I am dealing with a potentially insolvent estate where it took some time for pension providers to be informed of the death and so a number of payments were received which are now being claimed back.
Does the fact that these payments occurred due to the delay in notifying the death and would not otherwise form part of the estate mean that they can rank in priority to creditors of the estate at the time of death?
The ranking order of priority of creditors is determined by the category of the claim and not how or when it arose
So:
1 secured
2 funeral/testamentary/admin expenses
3 preferential
4 unsecured
5 statutory interest on 4
6 deferred e.g family creditors
A PR is usually well-advised to petition the court for an Insolvency Administration Order and the appointment of an LIP. This will avoid the PR from getting anything wrong and the pukka system incorporates procedural rules about claims and cut-off measures to time out creditors and eliminate latent claimants. Regs 3 and 4 and Sch 1 Insolvent Estates Order 1986 import the theological rules of bankruptcy (personal insolvency)
I have often been one of a team inputting tax and property law expertise with an LIP leading, admittedly mostly in a corporate insolvency or big ticket bankruptcy. An LIP appointment is not essential in law and non -specialist PR can administer the estate out of court but still observing the order of priority above; unless the estate is very straightforward DIY is not something I would recommend because of the tricky areas e.g joint ownership property and contingent, doubtful and even unscrupulous claims; plus potential banana skins like lifetime preferences and transfers at an undervalue.
As well as the risk of actionable liability there is a danger of doing work without getting paid. An LIP’s charges should not be susceptible of challenge in principle (amount is another matter), fall into category 2 and there will generally be an ad hoc deal with any category 1 claimants who will be reconciled to incurring some costs of enforcing their security. Those in category 4 have an uphill task to complain. Part 18 Insolvency Rules 1986 are granularly prescriptive and of course there is a competitive market (at least in theory!). Heavyweight creditors can often “influence” the selection of someone whose “handwiting they wecognise” or went to school with.
Another area where a PR should tread carefully is the technically solvent estate with a large number or wide range of creditors or high value and perhaps complex claims. In such situations it would be prudent to seek specialist insolvency advice and possibly outsource some of the processing.
The Law Society publishes a Practice Note, that I cannot access since I was voluntarily defrocked.
Jack Harper
Thanks Jack for your comprehensive reply - insightful as ever.