The ravages of the coronavirus pandemic are likely to have made many more people aware of the need to write a will in the event of their death. That act will also shine a light on the role of the executor.
What is an executor?
The government website explains that an executor is the person or persons named in a will as responsible for managing the estate of someone who has died. The executor applies for the “grant of probate” which gives him or her the legal right to deal with the deceased’s estate – their money, possessions, and any property they own.
If the person died without leaving a will, the executor is granted “letters of administration”.
The legal terms and processes are slightly different in both Scotland and Northern Ireland.
Responsibilities of an executor
An article in What Investment on the 22nd of September 2020 noted that executors operate within a strict legal framework. Their duties are onerous – not least because they may be held personally liable for any losses arising from mistakes or the mismanagement of their responsibilities.
The official Gazette explains that the duties of an executor are formally laid down in Section 25 of the Administration of Estates Act 1925. It notes that the person nominated as an executor typically needs to be reliable, well-organised, honest, and comfortable in dealing with financial matters.
The Gazette goes on to list the many duties and responsibilities of the executor – from understanding and checking the will, to making arrangements for the funeral, managing and distributing the financial assets, to completing the accounts of the estate.
Amid those listed responsibilities is the critical issue of arranging suitable insurance.
Property insurance during probate
Throughout the period of probate, any property owned by the person who has died remains in the ownership of the estate managed by the executor. The executor is responsible for managing and safeguarding that property against possible loss or damage.
The executor remains responsible for the property, which is vulnerable to risks such as fire, storm damage, escape of water, flooding, impacts, vandalism, and theft. In other words, the executor is responsible for ensuring that appropriate insurance remains in place. In the absence of such a safeguard, the executor may be personally liable for any loss or damage sustained by the property before the conclusion of probate. We have discussed elsewhere the need for house insurance during probate – including the need for cover when the property is likely to remain empty and unoccupied.
The executor faces an inescapable responsibility for ensuring the appropriate insurance of any property. Indeed, if there are insufficient funds in the estate to cover the cost of such insurance, the executor will need to pay for it him or herself.
It becomes clear that the executor assumes significant financial responsibilities from the moment a person dies – a time when all the bank accounts of the deceased are immediately frozen.
As part of the responsibility for making appropriate funeral arrangements, the executor might even find him or herself paying for those services if there are insufficient funds in the deceased’s estate.
Although beneficiaries of the will are naturally eager for distribution of the deceased’s assets, the executor must exercise extreme caution to ensure that all liabilities are met before such distribution can take place. Previously unknown beneficiaries – such as children from past relationships – may emerge, or additional tax liabilities may be revealed.
The executor has a legal duty to pay all taxes for which the estate is liable before any distribution of remaining assets may be paid to the beneficiaries of the will. That is why the executor must not rush into any premature distribution of the assets of the estate. If it later comes to light that the estate is liable for the payment of more tax, but there are no longer sufficient funds, the executor may be held personally liable.
The executor must recognise that if one of the beneficiaries of the will is bankrupt, the latter’s creditors must be paid before the distribution of funds to the beneficiary. If the executor fails to make such provision, he or she may be held personally liable for payment of the debts to creditors.
An onerous responsibility
The duties and responsibilities of an executor, therefore, are onerous. The responsibility for safeguarding any property – by arranging the appropriate type and extent of insurance – is a critical task. If it is overlooked or inadequate insurance during probate is arranged, then the executor may be held personally liable.