Executor Insurance Protects Lay Executors From Legal And Financial Liability During Probate

Did you know that lay executors can be held personally liable for mistakes they make during probate? Few do. That’s why executor insurance is a wise precaution.

If you’re reading this article you may recently have had a discussion with a friend or family member who is making a will, and who would like to appoint you as its executor. If you’re like most executors who aren’t acting in a professional capacity, you’ve probably never carried out the role before. If this is indeed the case, you need to know about executor insurance. In this article, we explain what executor insurance is, and how it can help you carry out your duties more effectively.

What Are The Duties Of An Executor?

The executor of a will is the person responsible for interpreting and carrying out the stipulations contained in the will. This statement makes things sound deceptively simple, and it’s true that in many cases the role of executor will be straightforward. But it is important to note that being an executor carries with it considerable legal responsibility. It’s not just a case of dividing up the deceased person’s estate and distributing the assets: there’s a process involved, and in order to avoid legal and financial penalties, the named executor must comply with it.

What Must An Executor Do?

The first task of an executor is to obtain current valuations of all the assets mentioned in the will. These need to be probate valuations carried out by a professional, and not the usual sales valuations familiar to anyone who has bought or sold property or other holdings. Next, the executor must apply for a grant of probate, and complete a return from HMRC so that the government can decide whether any inheritance tax is payable.

Implications Of The Role

Many people accept the role of executor without being aware of its full implications. The precise legal obligations of professional and lay executors are set out in the Trustee Act 2000, and a quick glance at the act reveals them to be many. For the inexperienced executor, there’s plenty of potential for making mistakes. This is an important point to bear in mind, because when you become an executor, you become personally liable for any omissions or errors.

Why Executor Insurance Is A Wise Precaution

Many people find their duties as executor to be relatively uncomplicated. However, probate has an unfortunate tendency to become unexpectedly involved, especially where family relationships are fraught or insufficiently resolved. As executor you could find yourself having to deal with situations such as the emergence of a secret second family, or claims made against you by unhappy relatives and friends.

You may also find yourself in hot water with HMRC, who often take recovery action if they think the assets named in the will have been valued too low. Once again, you could find yourself paying for this from your own pocket. Executor insurance protects you against such unforeseen circumstances, and helps you fulfil your duties unencumbered by fears of what might happen.

When To Insure Yourself

You needn’t take out executor insurance until the person nominating you has died, and their will is about to be enacted. If you’re already an executor and have just become aware of the need for insurance, you may be able to backdate your policy. Additionally, if there are a number of executors appointed in a will, it is often possible to obtain one policy to cover them all.

How Much Cover Is Necessary?

The amount of cover afforded by the policy is entirely up to you. Some people choose to cover themselves for the entire value of the estate, but others only find it necessary to protect against a lesser level of risk. But you should always make sure you’re covered for the entire length of the probate period. It’s also worth pointing out that executor insurance is usually something which can be reclaimed as one of the legitimate costs of estate administration.

Every year, many people without prior experience accept the role of executor. Most of them don’t expect to encounter complications, and few are aware that they can be held legally and financially liable for mistakes (mistakes which may not even be theirs).  So it’s difficult to think of a case in which executor insurance isn’t a wise precaution.

Peter Collins is a director at LFC Risk and Insurance, who provide individuals and businesses with insurance and risk management advice.

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