Many people will take on the role of Executor or Administrator without appreciating the full extent and complexity of the task. There are many risks to be being an executor of a will or administrator. It can be a demanding role, requiring an ability to manage competing interests, navigate the wishes of beneficiaries and deal with potentially complex legal and financial issues including inheritance tax.
Often, estates are simple to deal with and no issues arise. However, there are a number of potential problem areas for the unwary. This article focuses on the most common areas of risk associated with being an Executor or Administrator.
What is an Executor of a Will or Administrator?
An Executor is a person appointed in a person’s Will to deal with their personal affairs after death. Administrators are appointed by a Court where no provision has been made in a Will, or the appointed Executors are not able to carry out their role. Both roles involve identifying and valuing all of the assets of the deceased, finalising inheritance tax matters including inheritance tax returns, settling any debts due to others and distributing what is left.
With the responsibility of managing the assets, liabilities and personal wishes of the deceased comes exposure to risks which can involve both financial and legal consequences for Executors or Administrators.
Disputes with other Executors
It’s not uncommon for probate to become contentious. A person may appoint a single Executor or share the role between up to four people. They could be related to each other or have no connection at all. Agreement will have to be found on how to approach giving effect to the wishes of the deceased, and decisions reached on how to deal with their probate property. Disputes and disagreements on what to do and how to do it are not uncommon, which can lead to stressful situations for those appointed to resolve matters.
A sensible approach is to let one Executor take the lead role, rather than try to reach unanimous decisions but this is often easier said than done. To make matters more complicated an Executor may also be a Beneficiary of the Will so accusations of bias may arise. Professional probate advice may be necessary to try and reach a way forward.
Disputes with Beneficiaries
Executors naturally have to deal with those left something in a will or those who’s expectations of how they would be provided for are not met. Sometimes, this is a simple and straightforward process but equally, it can mean dealing with upset beneficiaries already coping with the emotional issues of a loved one’s death.
The role of settling the estate can also bring the Executor or Administrator into conflict with the family and friends of the deceased. People often have complicated family lives meaning there can be many competing interests to balance. Dealing with these individual demands can prove difficult, especially for those who dislike confrontation.
Where one exists, the Will itself might be challenged, presenting difficulties in settling the estate. The Executor will still have to try and deal with the responsibilities of preserving the estate while dealing with legal proceedings that can cause substantial delay. Getting this wrong can lead to legal costs being awarded personally against an Executor, exposing them to significant financial risks. Professional legal advice from a probate practitioner will be needed to navigate through this problem area.
As the person with responsibility for carrying out the wishes of the deceased, the Executor is the focal point for any decisions which cause animosity. There may be a probate property to be sold. It may be occupied by family members. Some beneficiaries may want their share of the sale proceeds as quickly as possible and there may be disputes about who occupies it and for how long.
In addition, legal claims can personally be brought against an Executor if a Beneficiary feels that the estate is not being administered properly. Executors and Administrators have a duty to safeguard and protect the estate and to carry out their role in a timely manner. They can be exposed to the risk of a claim by beneficiaries that delays have caused them financial loss, or assets have not been realised at their full value.
Many Executors or Administrators find that the role takes up more of their time than they ever imagined. Establishing the full extent of assets and debts can a lot of investigation and having to make contact with many other organisations such as banks, utility providers, accountants or investment companies. Executors are not paid for carrying out their duties but are able to claim reasonable expenses in carrying out their responsibilities.
Personal Financial Liability
One of the most important responsibilities of the Executor or Administrator is dealing with the financial affairs of the deceased. It is also the area of greatest risk of personal financial liability for the Executor or Administrator. The estate has to be properly valued which means establishing the extent of outstanding mortgages, credit cards, loans, utility bills as well as the tax liabilities of the estate, as well as money owed to it.
An Inheritance Tax Return is required for all estates regardless of size but the rules vary depending on the value of the estate. Fines can be imposed on the Executor or Administrator if the information provided is inaccurate or incomplete. The inheritance tax rules, reliefs and exemptions available and range of potential claims against the estate can be very complicated.
If an incorrect return is submitted, under-declaring the tax due then the Executor or Administrator is personally liable for discharging the payment due. Realising there is any form of debt owed after distributing the assets of the estate is a real risk, which causes problems for Executors and Administrators in trying to repair the situation. Ultimately they may be held liable for it.
The Risks of Being an Executor – Conclusion
Being an Executor or Administrator is a great responsibility and many take pride in performing this honourable and trusted role. Consideration needs to be given to the potential risks to avoid it becoming a poisoned chalice. It is sensible to have expert legal advice at the earliest opportunity to ensure that all goes smoothly and avoid having to deal with the problems highlighted in this article so take this opportunity to request a free consultation with a probate practitioner.