Lilly Whale: An executor’s ‘formidable’ task explained

Advisers often push clients to make a will, something that includes appointing executors. Here, lawyer Lilly Whale explores the role of an executor and offers guidance on the resulting responsibilities

Being selected to be an executor may appear to be a formidable task. It can require a large amount of work, and at times may seem overly complicated and time-consuming. This article is designed to give you some idea of an executor’s duties and the major pitfall of not complying with the responsibilities that the role entails.

What is an executor and what do they do?

An executor is responsible for gathering together the details of an estate, settling any expenses, debts and inheritance tax (IHT) and then distributing the balance in accordance with the deceased’s wishes.

The executor must undertake thorough searches to identify the deceased’s assets – bank accounts, shareholdings, pensions and so on, as well as physical belongings such as jewellery, cars or antiques – and liabilities, such as outstanding debts or mortgages.

Investigations do not extend simply to the deceased’s physical assets; an executor must additionally consider the deceased’s virtual estate. For instance, credits may be held in cryptocurrencies, PayPal accounts and other online entities such as gambling accounts.

It will also be necessary to identify any gifts made by the deceased; this may involve forensic examination of the deceased’s bank statements over a number of years. Briefly, gifts are tax-free if the donor survives for seven years after it is made; otherwise, the gift will be subject to IHT or could have an impact on the availability of the nil rate band tax-free threshold (currently £325,000).

Once the size and extent of the estate is established, the executor is then responsible for reporting to HM Revenue & Customs (HMRC) and settling the IHT due. During the course of the administration, the executor will also likely have to settle capital gains tax and income tax liabilities.

Once IHT is paid to HMRC, the executor must then apply for the grant of probate. The grant confirms that the executor has proper authority to deal with the assets and its production enables financial institutions to free up assets for distribution. Perhaps most crucially (given that the home forms the largest part of most people’s estates), the executor will be unable to complete the sale of any property without the grant.

Given the work involved, it will come as no surprise that executors frequently employ professional advisers such as solicitors to help them deal with the administration of the estate.

Sometimes professional advisers are even appointed as the executors: the solicitor who drew up the deceased’s will, for example, will have had a close understanding of not just the deceased’s assets but also of the familial workings of their lives and relationships; consequently they will likely have been privy to private thoughts and wishes of the deceased during their lifetime.

Fortunately, instructing a solicitor is an expense of the estate and the executor should not have to foot the legal bill personally.

What are the risks involved in being an executor?

Despite the obvious time commitment, there are risks that ought to be carefully weighed up before undertaking any task concerning the estate. While it is possible to renounce executorship, you cannot do so if the court considers that you have ‘intermeddled’ in the estate – a legal term meaning that the executor has already started dealing with the estate or its assets.

Undoubtedly the biggest risk for most is personal liability: an executor can be held liable for the debts of an estate – even if they are unaware that a debt existed, or had an agreement with someone as to how any liabilities would be settled.

One particularly alarming example of this is a case from 2018 of an executor who was left to settle an IHT bill of approximately £340,000 after the beneficiary absconded to Barbados without making payment to HMRC – despite an agreement between the two that the latter would do so – and without being heard of again.

The executor had already distributed the estate’s assets and, however innocent his understanding of the situation, with no funds left was ordered by the court to settle the tax bill out of his own pocket. To most this is the stuff of nightmares.

Other risks might include: failing to properly investigate the size of the estate, not properly accounting for expenses, failing to settle other debts, wrongly distributing the estate or even failing to gather in certain assets. Again, professional advice could help to navigate an executor through these sometimes difficult waters.

Despite the stark message here, being an executor does not have to be entirely overwhelming and many feel that it is a great honour to be entrusted with a deceased’s worldly goods. A word to the wise, however, is to give the task in hand some forethought from the outset so that you are fully apprised of what the job involves – as much for your own sake as well as the beneficiaries’.

Lilly Whale is an associate in the private team at Goodman Derrick