Q&As

In an otherwise insolvent estate, several life policies are nominated to the widow or are paid out at the discretion of the trustees of the policy. Can the creditors take action to recover from these policies?

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Published on LexisPSL on 23/06/2017

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • In an otherwise insolvent estate, several life policies are nominated to the widow or are paid out at the discretion of the trustees of the policy. Can the creditors take action to recover from these policies?
  • Transactions defrauding creditors
  • Claims by a trustee in bankruptcy

For the purposes of this Q&A we have limited our research to cover the position where an insolvency administration order has not been made, but rather that the insolvent estate is being administered by the personal representatives.

As a general introduction to the administration of insolvent estates, see Practice Note: Effect of the debtor's death on an insolvency process

Transactions defrauding creditors

The creditors may be able to take action if the nomination or payment meets the criteria for a transaction defrauding creditors.

Under section 423 of the Insolvency Act 1986 (IA 1986) a cause of action exists against a company or individual for relief following a transaction at an undervalue (TUV) which was undertaken, broadly, with the purpose of putting assets out of the reach of creditors. Such a cause of action may be prosecuted by a creditor or other person prejudiced by the transaction. Despite its name, there is no requirement to prove fraud.

A person or company enters into a TUV with another person/company if:

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