Executors – Do you know what you are taking on?
It is becoming increasingly common for friends and family to take on the role of Executor or Administrator of the Estate of a person who has recently died.
An Executor is usually appointed by a Will whereas an Administrator is appointed where the deceased died intestate (without a Will) or where a Will has been left but no Executor is applying for a Grant.
In the case of an Administrator, a Grant is required to give the Administrator the authority to act. The Grant is called a Grant of Letters of Administration.
In the case of an Executor, a Grant of Probate is usually required to confirm the Executors authority to administer the Estate.
Without such a Grant it is difficult, if not impossible, to deal with the deceased’s assets.
Executors and Administrators Duties
For the most part, the duties apply equally to Executors and Administrators. The reference to Executor below applies equally to an Administrator.
The duties are set out in statute in the Administration of Estates Act 1925 and in the Trustee Act 2000.
The general duties are:
- To collect in and safeguard the assets of the Estate;
- To pay the debts or liabilities of the deceased; and
- To distribute the Estate to the Beneficiaries who are properly entitled.
Executors have a duty to take reasonable care in terms of preserving the Estate and undertaking their duties generally. That general duty of care is set out in Section 1 of the Trustee Act 2000 and the duty is owed to the Estate and to the Beneficiaries.
Although professional/qualified Executors, may owe a higher duty of care than a lay Executor, the duty still applies to those who are not qualified.
What do the duties actually involve?
As a general rule, the more the deceased owned when they died, the more onerous the duties placed on the Executors. In practical terms, the duties include:
- Register the death, locate and read the Will, deal or assist with any funeral arrangements, inform all relevant institutions, particularly financial institutions and Government Departments, open a separate Executors bank account, value the Estate to include the house, the contents and any investments, prepare a list of assets and a list of debts, complete the required Inland Revenue Forms and identify whether Inheritance Tax is due, prepare the papers and apply for a Grant having dealt with any Inheritance Tax, distribute copies of the Grant, realise Estate assets and receive any funds due, settle any outstanding liabilities, prepare Estate Accounts, distribute the Estate to the Beneficiaries, and finally retain in safe keeping any documentation.
- All of this should be carried out as soon as reasonably practical. The “executors year” (12 months from the date of death) offers some guidance as to timescale.
- The obligations may be further complicated if for example the deceased ran a business, had foreign property or any claims are made against the Estate.
What if you get it wrong?
A breach of duty by an Executor is called a Devastavit. There are two categories of Devastavit: misappropriation and maladministration.
Misappropriation is self-explanatory but maladministration can occur in a number of ways. For example, where there has been a failure to insure, a failure to realise investments in a timely manner, a failure to pay debts on time, making payments to those not entitled and paying unjustified expenses.
If a Devastavit is proved then an Executor is personally liable for any loss.
If there is more than one Executor, one may even be personally liable for a breach by the other.
Taking the above into account, it is no wonder that many Executors still seek legal advice or assistance, however a growing number do not.
It will therefore perhaps come as no surprise that claims involving Estates and claims arising from the acts and/or omissions of Executors are increasing.
As well as dealing with claims against Executors brought by Beneficiaries, our Dispute Resolution Team, who have specialist Contested Probate Solicitors, are also advising on a growing number of claims between Executors who cannot agree as to how an Estate should be managed.
Phillip Gregory is a Partner and Contested Probate Specialist and in his next article he will look in more detail at the types of claim in which Executors/Administrators can become involved.