The role of an Executor

Thanks to Chantal from Castleacre Insurance for sharing insights into the role of an Executor this week.

This could also be entitled: Executor Forced by the Court to Reimburse an Estate to the tune of £300,000. A little more arresting. Here’s what Chantal tells us:

Many people who take on the role of executor for a family member or friend are not aware that they potentially face unlimited legal and financial liability. A solicitor in the same role is protected by professional indemnity insurance but a lay executor who makes a mistake when managing probate has no protection at all. In an era with increasingly complex family relations the task of being an executor has become much more complex and regulations on Inheritance tax and Probate are currently undergoing changes so this can present further problems for executors with more potential for errors.

Unfortunately executors often only think about insurance protection after they run into problems with beneficiaries, HMRC or creditors, this is at a point when it is too late to take insurance cover out – in the same way that you would not have a car accident and take out insurance after the event.

There are a number of real life legal cases where executors have faced legal and financial claims. In one recent example a lay executor had to personally reimburse £300,000 to an estate because of intentions set out in an earlier mutual will. In this instance two sisters made detailed mutual wills in 1991 (leaving their estates to each other). The wills stated that when one sister predeceased the other, further clauses in each other’s wills would come into effect, leaving their estates to 15 beneficiaries. In 2003 in spite of this agreement the surviving sister decided to change her will to add two new beneficiaries including her hairdresser. Then in 2006 she changed her will for a second time leaving the entire estate to her hairdresser, whom she also appointed as sole executrix. Upon her death, this had the effect of leaving the hairdresser with £300,000.

The claimants in this case – who were some of the beneficiaries under the original mutual wills – brought action claiming the original mutual wills were still valid, requesting the new executor and beneficiary return the £300,000. The court found there was sufficient evidence of intention when the original mutual wills were created and this intention should be enforced meaning that the executor had to reimburse the estate.

For other real life case studies see Castleacre Insurance‘s website.

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