When accepting the responsibility of being the executor of a decedent’s estate, one also accepts any liabilities. According to one senior will and estate planner in Newfoundland, the primary risk to executors is the last will and testament.
Many people draft wills that are quite vague and fail to specify important information about bequests to heirs and beneficiaries. For example, when it comes to distributing the contents of the home and the decedent’s personal effects, often executors discover that relatives have already taken items to which they believed they were entitled.
While items like photographs or knickknacks may have relatively low monetary value, their sentimental and symbolic value can be quite considerable to the other heirs. If they are missing, this can cause executors many problems.
The ownership of wedding rings and jewelry are also frequently in dispute, leaving executors “liable for any loss . . . cause[d] through negligence or mistakes, even in good faith.”
There have been incidents where executors were removed and made to cough up their own cash for any losses. Some have been taken to court by the heirs and held liable for the court fees.
Common losses can include:
- Donating valuable household items to charities
- Listing properties for sale below their market value
- Selling valuable estate property at yard sales
Keeping meticulous records of bank deposits, cheques and receipts is one way an executor can defend him or herself against good faith losses. Remaining in close communication with each beneficiary is wise to prevent being accused of favouring one heir over another. One example of a way to do this is to cc each beneficiary with all emails to the others.
Sometimes a well-intentioned executor will hesitate to spend estate funds on appraisals, but that can be a very expensive mistake. Especially for collections and items of indeterminate value, it is best to obtain three separate appraisals before listing any items or property for sale or disbursing them to heirs.
One of the best ways to avoid any liabilities is to retain qualified professionals like accountants, realtors, appraisers, estate administration lawyers and money managers to handle tasks related to the estate.
There is also executor’s insurance that can be purchased to add another layer of protection between the executor and any potential liability.