Protecting personal representatives against unknown claims: s.27 Trustee Act 1925 notices
Malik and Joanna are the executors of their late uncle, who ran a small antiques business from home before he died, domiciled in England. They have paid all the debts they know about and want to distribute the estate to the beneficiaries, but they are worried that there may be creditors of the business they do not know about.
Which of the following best describes the step they can take to protect themselves before distributing?
Choose one answer to see the reasoning.
Worked answer
Correct answer C: Advertise in the Gazette and a local newspaper, allowing at least two months for claims, then distribute having regard only to claims they know of.
THE RULE TO REMEMBER
PRs who advertise under s.27 Trustee Act 1925, allowing at least two months for claims, are not personally liable for claims of which they had no notice at distribution.
Protecting personal representatives against unknown claims: s.27 Trustee Act 1925 notices
Section 27 Trustee Act 1925 allows personal representatives to give notice by advertisement in the Gazette and in a newspaper circulating in the district in which the land is situated (and such other notices as a court would direct), requiring anyone interested to send in particulars of their claim within a time fixed in the notice of not less than two months. When that time expires, they may distribute 'having regard only to the claims, whether formal or not, of which the trustees or personal representatives then had notice'. They are then not liable to anyone whose claim they had no notice of at the time of distribution. The protection is personal to the PRs: s.27(2)(a) preserves a creditor's right to follow the property into the hands of a beneficiary (other than a purchaser), and the PRs must still make the searches a prudent purchaser would make.
Why A is wrong: The executor's year (s.44 AEA 1925) only means PRs need not distribute earlier; it gives no protection against unknown creditors.
Why B is wrong: Beneficiaries' assurances do not protect PRs from creditors' claims; the statutory route is advertisement under s.27.
Why D is wrong: The notice period must be at least two months, and s.27 protects the PRs personally; it does not extinguish the creditor's claim, which may be pursued against recipients.
Why E is wrong: An application to court is possible but not the only protection; s.27 advertisements protect PRs without a court order.
A little more practice done.
Related questions
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Which of the following best describes who has priority to take a grant and what type of grant will issue?
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Executor who may wish to act later: power reserved rather than renunciation (NCPR 1987 rr.27 and 37)
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