Can a beneficiary of an estate be bankrupt? - Palmers Solicitors

Can a beneficiary of an estate be bankrupt?

Can a beneficiary of an estate be bankrupt?

When someone dies, it is the responsibility of the executor or administrator of the estate to distribute the estate to the selected beneficiaries.

However, if one of the beneficiaries has been declared bankrupt, it is vital that you find this out as it will require a different way of handling the estate.

If part of an estate is accidentally distributed to someone who is bankrupt, then their trustee in bankruptcy – who will have taken over their finances – could make a claim against you to retrieve money that they could not recover from the beneficiary.

Who is liable?

If a beneficiary is bankrupt, they have a responsibility to disclose any inheritance received to the trustee in bankruptcy as it is an offence to not do so.

The executor or administrator in charge of the estate also has a duty to make sure that the money is paid to the right person which includes paying it to a trustee in bankruptcy.

If you are an executor or administrator and you mistakenly distribute part of an estate to a bankrupt beneficiary, the trustee can make a claim against you if they are unable to regain the full amount and you will be held liable to repay the money that can no longer be retrieved.

Additionally, you will be responsible for the trustee’s legal costs to recover the money.

How can this be avoided?

Before making any payments, you should conduct a bankruptcy search.

It can be really difficult to deal with an estate so it is important to understand your responsibilities as an administrator or executor of an estate before taking on this role.

At Palmers Solicitors, our expert Private Client team have experience of dealing with complex estate administration matters and can help executors deal with issues such as bankrupt beneficiaries.  For more information and advice, please get in touch with us.