Sometimes, when making a will, people prefer to use professional executors such as Spratt Endicott to represent their wishes when they die, or sometimes people will choose close friends or family members to organise their assets once they are no longer here. The aim of this page is to advise those chosen on the significant responsibility that they are undertaking when they become an executor of someone’s will, as well as the obligations they have towards the will’s beneficiaries, should they accept the role.
Liability to beneficiaries
There is a significant amount of responsibility that falls with the executor of the will and one of these is being liable to the beneficiaries should anything go wrong. For example, if you are an executor and cause loss to the estate then you will be liable to any beneficiaries for wasting the assets. It isn’t uncommon for private executors to make a mistakes during the administration process, especially if they have not been professionally advised and beneficiaries can lose out as a result.
There are common cases where executors have misinterpreted a clause of a will and have given one beneficiary more than they were entitled to; therefore, the other beneficiaries find themselves at a loss.
Occasionally, Executors might misappropriate assets from the estate, and use them for their own purpose. Clearly, they will then be personally liable, without limit, for the loss suffered by the beneficiaries.
Your duty to exercise care and skill
As an executor, you do have a duty to exercise care and skill when administrating the estate under the Trustees Act 2000. A professional Executor, such as Spratt Endicott, will be tested more rigorously when it comes to their compliance with the Trustees Act 2000 than, say, a lay executor. This can make those non-professional executors a little more comfortable, but can be a little concerning for beneficiaries to know. Regardless of whether you are a professional or private executor, with the act in place, you are expected to keep a close eye on factors such as investment performance within its terms.
Liability to third parties
Executors will sometimes make contracts with third parties, such as Estate Agents, as part of their role, which will make them directly liable to them under contract law, when it comes to administering an estate. The cost for these third party services can be recovered from the assets of the estate. However, if the claim then exceeds the value of the assets, the executor will be personally liable for any shortcomings.
Acts and omissions
Being an executor requires some important actions, or omissions, that might have significant consequences for the estate or beneficiaries. The executor must know that they will be held liable for these actions. If they can show that they are acting within the best interests of the estate, actions such as libelling a third party may be covered by the assets of the estate, but only if the claim value does not exceed the value of the assets; any shortfall becomes the executor’s personal responsibility. If it is proven that they didn’t act within the estate’s or the beneficiary’s best interests, the executor will not be entitled to any financial cover for this type of claim.
What to do about any outstanding debts
Sometimes, the deceased may have debts that remain outstanding after their death. The responsibility of paying back these debts lies with the executor and it is important that they take these into consideration before distributing the estate to the beneficiaries; because, if they distribute the estate and then still have remaining debts to pay, there is a chance that they will be personally expected to settle it. It’s vital that an executor does not distribute assets to beneficiaries until they are certain that the deceased has no remaining outstanding debts.
About your liability to the Revenue
Executors are personally responsible for completing self-assessment tax returns during the administration of the estate, and for payment of assessed tax. The tax may be payable after the administration is concluded, and it is essential such liabilities are allowed for, in distributing the estate.
Delay in lodging returns, or in payment of tax, and especially under declaration of income or gains, can now lead to significant penalties. These may not be recoverable from the assets of the estate.
Inheritance Tax: the executor’s responsibility
The Executor has the legal responsibility of ensuring that HMRC are informed when there are circumstances where an inheritance tax payment may need to be made e.g. assets awarded or payments made to the beneficiaries. Any failure in reporting this will result in penalties that may not be able to come from the estate.
What about liability to beneficiaries’ creditors?
Executors may be personally liable to creditors of a bankrupt beneficiary, if they pay the beneficiary direct and cannot recover it from him.
The duty to account
Every action taken by the Executor must be accounted for. These accounts must be clear and accurate. If an executor has no experience of keeping or making accounts, then they must delegate this action to someone who can do so. The court can intervene and demand an account, should they believe actions are not being recorded properly.
Protection against liability: How does it work?
Distributing land can sometimes get a little tricky. It is frequently difficult to be sure that all debts have been paid. Executors can protect themselves by advertising notices under Section 27 of the Trustee Act 1925 in the London Gazette and in local newspapers in the area where the deceased owned any land. In practice, it is best to advertise whether land is owned or not.
The notice specifies a two-month period for claimants to contact the Executors. Once that time has expired, the Executors are permitted to distribute the estate, having regard only to those claims of which they have actual notice (or “constructive” notice i.e. they ought to have known). A creditor who is too late can, however, pursue the beneficiaries who have received distributions from the estate.
Is there any relief from liability?
The court, on application, has power to relieve the Executor from personal liability for any breach of trust or duty. However, it is not wise to place over reliance on this, especially in the light of the Trustee Act 2000.
What about missing beneficiaries?
A particular area of risk for Executors is the case where a beneficiary exists but the Executor is unaware of this. Section 27 of the Trustee Act 1925 will usually protect Executors, where they do actually know or believe that the beneficiary exists, but are not aware of his whereabouts and therefore omit him from distribution. Special techniques are available to protect Executors who are placed in this difficult position and it is worth looking into this if you do find yourself in this particular situation.
Getting in touch
To learn more about how we can help you with these liability issues, please contact David Endicott on 01295 204005 or email email@example.com.