Product in Focus Series

Why carry out a credit bureau check during estate administration?

By Alex Turck on October 19th, 2021

In an increasingly digital society where confidently identifying all of a person’s accounts is becoming an increasingly complex task, new data and technology play a key role in helping estate administrators manage and mitigate risk.

According to research by Direct Line Life Insurance (2020), some 20 million people have needed to access a loved one’s financial accounts once they have passed away. However, 38% (7.7 million) were not fully aware of where all the bank accounts and personal or financial information of the deceased person were held; making it difficult to identify both assets and liabilities.

Why is finding liabilities and debts difficult?

In the same survey 88% of probate professionals reported it was getting more difficult to identify accounts of spouses or a civil partner. Technology, and the shift toward digital processes, plays a key role in this with 62% reporting the lack of physical credit and debit cards as an issue for accessing a bank account or a building society account. Further changes including an increase in online banking and biometric security have also led to difficulty identifying or accessing accounts belonging to the deceased.

What is the risk of missing liabilities when administering a person’s estate?

In addition to collecting in the deceased’s assets, the executor or administrator should take steps to settle all outstanding debts and pay creditors in full before distributing the estate to any beneficiaries.

If a personal representative fails to identify and discharge a liability, they can be held personally liable for the debts up to the value of the estate. If they distribute the estate, leaving a creditor outstanding, that creditor may bring a claim against the Executor even where the Executor was unaware the debt existed.

While personal representatives may protect themselves against personal liability by placing Trustee Act Notices in the Gazette, and Local Paper as required, nothing prevents the creditor from pursuing the beneficiaries of the estate. It’s foreseeable that this situation could nevertheless lead to claims against the personal representative.

Notably Section 27 of the Trustee Act also states that nothing frees the executor or personal representative from making ‘advisable’ searches so while advertising for creditors offers some protection, it’s important to ensure reasonable checks are made regardless.

Unknown debts are one of the greatest risks to personal representative and beneficiaries, so it is best to take every possible precaution to search for creditors and understand the debt position and locate any and all liabilities of the deceased.

What new solutions are available to mitigate risk?

As the title of the article suggests, credit bureau data is a new tool which can help provide a robust electronic check revealing detailed information about a deceased person’s financial affairs.

The three Credit Reference Agencies (CRAs) operating in the UK (Experian, TransUnion and Equifax) collect financial information from a wide network of financial institutions. Collating and sharing information with member financial institutions helping them to make lending decisions.

CRAs therefore hold a huge amount of detailed financial information, sourced from a variety of institutions in a digital format. Working within the Principles of Reciprocity the Agencies are supportive in helping personal representatives properly administer an estate, and provided proper secure processes are in place are willing to share data with estate administrators.

Estatesearch were the first company to provide estate administrators access to Experian credit data, in our Liability Search via our secure online portal. Being an electronic check of live digital data sourced from over 600 organisations, this search helps ensure estate administrators are making all reasonable endeavours and helps identify potentially hard to find accounts or liabilities.

Searching digitally allows the report to ordinarily be delivered within 24 hours, helping PRs rapidly identify accounts or liabilities and take steps to secure accounts or prevent debt accrual. In addition to identifying credit accounts and financial history, the data often helps signpost other assets held by the deceased. For example a current account is often indicative of savings or investments with the same provider.

How Estatesearch can help mitigate risk

In addition to providing access to Experian credit data as a stand-alone service in our Liability search, we also include the search as standard in our Financial Profile Service; an award-winning financial asset search helping identify assets and liabilities in the estate.

Our single comprehensive search helps incorporate important searches all into a single service. Helping you more efficiently conduct comprehensive checks and satisfy estate due diligence, providing better client service while mitigating against potential risks and any future liabilities.

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