When acting as an executor in a Will or indeed an administrator when someone has died without a valid Will (collectively referred to as a personal representative), then you are said to owe a fiduciary duty to the beneficiaries. In other words, you should always act in their best interest at all times.
In your role as personal representative (PR), you are duty bound to ensure that the wishes of the person who has died are carried out to the letter or the applicable law is followed and adhered to. You are duty bound, not only to the beneficiaries but also to the court and any creditors.
As PR, you are responsible for the finances and tax liabilities that arise in the estate. It can be a complicated process, especially when the estate includes numerous assets and property. The estate could be sizeable in terms of value and there may well be numerous beneficiaries, all of which add to the complexities.
Many people are unaware you could be held personally liable if something goes wrong, whether intentional or not and you may have to put things right out of your own pocket.
Being chosen as an executor is a real vote in confidence in your character. The person who named you in their Will, did so because they trusted you to do what's right. If you step in to administer the estate of the person who has died, then the onus is on you to get it right. We explore here the common mistakes made by personal representatives.
PRs may misunderstand the meaning of the Will and how the law applies. Often Wills are written in complex legalese and there are many powers and laws that apply to Wills and estates which people will simply not be aware of. Many PRs will blindly follow the 'latest' Will, without carrying out the essential checks to ensure that it is in fact the last Will. If a later Will is found, this can have dire consequences to the taxation and distribution of the estate. As well as this, there is a general lack of understanding around Probate, what it is, when its needed and how to apply for it. It is not too uncommon for estates to be ignored and it come to light many years later that Probate should have been obtained causing untold issues later on.
Many people start the estate administration process thinking it will only take a couple of weeks, but not realising that actually it is a lengthy process which could take 9 months to a year, if not longer to complete. Once that person has started acting as the personal representative, they can't quit. Grief is very often not considered, the PR has probably lost a loved one and actually dealing with the process may well be too overwhelming and they choose to take their time. Ideally, a beneficiary should be paid their inheritance within a year of the death, known as the "Executor's Year".
Personal Representatives can fail to keep clear and accurate records. The PR must keep track of everything they are doing and they will need to prepare detailed Estate Accounts not only for the beneficiaries but by order of the Court or HMRC. These Accounts will need to show every financial transaction and account for every penny belonging to the estate. Many executors fail to open up a separate bank account to deal with the estate monies and instead use their own account and in doing so, they are in breach of their duties since you must not mix your own money with estate money.
Beneficiaries who are due to inherit from the estate can be inpatient and demanding, they will want to know how much inheritance is due to them and when to expect it. Many PRs fail to communicate with the beneficiaries to provide anticipated timescales and so will often bow under pressure from the beneficiaries and start to distribute the assets early. It is advisable to wait for 6 months from the date the Grant of Representation was issued before distributing to the beneficiaries which is the time limit for people looking to make a claim against the estate. PRs can also be too willing to take things on trust, such as with the removal of personal items which claim to belong to the beneficiary as well as failing to prevent the removal of such items by people who are not entitled to them.
5. Safeguarding the estate
PRs will often fail to pay debts and taxes in time and so will often incur penalties and charges. They may also pay the inheritance to the beneficiaries without paying the creditors in full, which is incorrect. There is a strict order outlined in law detailing the order in which the estate should be distributed and any failure to follow this could result in the PR being personally liable. Many PRs will often forego to take the sensible steps to place the statutory notices and advertise for creditors to come forwards, which means that a creditor could claim against them personally later on. PRs will often fail to look after the assets properly, despite the fact that they are duty bound to preserve the value of the estate and will fail to adequately insure, which is common place for vacant properties. Some PRs will manage the assets unwisely, for example invest cash irresponsibly or not recognise the appropriate time to realise assets. Some PRs may sell assets too cheaply and sometimes at "mates rates", they may well be a party to that transaction which is in breach of the self-dealing rules and the transaction will be at risk of being set aside. PRs will often transfer property or assets which then give rise to unintended tax consequences.
Mistakes do occur in the administration of estates and beneficiaries may have claims against the PR to compensate them for losses resulting from that mistake. Within reason, however, there is a general duty to find a way of putting matters back to where they should have been in the first place, or at least to try and limit the loss suffered. Although going to court to try and remedy the mistake is rarely inexpensive (due to the professional costs and expense incurred in making an application), that cost may be less than the damage caused by the mistake itself, and therefore worth considering.
Where a PR is acting jointly with another, this does not automatically absolve them of any blame if something goes wrong. If a co-executor or administrator makes a mistake then you could be liable too.
It is important to realise that just because you are named as executor or legally entitled to act as administrator, it doesn't mean you have to take on the job. If you've got too much on your plate, or perhaps you are of ill-health or just do not feel able then be honest with yourself early on. It's better not to take on the role than do try to struggle through. In this situation, instructing a professional to help you is often the preferred option, not only can they ensure the estate is dealt with correctly and in adherence of the law but they can also ease the emotional burden from you as PR and give you peace of mind.
If you want need any support or advice, then speak to our Bereavement Team for free on 03300 250825.