Executor liability is just one of the numerous risks that come with being appointed as an executor. We have set out below some examples (but not an exhaustive list) of ways in which an executor may be held liable for a breach of duty or responsibility. If executor liability crystallises, then the executor may be exposed to personal liability.
In the most common cases of executor liability, an executor is help liable where he or she has:-
• violated applicable law;
• failed to comply with the terms of the last will;
• abused any of his or her powers as executor; or
• dealt in the estate assets for his or her own account.
The administration of the estate generally needs to be commenced and concluded within a reasonable period of time. If you fail to do this and, as a result, the beneficiaries under the will are exposed to any form of financial or pecuniary loss, you could be held liable for the loss. Such risks of executor liability can be avoided with some organization and guidance.
As an executor, you are obliged to secure and protect the assets of the estate. If you fail to do this and it results in the assets being damaged, lost or stolen then (in the absence of having adequate insurance over the assets covering the loss) you could be held personally liable for the loss or, as the case may be, the reduction in the value of the assets in question. Similar to this executor liability, another liability arises if you fail to properly manage, insure or repair real property (whether commercial or residential) you could be held liable for any losses including loss of rental income.
Executors are required to act prudently in the management of estate assets and investments. If an executor acts without due care and prudence, such as in the case of buying speculative securities or disposing of valuable assets substantially below market value, he or she could be held accountable. In fact, executor liability often arises in this manner.
While executors can take professional advice before making investment decisions, the ability to make these decisions is personal to the executor and cannot be delegated. Therefore any improper delegation of executor duties, such as allowing investment advisers complete scope to make decisions in respect of and deal with the estate’s investments without your supervision, could result in executor liability being imposed on you. The same principle applies irrespective of the assets in question. As such, it would apply equally to allowing someone to freely manage the deceased’s business or property portfolio, etc. If an executor engages a professional to manage some aspect of the estate, the executor must closely supervise the carrying out of those management functions – it is his or her responsibility after all.
As executor, you are responsible for ensuring that the correct people benefit from the estate. If you accidentally make payments or distributions to the wrong people, you could be held personally liable to make good the damage caused by securing the return of the misplaced assets or compensating the beneficiaries accordingly. The level of such executor liability could be quite high, so care must be taken to avoid it.
Taking actions without the proper approval can also expose executors to executor liability. Depending on the proposed action in question, you may require the prior consent of beneficiaries, co-fiduciaries or even a court.
You need to ensure that you have properly attended to the payment of all creditor accounts, including any taxation liabilities. As the executor you are responsible for ensuring these payments are made – to the extent the estate has assets of course.
It should be borne in mind that a beneficiary named under the terms of a testator’s will or even a co-executor can institute legal proceedings against an executor for breach of an executor’s duty or responsibility. The remedies that can be sought by the litigant vary depending on the nature of the alleged breach of duty/responsibility and the specific circumstances involved. If you are subject to any legal claim, you should immediately speak to a lawyer.
How Can EstateBee Help You?
For more information on executor liabilities and probating an estate, check our some of the other articles on our website.
Alternatively, for a more in-depth discussion on probate and executors’ duties, responsibilities and liabilities, check out our book How to Probate an Estate – A Step-By-Step Guide for Executors. This book explores the process from the moment the deceased passes away right through to the distribution of assets. Items such as death certificates, autopsies, funeral planning and asset management are discussed at length. It will show you how to initiate and close probate with ease, learn how to locate and manage estate assets, deal with creditors’ claims, taxes, and trusts, avoid the common mistakes made by many executors, and much more….
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