Executors can be held responsible for unpaid debts connected to a deceased estate
Executors can be held personally responsible for unpaid debts which emerge after an estate has been distributed. Claims from creditors can be payable for up to 12 years after someone’s death, placing executors and administrators in a vulnerable position.
In an age when many people deal with a high proportion of financial arrangements online, it can be really difficult to identify creditors and outstanding debts on a deceased estate but there are a couple of simple steps lay executors can take to protect themselves against such claims.
Step One – Deceased Estate Notices
The first is to place two Deceased Estate Notices, one in the Gazette (an official journal of record of the British government), and another in a newspaper local to the deceased person.
Deceased Estate Notices are not a legal requirement in the UK but the Trustee Act 1925 stipulates that a statutory advertisement for a deceased estate offers executors protection from creditors and any unidentified beneficiaries, because the executor or administrator has demonstrated due diligence in their effort to identify them. Placing these notices will limit liability significantly – solicitors acting as executors will do so as a matter of course, but lay executors are not necessarily aware of their value.
The cost of placing a notice in the London Gazette (the relevant Gazette for England and Wales) can be reimbursed from the estate as part of the executor’s reasonable expenses, but whilst the cost is relatively small, they offer executors valuable protection. An executor or administrator must present either a copy of the death certificate, grant of probate or letter of administration in order to advertise but once the deceased estate notice has been placed creditors or potential beneficiaries can only make claims for a limited time – just two months and a day as opposed to the 12 year window – after this the executor will not be held liable for claims from debtors or beneficiaries.
Step Two – Indemnity Insurance
A solicitor acting as an executor is protected against potential legal and financial claims by professional indemnity insurance, which offers cover for claims and legal defence costs, but very few lay executors think about taking out insurance, although they are equally vulnerable.
As with Deceased Estate Notices there is no legal requirement to take out insurance but this type of cover can offer valuable reassurance and premium payments can also be reimbursed from the estate as part of the executor’s reasonable expenses. Executors’ policies usually cover the period it takes to distribute and manage an estate, in essence the time during which you are most vulnerable to claims – for example at Executors Insurance indemnity policies last for 18 months and cover up to four executors. Most indemnity policies can be renewed if the estate takes longer than you anticipate. If you have finished dealing with the estate but are concerned that later claims may arise you should be able to extend your policy for 12 months at time.
More information on Deceased Estate Notices is available on the Gazette website
About the author
Guy has worked in the insurance profession for over thirty years, initially in the London Insurance market as a broker and subsequently as a Lloyd’s Members’ Agent. He set up private client insurance brokers Castleacre in 2005. Castleacre is the first company in the UK to offer indemnity insurance to lay executors – in direct response to clients who had become executors but could not find suitable cover on the market. If you have would like to know more about executor liability insurance or to contact Guy click here. If you wish to view the Executors Insurance blog click here.