The legal liabilities of personal representatives, executors and administrators
Contentious probate lawyer Naomi Ireson looks at the liability of a personal representative.
What is a personal representative?
A personal representative, or PR, is someone with legal authority to administer an estate. If they are appointed under a will they are called an executor. Where there is no will they are called an administrator.
What are the duties of a personal representative?
The personal representative conducts the administration of the estate. They call in the assets, pay all debts and distribute the net estate to the beneficiaries named in the will or in accordance with the intestacy rules.
Can an personal representative be held liable to creditors and beneficiaries of the estate?
Yes. If a PR breaches their duties of office then they may be held liable to the creditors of the deceased for any loss suffered by them. A PR is can incur personal liability from the moment they start dealing with the affairs of the deceased.
Can a personal representative be held liable for breach of duty to administer an insolvent estate?
Yes. There are statutory rules which set out the order in which claims must be paid by the PR if there are insufficient assets in the estate to pay all the debts and liabilities, including legacies. If a personal representative fails to pay the debts in the specified order then they may be guilty of maladministration. Debts of the estate include any Inheritance Tax (IHT) due. The rules vary depending on whether the estate is solvent or insolvent and whether the debt to the estate is secured (such as a mortgage) or unsecured.
Can a personal representative be held liable for the actions of another PR?
The liability of a personal representative would not usually include acts carried out by their fellow personal representatives.
Is it possible for a PR to avoid liability or provide a defence to a claim brought by creditors of the estate?
Yes. Provided PRs perform their duties to the estate diligently then they should be able to defend themselves against any claims. If a creditor brings a claim against a PR to recover a debt due from the deceased then the PR is able to plead any defence to the claim which the deceased may have pleaded had he been alive.
Is it possible when making a will to include a clause restricting the liability of a personal representative?
Yes, but only so far as beneficiaries are concerned. Such a clause may restrict the liability of a personal representative for claims brought by a beneficiary under the will but not for actions brought by creditors of the estate. Statutory relief will be given if the PR can prove that they acted honestly and reasonably when distributing the deceased’s estate.
How can PRs protect themselves against any unknown creditors/beneficiaries?
PRs must take all reasonable steps to ascertain details of the creditors and beneficiaries of the estate so they do not leave themselves open to personal liability. Protection is given under s27 Trustees Act 1925, which provides that the PR must advertise the distribution of the estate in the London Gazette and local newspapers in the area where the deceased lived or carried out his business. After the notice period has expired the PR will be able to safely distribute the estate without being personally liable to any unknown creditors or beneficiaries of the estate.
If you are involved in a dispute or need further guidance on the liability of a personal representative then please contact us for a free assessment of your case on 0333 888 0407 or send us an email.