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EXECUTORS –  PROTECT YOURSELF FROM BEING PERSONALLY LIABLE

As an executor you have an important role to play in administering a deceased person’s estate. But with this role comes significant responsibility, including the risk of potential claims against you.

Seek Legal Advice

It’s also a good idea to seek professional advice when necessary. This can include consulting with a lawyer, accountant, or financial advisor to ensure that you are properly fulfilling your duties as an executor. If you’re unsure about any aspect of your role, seek advice before taking any action.

Best interests of the Estate

Executors have a legal duty to act in the best interests of the estate and its beneficiaries. This duty includes ensuring that all assets are properly managed and distributed, debts and taxes are paid, and accurate records are kept. If an executor breaches this duty, they may be liable for any loss suffered by the estate or its beneficiaries.

Impartiality

As an executor, you have a duty to act impartially, treating all beneficiaries equally.  You must also avoid any conflicts of interest or potential biases, and ensure that you’re not favouring any one beneficiary over another.

Keep Detailed Records

To protect yourself from potential claims, it’s important to keep detailed records of all your actions as an executor. This includes keeping receipts for any expenses you incur on behalf of the estate, such as funeral expenses, legal fees, and other costs. You should also keep copies of all correspondence related to the estate, including emails, letters, and phone calls.

Good Communication

It’s important to act with transparency and communicate clearly with the estate’s beneficiaries. This includes providing regular updates on the estate’s progress, responding promptly to any questions or concerns, and providing copies of relevant documents upon request. By acting with transparency, you can help to build trust and reduce the risk of any potential claims against you.

Advertise

We recommend advertising for creditors in a newspaper circulating in the area where the deceased last lived at least once and with information about the deceased’s name, date of death, and details of the executor or administrator. The advertisement must also specify a deadline by which creditors must come forward, which must not be less than one month from the date of the advertisement.

Wait 6 months

We recommend waiting 6 months from the date that probate or letters of administration is granted before distributing the estate.  That is to ensure you are not personally liable should a claim be made against the estate.

Estate Claims

Any person who has been left out of a will or believes that they have not been adequately provided for under the will can bring a claim under the Family Protection Act 1955 or the Law Reform (Testamentary Promises) Act 1949.  A spouse/de facto partner may also bring a relationship property claim against the estate.  A person may also claim that the Will-maker did not have mental capacity at the time of making the Will or that the Will-maker was under duress and seek to have the Will over-turned.

If you as the executor are notified of a challenge or potential dispute, they should seek legal advice promptly and delay distributing the assets of the estate until the dispute has been resolved.

Income Tax Returns

The executor of an estate may need to complete and lodge income tax returns for the deceased up to the date of death and for any financial years prior to death for which tax returns are outstanding. If the estate earns income (such as rent) the executor should apply for an IRD number for the estate from Inland Revenue and prepare and lodge estate income tax returns for each financial year in which the estate is open. If the executor finalises the estate without attending to payment of tax, they may be personally liable.

Superannuation and Life Insurance

If superannuation or life insurance monies are paid into the estate, the executor should seek legal advice before using these funds. In some cases, these funds may not form part of the estate and may be payable directly to the nominated beneficiaries. The executor should seek legal advice to determine the correct course of action