Can an executor be held personally liable for mistakes made in estate administration?

Being named as an executor in someone’s Will – that is, the manager, distributor and administrator of the estate – is a legal role with serious responsibilities.

For this reason, perhaps it is no surprise that an executor can be held personally and financially liable for mistakes made during estate administration. In some scenarios, their own money may be used to cover a shortfall or loss – and this can apply even when a mistake was completely honest.

In this article, we look at the most common risks for an executor and the practical steps they can take to protect themselves.

Common risks and liabilities

Let’s start by looking at the potential pitfalls for executors:

Premature distribution

This is one of the most common and most expensive mistakes executors make.

It is normal for family members to want access to money quickly, especially when they are under financial pressure. However, if an executor pays beneficiaries before settling all debts and taxes, and a creditor or HMRC later comes forward, they can be personally liable for any remaining shortfall.

Tax errors

Executors are responsible for reporting and paying any Inheritance Tax due. They also deal with income tax up to the date of death and during the administration.

Underpaying or misreporting either tax, perhaps by undervaluing an asset or missing a deadline, can lead to personal penalties and interest charges. HMRC expects executors to take reasonable care, so having numbers professionally checked can be worthwhile.

Missing creditors

Debts relating to credit cards, personal loans, or care home fees may only come to light later in the execution process.

If a valid creditor is overlooked and the estate’s assets have already been distributed, the executor may be left personally responsible for that debt. Debts owed to HMRC or the Department for Work and Pensions may also take time to become apparent.

Asset mismanagement

Until the estate is finalised, an executor has a fiduciary duty (a legal obligation to act solely in the best interests of the testator, the person who left the Will) to protect its assets.

Allowing assets such as a valuable property to fall into disrepair or be uninsured breaches that fiduciary duty.

If the estate loses value as a result of mismanagement, the beneficiaries can bring a claim for their loss.

Incorrect payments

Misinterpreting a clause, overlooking a gift or distributing a share to the wrong person can all leave the executor directly liable to remedy the matter, using their personal money in some cases.

How to protect yourself

As an executor, what measures can you take to guard against mishaps for which you may be liable?

Advertise notices

Executors can advertise for creditors in The Gazette (the United Kingdom’s official public record) and a local newspaper.

Once the notice period of at least two months has passed, the estate can be distributed with legal protection against claims from creditors you did not know about. It is a simple, inexpensive step that offers valuable peace of mind.

Maintain records

Executors should keep accounts of every asset, debt, expense, and distribution, along with receipts and correspondence.

Clear estate accounts help with organisation and make it easier for an executor to show they acted properly if a beneficiary raises questions.

Seek professional advice

Some estates are complex, and instructing a probate specialist or solicitor can remove much of the risk in harder cases, such as when the estate is high-value or involves property or a business.

Professional fees are normally paid from the estate rather than by the executor.

Consider insurance

Executor indemnity insurance can protect against hidden claims that appear after distribution. These claims may involve an unknown beneficiary or an undisclosed debt.

It is worth considering where there is any uncertainty about the deceased’s finances.

At Bennett Smith, our Wills and Probate team can advise you on your duties as an executor, handle the full administration on your behalf, or review key decisions before you act. Get in touch today.