Pitfalls of Being a Personal Representative
Posted on 22nd February 2023 at 11:24
So, you’ve been appointed as an executor/administrator in an estate. What does this mean?
What is a Personal Representative?
An Executor is a person that is named in the Will who has the responsibility to ensure that the deceased’s estate is properly administered and their wishes in the Will are carried out.
An Administrator is a person appointed to distribute the estate in the absence of a Will or Executors.
The main responsibilities of a Personal Representative include but are not limited to:
• Registering the death;
• Arranging the funeral;
• Updating the home insurance;
• Securing any valuables;
• Place statutory notices;
• Valuing the estate and report to HMRC;
• Paying any inheritance tax;
• Applying for probate;
• Dealing with the deceased’s financial liabilities;
• Holding the funds for the statutory waiting period;
• Distributing the estate among the beneficiaries;
• Keep accurate accounts of the estate.
The role of a Personal Representative can be very onerous and when mistakes are made they can be held personally liable. See our ‘Probate Process’ for more information.
The Common Pitfalls of Personal representatives
People often underestimate the huge responsibility and challenges of being a Personal Representative and the personal liability it brings if things go wrong. Here are some of the common pitfalls that Personal Representatives may fall into:
Personal Representatives are responsible for ensuring all of the relevant taxes are paid and all of the necessary paperwork is filed with HMRC and the Probate Registry. If not done correctly, the estate funds are mismanaged or a deadline is missed, then they may be held accountable personally.
It is essential that the Personal Representatives ask the beneficiaries whether they have received any gifts from the deceased within the 7 years before they passed away and it is strongly recommended that Personal Representatives check all bank and building society statements for the 7 years prior to death to see what transactions have taken place which may be regarded as gifting.
If the estate is taxable and lifetime gifts are not accounted for, this could result in the incorrect amount of inheritance being paid which could result in penalties or claims from the beneficiaries, which if there is no money left in the estate the Personal Representatives could be personally liable to settle.
Claims Against the Estate
It is important that Personal Representatives take appropriate steps and professional advice in relation to claims against an estate in order that they do not become personally liable for any legal fees involved.
Income & Capital Gains Tax
Personal Representatives are responsible for paying income tax on any income that has been received by the estate from the date of death and also through the period of administration. They are also responsible for reporting any capital gains that are made in the estate.
If income or gains are not accounted for and reported correctly then this could result in penalties that the Personal Representatives may be liable to settle.
Insuring & Securing Vacant Property
It is essential that a Personal Representative updates property insurance to vacant possession insurance when the deceased’s property has become unoccupied. If this is not done, the property insurance could be void and the Personal representatives could be held liable for any claims.
Personal Representatives should also ensure that the property is secure and visit the property at least once a week to comply with the terms of the vacant possession insurance.
It is essential that Personal Representatives also check whether the deceased has set up any trusts and what duties and liabilities arise under these.
Distribution & Putting Statutory Notices in Place
Personal Representatives are responsible for distributing the estate to the beneficiaries. However, before this is done they need to ensure that all liabilities in the estate are settled. As a Personal Representatives it is best practice to put place Statutory Notices for Creditors to avoid personal liability for unknown debts.
Personal Representatives must also make sure that they pay the beneficiaries their correct entitlement in the estate as if they overpay a beneficiary, they may be personally liable to make this up to the other beneficiaries.
Personal Representatives must also check to see whether any of the beneficiaries are bankrupt as if they are, then they will need to pay the beneficiaries entitlement to their creditors first and can be held personally liable if they get this wrong.
It is good practice for a Personal Representative to wait at least 6 months from when they receive the Grant of Representation before distributing the estate as a claimant has 6 months to issue a claim against the estate.
If a loss occurs due to a Personal Representative acting too slowly, they may be personally liable to the estate for that loss. For example, selling a property, stock or share which falls in value or failure to pay a debt that leads to additional interest or penalties.
Failing to Communicate with Beneficiaries
Personal Representatives should inform Beneficiaries of their interest in the estate and give them a timeframe for the administration. They should also advise the Beneficiaries of any of the Personal Representative’s fees in order to avoid any disputes.
Personal Representatives should consider carefully whether they have the necessary time and expertise to take on the role as a huge amount of work needs to be carried out which may take a considerable amount of time. Personal Representatives should not be tempted to cut corners and should seek the advice and assistance of legal professionals to limit their personal liability.
We understand that this process can be daunting and difficult, especially at a time when you are suffering a bereavement and trying to grieve. We can advise you throughout the matter, without using legal jargon to ensure you understand everything.
We can deal with the whole process for you to give you peace of mind.
Contact us on 0113 2007480 or email us on email@example.com to arrange your free initial, no obligation consultation with a specialist.
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