What Insurance Should I Consider For an Intestate Estate?

If you are an administrator of an Intestate Estate, you have a legal duty of care to protect the beneficiaries from financial loss, so that includes protecting any property in the estate, as well as protecting against third-party liability claims, which is the sole purpose of our Estate Protect Direct policy.

So, let's talk about where you have a potential liability to third parties. 

If you read on to the end, I will tell you how to save 50% on all of these policies.

Firstly, you may have a Missing Beneficiary risk, as the rules of intestacy are complex and claims from unknown or missing beneficiaries are not considered during the distribution, which can arise at any time after the estate's distribution, creating significant financial risk for the administrators and beneficiaries.

Those entitled to inherit under the rules of intestacy (and usually in this order) are:

• The spouse or civil partner of the deceased.
• The children of the deceased: this includes adopted children (if none are surviving, then this share goes to grandchildren).
• Parents (either)
• Brothers and sisters (if none are surviving, then this share goes to nieces and nephews).
• Grandparents
• Uncles and aunts (if none are surviving, then this share goes to cousins).
• If none of the above is living, or cannot be found, it goes to the Treasury Solicitor.

Crucially, unmarried partners have no automatic right to inherit under these rules, regardless of the length of the relationship.

Plus, as to who gets what is complex, so can distributing an estate to large or blended families.  If this is your situation, you should consider getting legal advice and also appointing a specialist genealogy firm to research the family and outline the risks.

Not all genealogists are experts in probate.  Appointing a hobbyist researcher is not the same as appointing a Probate Genealogist.

A specialist doesn't just "find people"; they provide the verified evidence required to protect the estate and can facilitate Missing Beneficiary Insurance.

We can help by introducing you to a vetted specialist in this field, the sooner the better, as this research can take time.  If you instruct a genealogist late in the process, it can significantly delay the estate's distribution.

So, as you can imagine, administering an intestate estate can be a huge amount of work for the Administrators, as well as introducing a big financial risk when it comes to claims from missed, missing or unknown beneficiaries.

In the absence of insurance, legal costs and awards to third parties can be significant and will initially fall to the administrators to pay.  If they have insufficient funds, the existing beneficiaries can be drawn into the claim and forced to contribute to the legal costs and the third-party award.

Imagine you are an Administrator of a £300,000 estate that has been successfully distributed to the many beneficiaries, and then, years down the line, a beneficiary or group of beneficiaries come forward to make a claim.

Firstly, the Administrators would have to pay for their own legal defence.

If they lose and the third party is awarded their missing share, plus inflation and the costs of their legal action, the total costs could be significant for the Administrators.

Would you and the other Administrators have this money?  It is possible this could seriously harm all your financial futures.

It is unlikely that you could recover this loss from the other beneficiaries, particularly as there might be lots of them, and they would likely have spent their inheritance.  If you asked them for the money, the beneficiaries could argue that the Administrators have failed in their duty of care to protect them from financial loss, placing responsibility on you and the other Administrators to find the money.

If the money can’t be recovered from the Administrators due to a lack of funds, the Beneficiaries may then be required to repay some or all of their inheritance to the third party.

Thankfully, these significant losses and stress are completely avoidable with Missing Beneficiary Insurance, which can be arranged in two scenarios:

• Peace of mind cover, when there are no known missing beneficiaries, but the Administrators just want the comfort of insurance. This cover is commonly arranged.
• Where there is a known beneficiary that cannot be found, even after appointing a specialist genealogist to track them down. This is less common and more expensive to insure, but insurable, nonetheless.

So, it is a key insurance cover for intestate estates. 

A Missing Beneficiary Insurance policy will cover, up to the level of indemnity you have chosen:

• Legal Defence Costs and Expenses.
• An Award to a Successful Claimant.

Insuristic has streamlined the process of arranging cover for Administrators.

Firstly, our cover runs in perpetuity, which means you and the other administrators and beneficiaries have cover forever should another beneficiary come forward and make a claim. 

The level of indemnity you choose is index-linked for the first 10 years, by 5% each year up to a maximum of 125% of the value you choose.  You should still add a bit on top to allow for future legal cost growth, but this combined helps you avoid underinsurance.

Also, there is no excess to pay, which means the Administrators don’t have to pay the first few thousand pounds of any claims.

All this means when you distribute the estate, provided you haven’t underinsured, you can really get on with your life without the worry.

Many intestate estates we see are £350,000 or less.  To save you money, we can quote without a full genealogy report, provided you have a professionally verified family tree going back at least three generations or three stems.   

If the genealogist confirms there are no issues, you can arrange the insurance on this basis, but please be aware that having a genealogy report will make the insurance cheaper.

For estates larger than £350,000, we will need you to provide a genealogist report produced in the last 12 months, along with a verified family tree going back at least three generations or three stems.   Provided there are no known issues, we don’t need to see the report; just keep a copy for your records, or, if you want, upload it to our portal before you submit your quote.

If the report has known beneficiary issues, your quote will refer.  We will discuss the risk with the underwriter and will handle the quote process offline.

So, let's go back to this claim scenario, where you have a Missing Beneficiary Insurance policy.

Firstly, all you need to do is pass the claim to the insurer.  You shouldn’t disclose to the third party about the existence of the insurance policy, comment or get involved, as this could invalidate your cover. 

The insurer will deal with the claim and legal defence on your behalf.

The insurer will defend the claim; if the defence is successful, the policy pays the legal costs and expenses.

If the claim is successful, the existing beneficiaries are unaffected; they can keep the money they had inherited.  So it is important to stress when arranging this cover that it is for the beneficiary's peace of mind as well as yours. 

The claimants would be paid their inheritance by the insurance company, which would also cover the legal costs, which is why setting the right level of indemnity is important, as you don’t want any expense at this point.

The result is that everyone is happy, and you have protected the Administrators and beneficiaries' liability from claims from other beneficiaries.

A big risk for Intestate estates is if a legally valid Will is found after you have distributed the estate.  This can be a significant claim for the Administrators and could involve a loss equal to the size of the estate.

If the estate was, say, £300,000 and you’d distributed this to the beneficiaries under the rules of intestacy, you aren’t going to be able to recover this money easily from the existing beneficiaries.  Again, they could use the failing in your duty of care angle, so this loss would fall to the Administrators to pay.

If you haven’t got Missing Will Insurance, you would all have to pay the legal defence costs first.

Then, if the courts verify the Will is valid, all the Administrators would need to find £300,000 to pay the beneficiaries of the Will, which could be different to those benefiting in intestacy.  Even if they are the same beneficiaries, the amounts they will inherit under a Will are likely to be vastly different and could still result in a six-figure loss being shared among all the Administrators.

Thankfully, these significant losses and stress are completely avoidable with Missing Will Insurance. 

It can be paid for by the estate prior to distribution.  The cover runs in perpetuity, meaning all Administrators and beneficiaries receive cover under Insuristic’s policy forever.

Provided all the deceased's documents have been searched, and you have also completed a Will Search Combined through the National Will Register, which searches their extensive Will database as well as every Solicitor and Will Writer in the proximity of where the deceased lived, then you can arrange Missing Will Insurance.

Like all our legal Indemnity Insurance Policies, Missing Will Insurance cover runs forever, protects the administrators and beneficiaries and is excess free, so as long as you haven’t underinsured, you can all rest easy should a Will be found, the insurer handles everything, and the existing beneficiaries can keep the money they inherited, with the insurer paying the successful claimant.

Now let's move on to another risk: claims that fall under the Inheritance (Provision for Family and Dependants) Act 1975.

A claim can come from a person who believes they fall under the definition of a “dependant” under the provisions of the Act, and:

If you distributed the estate within the statutory 6-month waiting period, or

Where the statutory period was met before distributing the estate, but the courts decided a dependant had a successful claim.

The people who fall under the definition of the Act are:

• The spouse or civil partner of the deceased
• A former spouse or civil partner of the deceased, if they were married or in a civil partnership for at least two years immediately before the death
• A child of the deceased
• A child of the family of the deceased (this includes stepchildren, adopted children, and children who were treated as children of the family by the deceased)
• A dependant of the deceased (this includes people who were financially dependent on the deceased, such as a parent or sibling).

The administrators may not have known any of these people existed.

If they have a successful claim under the Act, the court can make several orders, including:

• An order for a lump sum payment
• An order for periodical payments
• An order for the transfer of property
• An order for the variation of the deceased's Will

Claimants have 6 months to claim from the date of the Letters of Administration, which is why many solicitors make you wait 6-10 months before the estate is distributed. 

Claims of this nature are becoming increasingly common. In fact, there are hundreds of law firms specialising in Contentious Probate, just search on Google for this, and you will see for yourself.

The number of claims isn’t highly visible, as the majority settle out of court, which still includes hefty legal costs and expenses, as well as awards to any successful claims from dependents.

So, these claims can be as big as Missing Will or Missing Beneficiary Insurance claims.

To protect against Inheritance Act Claims, the Administrators can purchase an Early Distribution Insurance policy, which means the beneficiaries won’t need to wait 6 months or more for their inheritance.  The estate can be distributed as soon as you have the Letters of Administration.

So, their beneficiaries get their money quicker, and you aren’t likely to receive complaints from them about how slow the process is, which, as you will be finding out, is extremely common.

You can tell the beneficiaries early in the process that it is your intention to distribute, provided everything is in order, when you have the Letters of Administration. The knowledge of this might make the process less stressful and confrontational for you.

Known disputes, on the other hand, will almost certainly go down the Contentious Probate route, which we can help you with, with some free consultation.  The best practice here is that as soon as you have a sniff of a dispute, you should get advice; you could nip it in the bud early and prevent a financial and legal headache down the line.

We have a link to a free continuous probate consultation within the probate risk management section of our website.

Lastly, the Administrators and beneficiaries need to consider claims from unknown creditors that arise after the estate has been distributed.  The relevant policy for this risk is Section 27 Insurance.

However, before I discuss the cover, I wanted to talk to you about a common practice and misconception regarding how to protect against this risk.

There is a documented best practice that solicitors have used for many years: place a Section 27 Notice and advertise the death in the local papers.  Not only does this delay distribution by 2 months whilst waiting for the notice to expire, but it is also expensive and provides little cover against creditor claims.

The Section 27 Notice is supposed to protect the Administrators from claims from unknown creditors.  With the Notice, creditors have 2 months to make their claim; after this period, the Administrators can pass this debt on to the beneficiaries without financial liability.

This practice is widely used in the legal market; however, it provides you and the beneficiaries with no protection against unknown creditor claims.

If you rely on the notice and there is a claim, the beneficiaries could argue that by not arranging Section 27 Insurance, the Administrators were negligent in their duty of care to protect them from financial loss and push this liability back to the Administrators.

This is where Section 27 Insurance makes much more sense for everyone involved.

The cover protects the Administrators and beneficiaries from unknown creditor claims.

The Administrators don’t need to incur the expense of placing a Section 27 Notice and expensive newspaper advertisements.

For smaller estates, the insurance is usually much cheaper than placing the notice and advertisements and offers better financial protection.

And, when paired with Early Distribution and Section 27 Insurance, you can safely distribute the estate within the statutory 6-month waiting period.

You can arrange cover with or without a deceased credit report, although having one can save you approximately 20% of the cost of Section 27 Insurance, so this makes sense.  Lay Administrators can get this report for free from either Experian or Equifax, or there are paid solutions that might speed things up.

You can find details of all these policies within the Probate Risk Management section of our website.

If you are an Administrator of an Intestate Estate, the key policies you should consider are:

• Missing Beneficiary Insurance – protection against claims from beneficiaries not catered for when distributing the estate.
• Missing Will Insurance – to protect against the risk of another Will being found.
• Early Distribution Insurance – to speed up the distribution of inheritance, with protection against Inheritance Act-related claims.
• Section 27 Insurance, to protect against claims from unknown creditors, and when paired with the other covers, to speed up Estate Distribution.

All these policies run forever, protect the administrators and beneficiaries, have no excess to pay in the event of a claim, and are automatically indexed linked for the first ten years of the policy to help you protect against underinsurance.

Insuristic is the first insurance broker in the UK to quote online for lay administrators.   Many of our competitors will insist that you use a Solicitor for the Estate Administration before they will quote, which may be impractical and more expensive if the estate doesn’t warrant it.

I challenge you to find a better or cheaper policy online. 

Now, at the start of this video, I promised you a tip on how to save 50% on all of these policies.  Provided that you have requested a quote for all 4 policies and there are no known issues, you will automatically receive a 50% discount on each policy, resulting in a significant saving for the estate.

I hope you found this video useful. If you did, please give it a quick thumbs-up so YouTube flags it as useful to others.