Protecting yourself if you are an Executor or Administrator of an Estate
Finding yourself appointed as an Executor or Administrator (together known as “Personal Representative”) for a Deceased’s Estate can be a daunting experience.
A difficult relationship with the beneficiaries of the Estate can add to this pressure.What can you do to protect yourself should these circumstances develop?
The role of a Personal Representative is one which comes with many duties and responsibilities. As a Personal Representative, you have a legal duty to:
- Collect in all of the Estate assets;
- As far as possible, pay all estate liabilities; and
- Distribute the remaining Estate assets in accordance with the Deceased’s Will or - if they died without a Will - the Intestacy Rules.
Should you fail to carry out your legal duties it is possible for beneficiaries or creditors of the Estate to commence legal action against you.
Threats of such action or legal claims being commenced against you can be a frightening experience, especially if you feel that there has been no wrongdoing on your part. These claims may have personal consequences for you, depending on what is alleged.
Our expert Private Wealth Disputes Team has successfully defended claims made by beneficiaries and creditors, some of which include:
- Circumstances where a Personal Representative distributed Estate assets to someone who was not a beneficiary;
- Where a Personal Representative failed to pay all of the debts of an Estate before distribution;
- Where Inheritance Tax has been paid incorrectly;
- Where investments have not been managed appropriately; and
- Allegations that the Personal Representative has used Estate assets for their own personal gain.
As a Personal Representative you may - often through no fault of your own - be threatened with legal action by the beneficiaries or creditors.
You can renounce from your appointment as a Personal Representative. This means that you chose not to take on the role. A Renunciation needs to be in writing but does not have to be made by Deed.
However, you can only renounce your position as a Personal Representative if you have not intermeddled in the Estate. Whilst definitions of intermeddling are wide ranging, you are able to arrange a funeral but cannot do much else; for example, if you start to obtain valuations for the Deceased’s property or approach their banks for financial information, this amounts to intermeddling and stops you being able to renounce from your role.
Place a notice under the Trustee Act 1925
As a Personal Representative you may be concerned that once you have paid out all of the money to the beneficiaries you may be liable for wrongfully paying out sums or for not considering all creditors. You can find some protection against claims of this nature by placing an Notice under the Trustee Act 1925. This requires you to advertise a Notice in a certain form in at least 2 different places, which are specified to be the London Gazette; a newspaper local to any land in the estate; and - should it be necessary - any other place you feel appropriate.
The Notice must advertise your intention to distribute the Estate. If nobody comes forward within two months of the Notice to say that they have a claim against the estate, you can then distribute the estate without being liable to those people. It is important to note, however, that if anybody comes forward after the two months and you have not distributed the Estate, you must still consider their claim.
The rules for advertising the Notices do have to be followed strictly in order to receive any protection under the Trustee Act 1925.
It is possible to obtain an insurance policy to protect a Personal Representative from liabilities which may arise as a result of distributing the Estate. However, as with any insurance policy, the Insurer will only be willing to provide a policy, if the circumstances of the Estate match their criteria.
As a Personal Representative, you have the power to hold back Estate funds in contemplation of any claims which may be brought against the Estate. This does, however, need to be considered very carefully. You must be very sure about the amount you wish to retain and for how long a period. This information must be communicated to the beneficiaries.
You can ask the beneficiaries to sign a document to say that should there be any claims against the Estate following distribution, then you can recover the money from them to settle any such claims which are successful. However, any indemnity is - in practical terms - only worth whatever assets the beneficiary has. Thus, if they dispose of any inheritance before you require the indemnity, it may prove to be of little use.
An application to the Court under the Civil Procedure Rules
On occasion a Personal Representative may want to take steps in administering an Estate which is opposed by a Beneficiary. It is possible to refer difficult decisions to the Court for their approval. Whilst the Court is not the appropriate forum for every query of administration, it is possible to apply to the Court if you are unsure about distribution or another question arising in the administration of an Estate. The Court can authorise the distribution of the Estate or provide directions as a result of which you, as a Personal Representative, would be protected from any claims which arise as a result.
There may be clauses in the Deceased’s Will which protect you from liability as a Personal Representative. Some clauses in the Will can even go as far as to exclude the Personal Representatives from negligence claims. Consequently, if you face a claim as a Personal Representative, it is worth having the Will reviewed professionally.
Concurrence and acquiescence
If the beneficiaries agree to the action, you have taken either by staying silent or - more preferably – by openly communicating their agreement to you, this can amount to consent to your actions in administering an Estate. Any such consent can operate as a bar to those beneficiaries suing you for the action later. You must, however, make sure that the beneficiaries are fully informed of the facts and legal effects of your actions.
Any claim against a Personal Representative must be commenced within a period set by law. This is outlined in the Limitation Act 1980. The usual rule is that residuary beneficiaries must bring a claim against a Personal Representative within 12 years of from the date on which the right to receive the share of the Estate accrued. The rules surrounding the Limitation Act 1980 are complex and it is advisable to seek independent legal advice as soon as you are made aware of a claim.
An application under the Trustee Act 2000
Many Personal Representatives feel very strongly that they have acted honestly and reasonably. This belief makes being sued even more upsetting. If, as a Personal Representative you acted honestly and reasonably but the Estate has still suffered loss it is possible to invite the Court to excuse any breach of trust and relieve you from any personal liability.
It is clear from the various options available to a Personal Representative should a dispute arise in the administration of an Estate that professional advice is important. However, as a Personal Representative you can take simple steps to help protect yourself.
We recommend that you keep a record of all actions taken in relation to the Estate and maintain up-to-date accounts. Additionally, whilst keeping beneficiaries informed on an ongoing basis can be a tiresome task, it is useful in order to avoid any misunderstandings which may lead to potential claims.
It is also important to seek legal advice at the onset of any dispute, to ensure that your position is protected, both personally and in your capacity as a Personal Representative.
If you find yourself in a situation where a claim is being brought against you as a Personal Representative or perhaps you feel that a Personal Representative is not acting in the best interests of the Estate, our dedicated Private Wealth Disputes Team are available to provide expert advice.
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