiary you distribute money to have not been declared bankrupt.
Is the beneficiary bankrupt?
If you do not carry out the correct checks or you mistakenly distribute an estate to a beneficiary who is bankrupt, then a claim could be brought against you by the trustee in bankruptcy to recover the money. A trustee in bankruptcy takes over the financial affairs of the bankrupt beneficiary and any payments would be made to the trustee rather than directly to the beneficiary. The beneficiary would only be provided with living expenses and the remaining funds would be used to pay any creditors owed in order of preference. If the amount exceeds the debt to the creditors, then the remaining funds would be paid directly to the beneficiary by the trustee in bankruptcy.
It is therefore very important for the funds to be paid to the trustee in bankruptcy rather than the beneficiary as any funds that were wrongly paid to the bankrupt beneficiary which were not able to be recovered would allow for the trustee in bankruptcy to hold you as an administrator or executor personally liable for repaying the money as well as any legal costs in regard to recovering the funds.
Conduct a bankruptcy search
To avoid this, a bankruptcy search should be carried out before payment is made. A bankruptcy search is an official search of the register against a specified name, which results would indicate whether a bankruptcy petition has been presented and, if appropriate, a bankruptcy order has been made.
What happens if a beneficiary has a bank account abroad or lives abroad?
You, as the executor would be required to carry out a foreign bankruptcy search. Various third-party organisations offer this service. Bank details would be required as well as full IBAN numbers.
Carrying out administration of an estate can be a complex and stressful. Our experienced team within our Private Client department offer options to help assist you such as a grant only option or we offer a full administration of the estate option. If you are dealing with an estate and wish for some guidance, please contact us on 01912329547.