Executors and Administrators
What are executors and administrators and what are their roles, duties, responsibilities and liabilities?
When a valid will exists, a person dealing with the estate is called an executor. If a valid will does not exist then this person is called an administrator. Executors and administrators are both sometimes known as Personal Representatives.
What is probate?
Probate is the authority given by the court (in the UK this is the Probate Service) to a Personal Representative allowing them to administer the estate of a deceased person. This authority is given by issuing a Grant of Representation. In the case of an executor the Grant of Representation is called a Grant of Probate and in the case of an administrator it is called Letters of Administration.
How do I become an executor of a will?
You can only become an executor by being named as such in a valid will. Any number of executors can be named in a will but only a maximum of four can undertake probate duties. Normally it is possible to have just one (i.e.. sole) executor. However if one of the beneficiaries is a minor (under 18) or one of the beneficiaries has a life interest in any of the assets then two executors are required. If there is only one executor then the Court will usually appoint another personal representative who would only deal with these matters. If you are named as executor you have several options:
You can accept the position. You will legally own all the assets from the time the testator dies and will have the responsibility of discharging your duties with reasonable skill and care. You will not be able to take any of the assets into your possession nor dispose of them until the will has been “proven” and your position as executor is confirmed by a Grant of Probate (also known as a Grant of Representation). You can however act with authority in other matters. A Grant of Probate is sometimes not needed. See Applying for Probate.
You can renounce the position i.e.. refuse to do it. To do this you will need to sign a Deed of Renunciation and lodge it with the Probate Service.It is recommended that you take legal advice when doing this.
You can have Power Reserved (see below). This means that you are not going to do anything to help administer the estate but you reserve the right to do so in the future. You might use this when one of the executors lives out of the country, for instance.
Power reserved may often be helpful where next of kin are named as executor and they are struggling to cope with the grief of the bereavement. They may not wish to renounce their position as executor but may not feel able to deal with all of the work and papers associated with applying for probate. The remaining executors can apply for the grant of probate. Under these circumstances it is only their written authority which is required to deal with the sale of the estate’s assets and the settlement of liabilities. This can be useful where it is difficult to obtain signatures from all of the executors and can streamline the post probate process. It is always worth referring to the fact that one or more of the executors has power reserved when sending off letters after probate to avoid the recipient returning the documents and requesting all executors to sign. The probate grant records the fact that power has been reserved to other executors. By reserving power the executor that has not applied for probate has the right to prove the will at a later stage if they wish. This is termed a grant of double probate and the application is made to the Probate Registry. Under these circumstances documents will then need to be signed by all the executors.
If a solicitor is named as an executor and you do not want to use their services they would be advised to take Power Reserved. This means that they can act (and get their fees) if something prevents you from undertaking your duties. You do not have to sign the Probate Application forms but they will record that you are taking Power Reserved. An executor with Power Reserved can get a Grant of Probate from the Probate Service at any time. Once you have renounced your executorship you cannot change your mind. If you intend to renounce the position it is important that you do nothing which could be construed as behaving like an executor (for instance writing a letter stating “I am the executor of …”). In theory you have then accepted the role. An executor is responsible for administering the estate for the rest of their life. In theory it is possible for something to come to light many years after you thought your duties were finished which you will then be obliged to deal with.
You should not undertake the role of executor without knowing the consequences. Importantly, you should also refer to Executor Liabilities If you intend to renounce the position you should take care to do so before you do anything that could be interpreted as executor behaviour. For instance, paying a debt could be construed as having accepted the role and you cannot then renounce it. This is known as “intermeddling”. Arranging the funeral is not considered intermeddling.
If the executor is not acting correctly
The next of kin or the beneficiaries should write to the executor and ask them to produce an account of the administration of the estate. If the response is not satisfactory or there is no response at all then they can apply to the Court to have the executor removed or replaced. The case to the Court must be robust in order for it to be considered. An executor will have to cease to act if they are convicted of a crime and sent to prison or if they become mentally or physically incapable of acting. Legal advice should be taken in any action to have an executor removed from their position.
If there is a valid will but no executors
If a valid will exists the only people who can become executors and apply for a Grant of Probate are people named as executors in the will. If there are no executors named, or if they all renounce the position, or they have all died or are incapable of carrying out the role then the will still stands but its wishes must be carried out by an administrator, rather than an executor. This would normally be the beneficiary entitled to the residue of the estate and the process is called Administration with Will Annexed. One exception to this is if a sole executor is incapable of carrying out the role due to mental incapacity. If an enduring power of attorney exists then the attorney can act on the executor’s behalf and also apply for Probate unless the Court of Protection has already appointed an executor. You may wish to consult a solicitor in this instance.
If there is no will
If there is no will, or the will is invalid then Letters of Administration (also known as a Grant of Representation) will probably be needed to give you the authority to deal with the estate. Letters of Administration will not be needed in some circumstances. See Applying for Probate. Unlike an executor, a personal representative who intends to apply for a Grant of Administration only owns the estate once the Grant has been issued and has no authority to act until then. A potential administrator should not, for example, advertise a property for sale before the Grant has been issued.
Who can become an Administrator?
In order of priority:
- The spouse or civil partner of the deceased
- A child of the deceased
- A grandchild of the deceased
- A parent of the deceased
- A brother or sister of the deceased
- A nephew or niece of the deceased
- Another relative of the deceased
These people are the ones capable of inheriting under the laws of intestacy and if there are none of these then the estate will pass to the Crown. Most estates will be administered by the Treasury Solicitor, but deaths in the Duchies of Cornwall and Lancaster pass to those Duchies and are dealt with by Farrer and Co.
What are the duties of a Personal Representative?
Stating it as simply as possible, the duties of an executor or an administrator are:
- To safeguard and collect assets
- Pay the debts of the deceased
- Distribute the remainder of the estate to the beneficiaries
In order to perform these duties there will be many tasks to be done before and after obtaining a Grant of Probate and these tasks are addressed in other sections of this website.
It can come as a shock to the first-time executor or administrator to learn that they can be held personally financially liable for mistakes made administering the estate. There are three main ways in which an executor can become personally responsible:
- Any losses caused by the executor which affect one or more beneficiaries and which could reasonably have been avoided could become the personal representative’s responsibility
- Fines or interest imposed by the Inland Revenue are the Personal Representative’s responsibility
- Expenditure which is normally reclaimable out of the estate (funeral expenses, estate agent’s fees etc.) will fall to the executor if there are not enough funds in the estate to pay them.
The list of potential pitfalls is quite long and is often used on solicitors’ and probate service providers’ websites to try to scare potential customers. Awareness of these pitfalls is important if the individual is to avoid them. Equally, knowing when your own expertise is lacking and when to employ the services of a professional is important. There are many potential pitfalls which we gave covered below and in the regular blogs on this site by Guy Everington of Castleacre Insurance. The key pitfalls as follows:
- Neglecting to properly insure the assets of the estate if it suffers a claim
- Diminishing the estate through imprudent investment and inadequate book keeping
- Failing to pay the correct taxes on the estate
- Selling an asset without the agreement of all the executors involved with the estate
- Engaging in an action which constitutes a conflict of interest without declaring or disclosing your interest to all relevant parties
- Improperly delegating a decision to someone who has no legal authority over the estate
- Paying or distributing goods, chattels or assets to the wrong beneficiary and then failing to recover those assets or monies to the detriment of other beneficiaries
- Failing to identify a creditor who subsequently makes a claim after the estate has been distributed
- Missing an overseas bank account relating to the estate which subsequently comes to light and results in a tax fine after the estate has been distributed
Care and skill
A Personal Representative is required to look after the estate assets with an appropriate degree of care and skill. For instance if large sums of money are involved – entirely likely if a house is involved – you are expected to invest the money appropriately and with a safe degree of diversification. You should ensure, if possible, that interest earnings and capital growth are balanced to minimise tax. Full advantage should be taken of each tax year that the administration period covers. You are allowed to take professional advice on these matters and to charge the estate for the advice. Equally, if the cost of advice is likely to be expensive relative to the sums involved then it makes sense to make your own decisions.
Assets should be kept secure and insured if appropriate. If a house with its contents is left unoccupied it would be sensible to remove valuables and keep the property locked. The house should be insured and the insurers informed that it is unoccupied. It may be that the deceased had not taken out insurance on the property so the executor may need to do this – don’t assume that it is insured. It is worth looking around the house to try and locate an existing house insurance policy, and checking the deceased’s bank statements for insurance premium payments.
Once a Grant is obtained you need to distribute bequeathed assets and convert other assets into money in a timely manner. If a loss occurs because you were shown to be too slow then you may have a responsibility. Examples would be selling a house which falls in value or failure to pay a debt leading to penalty charges.
Clearly if you steal from the estate then your liability to repay is unlimited. If interest is earned on estate monies make sure it is properly accounted for in a way that you can explain if asked.
As an executor you have a responsibility to pay inheritance tax, if due, and to complete tax returns covering the administrative period. If you miss deadlines you will be liable for both interest and penalties and these cannot be claimed from the estate.
Gifts that the deceased made within seven years of their death may be liable to tax. The recipient of the gift is responsible for paying this tax within six months of the death. If they fail to do so then it becomes the executor’s responsibility to pay it. The tax can be claimed out of the estate but if you have distributed all the assets then you could end up paying it out of your own pocket.
In a similar vein, if you do not make reasonable efforts to enquire about lifetime gifts you could find yourself responsible if they subsequently come to light.
If you misinterpret the will and overpay one of the beneficiaries you may need to make up the difference to the other beneficiaries. If one of the beneficiaries is bankrupt then his creditors must be paid by you, as executor, before anything is given to the beneficiary. Even if you were not aware of the bankruptcy you will still be liable if you get this wrong.
Although you can make interim or staged distributions as appropriate, you must make sure that all debts, including taxes, can be paid out of the estate.
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Executor liability insurance
You may want to consider taking out Executor Liability Insurance. This can protect you against errors carried out during probate and the appearance of unknown beneficiaries and would include legal cover and financial reimbursements. The period of cover can usually be extended to suit and the premiums are a legitimate expense which is chargeable to the estate.