Ahere are 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.
An executor can be held liable if he or she:-
* violates any applicable law;
* fails to comply with the terms of the will;
* abuses any of his or her powers as executor; or
* deals 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.
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. Similarly, 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.
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 advisors complete scope to make decisions in respect of and deal with the estate’s investments without your supervision, could result in 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 most 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 accidently 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.
Taking actions without the proper approval can also expose executors to 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 personally liable to ensure these payments are made.
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 the executor for breach of duty/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. However, the principal remedies available would include an order of court:
For more on executor protection see our book on executors and probate!
How To Probate An Estate - A Step-By-Step Guide for Executors
This book is essential reading for anyone contemplating acting as an executor of someone’s estate! Learn about the various stages of probate and what an executor needs to do at each stage to successfully navigate his way through to closing the estate and distributing the deceased’s assets.
Published December 2010
Amazon Price: $24..95