The Hidden Risks of Being an Executor

Being appointed as an executor is a big responsibility, much bigger than most people think. The trick is not to lose your own assets in the process.

On the surface it seems a reasonably simple job description: executors deal with the estate of someone who has died and has a will.  If a person dies without a will the court appoints an “administrator” (usually a relative of the deceased) to do the job. An estimated five million people in the UK are currently listed on wills as potential executors.  Family members or close friends are appointed in about 75% of all wills, another 24% name solicitors along with 3% who use banks or specialist probate companies.1

Executors (usually one or two) are responsible for a variety of tasks such as arranging the funeral, locating the assets of the deceased, paying any bills or taxes owed and distributing the remaining assets to the beneficiaries, all under the rules laid out by the court.  It can be a fairly simple job or fiendishly complex depending on the nature of the estate. A survey of executors found that 47% thought the process straightforward, another 17% found it far harder than expected and 12% called it “a complete nightmare.”2

In a basic estate all the property might pass to a surviving spouse without the need to deal with other beneficiaries or inheritance tax (IHT). A more complex estate might include numerous beneficiaries, a complicated collection of assets with incomplete records and substantial IHT issues.  It is therefore important to choose an executor you trust 100% but who is also capable to do the job.  A spouse or best friend may be splendid person but that doesn’t mean they will be able to navigate the finances of the estate.

There are some options for an executor who feels they he is in over his head.  He can get help from professionals, the costs of which are paid by the estate. But it’s not cheap.  Solicitors often charge 2% or more of the assets under administration and banks double that. The best bet is often specialist probate companies which charge a set fee or give advice by the hour.  The key thing is that executors shouldn’t be afraid to ask for help or shop around on price. Ultimately, if someone is unable or doesn’t want to take on the responsibility of being an executor they can renounce their executor status via their local probate registry and responsibility will fall to replacement or alternative executors named in the will.

The danger comes when people think they can handle the job of executor and go on to make serious mistakes that can affect the estate, the beneficiaries and themselves.

Few people (only 4% in a recent survey) are aware that executors assume personal liability for mistakes they make.  This liability is unlimited in size and can continue for up to 15 years. The threat is very real. In a case this year an overseas beneficiary reneged on an agreement and left the executor legally responsible for an unpaid £341,000 inheritance tax bill.3

Executors can be sued by beneficiaries if mistakes lead to a substantial reduction in the estate’s net assets.  In one recent case a dispute between executors over the validity of a will triggered £350,000 in legal costs regarding an estate worth only £134,000.  The Court of Appeal forced the executors to pay the legal costs themselves.4

The good news is that, like most things in life, insurance is available to cover many of the risks. An Executors Liability Policy covers any legal costs and claims relating to the administration of a will.  The cost of the insurance can be charged as part of an executor’s expenses and paid by the estate. It’s the kind of insurance the professionals have as estate administrators and you should have it too if you are ever asked to be an executor.  Now you know.

This article has been sponsored by the good people at eWill.io (The world’s most sophisticated digital will).

1A survey of 2,000 UK adults conducted by Censuswide Research Agency on behalf of Executors Insurance and published in the Sunday Times, August 2, 2015.
2Ibid.
3The Daily Telegraph, “Executor is left on the hook for £340,000 inheritance tax bill after beneficiary fails to pay.” 26 May 2018.
4 The Sunday Times, 2 August 2015.

Leave a Reply