Finding the right executor is an important consideration when preparing a will. Sometimes, though, things change, and life has a way of throwing curveballs. Your well-chosen executor may find that they need to declare bankruptcy somewhere along the way or your beneficiaries may find themselves in such a position. What are the implications on your will when the time comes to file probate and distribute your estate? We take an in-depth look at this to help you get the facts.
Executors and trustees
While it is not advisable for someone who has been declared bankrupt to act as an executor or trustee, it is also not impossible. The implications are of a practical nature. For example, when it comes to selling assets, such as property, it would be difficult to do if they have been declared bankrupt. The beneficiaries themselves may have concerns about someone who has been declared bankrupt to act in such a capacity, particularly where they may not be that well known to them.
From a beneficiary’s perspective, there are implications to inheriting assets. This is because part or all of that inheritance may have to be used to pay off debts, which would not happen directly. In an ideal world, should a beneficiary become bankrupt at any time they would inform the trustee or executors of an estate, but this doesn’t always happen.
The first task before probate is lodged should be to check the solvency status of beneficiaries, trustees, and executors. For those who are UK based, this is a simple task of checking the Individual Insolvency Register. This holds information on bankruptcies, debt relief orders, and individual voluntary arrangements.
Keep in mind that individual voluntary arrangements will not be as restrictive when it comes to beneficiaries receiving their share of an estate and that bankruptcy orders may have expired but not yet been removed from the database, so it worth following up on any findings. For those who have individual voluntary arrangements in place, it should still be possible to have an inheritance paid out. However, a beneficiary with such arrangements in place could still be declared bankrupt, making such checks just as important to carry out.
If a beneficiary is overseas, such checks should be carried out in the country in which they reside. This could either be done through a local solicitor or by using an agency in the UK with links to that country that could carry checks out on their behalf – in fact, this is something that we specialise in. Talking to us or your probate manager in the first instance to determine the best and quickest way of getting such checks completed.
What happens if you don’t run checks?
Failure to run such bankruptcy checks could have implications for both the executor and beneficiary. Should an executor, or any solicitor acting on their behalf, fail to check a beneficiary’s status the trustee in bankruptcy could sue for the amount that is paid out to the beneficiary.
For more detailed advice on bankruptcy checks and their implications on the estate of a loved one get in touch with our team at IWC Probate Services. Find us on 020 8017 1029 or by dropping us a line at firstname.lastname@example.org for an initial discussion or to make an appointment.