What are the Personal risks in being an executor?
The executor to an estate has the job of winding up someone’s affairs after their death. The role involves both responsibility and personal financial risk. We look at the personal risks in being an executor to someone’s Will.
When someone passes away, their executors (named in their Will) role is to administer their estate. Their job is to ensure that the beneficiaries receive everything to which they are entitled. Most importantly the correct procedure must be followed. The executor (or administrator, if the deceased did not leave a Will) acts in the best interests of the estate and the beneficiaries at all times.
Conducting estate administration
The executor or administrator needs to identify all of the assets in the estate and value them. They need to calculate and pay Inheritance Tax, where this is due. Where necessary, they must apply to the Probate Registry for a Grant of Probate. However, in the case of no Will they will apply for a Grant of Letters of Administration.
Once the grant is received, assets can be sold, to include property, and debts should be cleared. Estate accounts need to be prepared before the estate is distributed to the beneficiaries.
Risks in estate administration
These are some of the potential risks that may be faced by an executor when dealing with the deceased’s estate:
The executor or administrator has to ensure that all of the deceased’s debts are identified and paid. This may involve advertising in the press for creditors to come forward. Failure to clear debts may mean that a claim is made against the executor in the future. The executor is liable, even if they were unaware of the existence of the debt.
If the estate is insolvent, ie. there are not enough funds to pay all of the debts, it is essential that the executor pays creditors in strict order of priority. It is recommended that legal advice is sought to ensure that this is done and personal liability avoided.
In a case where debts are not paid on time, ie. if an outstanding tax liability is not cleared, and a penalty is imposed on the estate, the executor is liable to pay. This is because it arose through their error. Therefore the executor is liable for any losses to the estate, even if they occur because of a genuine mistake.
The executor or administrator must also ensure that all beneficiaries who are entitled to inherit are identified. However this is not always a straightforward process. It may be that the deceased has left their estate to be shared between their children. Unfortunately it may not be clear how many children there are, if the deceased did not leave a Will. Beneficiaries entitled to inherit under the Rules of Intestacy must be located.
Once again, it may be advisable to place press advertisements for beneficiaries to come forward. Failure to identify a beneficiary poses the risk that the executor faces a potential future claim for which they could be personally liable.
Claims against the estate
The estate may face a claim from someone who believes they are entitled to a share of the estate. The executor or administrator has to remain neutral in this circumstance. Furthermore, they must not actively defend the claim or they may become personally liable for paying the claimant’s legal costs if the claim succeeds.
Following a death, disputes could arise between those with an interest in the estate. It is important to deal carefully with these to avoid personal liability.
The role of executor or administrator is often more complex than initially anticipated. There is a degree of risk to the individual carrying out the role. An experienced probate solicitor will be able to ensure you follow the correct procedure throughout and that your exposure to personal liability is minimised.
The job can also be exceptionally time-consuming over a long period of time. Seeking professional help in dealing with the administration can free you from the long-term obligation.
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