Most people usually only act as an executor of an estate once in a lifetime. This means that there are a lot of executors out there doing their best to figure out what they are supposed to be doing, and it’s not easy.
A major consideration here is that an executor is personally liable for any losses he or she causes the estate. That means that if negligence, delay or recklessness causes a loss in monetary value, the executor is personally on the hook for repaying that loss. The loss could be penalties and interest on a tax return that the executor filed late for no good reason. It could be the sale of property for less than market value because he or she didn’t bother getting estimates. It could be from charging expenses such as meals or travel that don’t qualify as legitimate estate expenses.
This rule can be tough to translate into actual practice, because most people understand that legal fees and executor expenses are covered by the estate. This doesn’t mean that the estate will compensate for every meal or kilometer driven. The estate will only pay the reasonable costs and expenses of a proper administration. The estate will not pay for the executor’s mistakes that could have been avoided with a little bit of attention.
An executor whose behavior is so unreasonable that it amounts to fraud or neglect, the courts deal with estates like this on a case-by-case basis.
If however the executor has simply neglected to take care of things and monetary value has been lost, the executor could repay the loss by reducing or completely eliminating the pay he would otherwise have received for being the executor. If it goes beyond that, and the executor has behaved in an egregious way, foregoing the fee might not be enough. The executor could be held liable in court for losses that must be paid out of his own money.
If you are a beneficiary of an estate and you believe that the executor is causing losses to the estate, consult with an experienced estate lawyer, and take as much of the related paperwork as possible. Get an opinion on what, if anything should be done about negligence on the part of the executor.
If you are an executor and you are at all concerned about your own liability, the best thing you can do is engage the help of professionals. A lawyer can guide you through every step of the process and make sure that everything is done properly. If necessary, a lawyer can co-ordinate other professionals such as financial advisors, accountants, realtors and appraisers. He or she will advise you of your responsibilities and recommend an appropriate compensation amount. Your actions will be backed up with documented proof of the steps you took and why. Remember, if you are honest, keep everyone info up to date and informed, and move things along as quickly as possible, you are not likely to run into trouble.
Most estates can be wrapped up within a year so this should be your goal. It might take longer if the estate involves selling a business, dealing with real estate in other countries, asking the court for an extension, etc.
Executor liability insurance is available to insure against personal liability and defence costs should the executor face litigation regarding decisions they make in the course of administering the estate, which could expose the estate to potential legal expense.
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