Executors’ Personal Liability Explained
02 February 2017
In England & Wales an Executor can be held personally financially liable for any loss resulting from a breach of their duty, even if the mistake made was a genuine error.
Executors have a duty to disclose all known information about the Estate including (but not limited to) the personal income of the deceased, such as income from bank accounts and any known liabilities such as credit cards, utility bills and outstanding debts.
Beneficiaries have the ability to start legal proceedings against the Executor in certain circumstances. This is often to recover the loss incurred due to errors made in the Estate administration process. It is therefore essential to verify the information about the Estate is accurate. It may be prudent to complete financial asset searches to ensure all assets have been located, and gather further Estate information by other means.
When dealing with the administration of Estate funds, all liabilities must be paid before funds are released to any beneficiaries. If all known liabilities have not been paid, the Executor can be liable for non-payment of debts. If there is insufficient funds within the Estate to pay all the debts, the Executor will need to prioritise the funeral costs and associated expenses before following the procedure for dealing with an illiquid Estate; this means that the Estate assets are not easily converted into cash.
The Executor may find they have further responsibilities with respect to the deceased's Will. Executors can be appointed as a Trustee with further duties and powers to abide by until the Trust comes to an end. The Will may have further directions such as whether the deceased has a preference on their final resting place and whom certain items should be given to.
A professional Executor may interpret a Will differently to a lay Executor depending on the language used, and so it's best to get expert guidance to ensure no personal liability is initiated.
Appointing a Professional Executor
An Executor can make the following decisions should they wish to avoid the liability by Renouncing to act an Executor. However it would be best to review the implications, such as allowing another person to apply for the Grant of Representation, and take an active role.
Due to some of the hurdles that come with the position of responsibility, some people prefer to appoint a professional Executor to administer the Estate on their behalf. This allows them to choose the amount of involvement they have during the Estate administration process.
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What Does an Executor Do?
The role of an Executor, also known as a Personal Representative, is to ensure that the deceased's Estate is administered in accordance with the law and aligns with the wishes of the deceased.
Responsibilities of an Executor
The Executor is responsible for many decisions throughout the Estate administration process and has a duty, and is liable, to ensure that they act in the best interests of the Estate; and not their own. Examples of the Executor's responsibilities include (but are not limited to):
- Ensuring that assets are insured against loss
- Correctly identifying the relevant beneficiaries and distributing the funds accordingly, the Executor is not required to distribute funds within one year of the date of the Grant of Representation
- Completing the settlement of the Estate in a timely manner.
In order to successfully complete the settlement of the Estate, it is fundamental that the Executor deals with any claims against the Estate, and deals with all taxes such as Inheritance Tax (IHT) and Capital Gains Tax. HM Revenue and Customs (HMRC) can issue penalties against the Estate if tax affairs have not been settled and for late payments within the appropriate period.