The Liabilities of a Personal Representative – The Will
When a person dies leaving a valid Will an Executor is named to deal with the administration of their estate. Alternatively, when they die without a Will a person can apply to be appointed as Administrator to deal with the administration. Unfortunately for many lay Executors and Administrators, collectively known as Personal Representatives, the volume of work in administering an estate is not apparent until the time arises and can catch many with busy schedules off guard. They can take for granted the complexity involved and be completely unaware of the personal liability that can arise through not acting correctly or by hastily distributing the estate.
By seeking professional advice from the Tax and Estate Planning team at Whitehead Monckton Personal Representatives can significantly reduce any potential personal liability arising against them.
Over my next two articles, I cover the risks involved for Personal Representatives not seeking professional advice. Firstly below, I deal with taking advice on a person’s Will, or lack of.
The Last Will and Testament… or is it?
A person can make a new Will as many times as they wish during their lifetime. It is important therefore that an Executor purporting to act under a Will ensures it is the correct one. Similarly where a person applies to be appointed Administrator on the basis that the deceased left no Will, they must have made reasonable investigation into whether there was a valid Will left by the deceased. Either way, a Personal Representative later distributing an estate incorrectly without making reasonable enquiries can be held personally liable.
The need to make enquiries can be seen in the recent case of Blyth v Sykes 2019. In the deceased’s possessions at death was found an envelope from her solicitors containing a certified copy of a will; an unsigned draft of the will; the solicitors' invoice for preparing the will; the original of a later codicil modifying the will; but not the original will. The issue in the matter was whether the deceased had revoked her Will or not.
Imagine in a similar scenario that a person applying to administer the estate automatically assumed the deceased destroyed their Will with the intention to revoke it because the original was missing and proceeded to distribute the estate under the intestacy rules (which dictate how a person’s estate is distributed where there is no Will). Imagine a beneficiary of the missing Will had subsequently come forward alleging that the deceased had not intended to revoke the Will but had just misplaced it. If sufficient evidence was brought, as it was in the case of Blyth v Sykes 2019, then the estate could be administered in accordance with the Will based on the copy. However, if the Administrator had already distributed the estate then he could potentially be personal liable for making good the monies in the estate if they could not be reclaimed from the beneficiaries.
Will Trusts and Personal Representatives as Trustees
Lay Executors can often misinterpret the ‘legal jargon’ contained within Wills. Without knowing it they may be paying the wrong share to a beneficiary or incorrectly paying a sum of money outright to a person when in fact a Trust has been created for them. Not all Trusts are immediately apparent under a Will particularly if there is a contingency age for a beneficiary such as 21 or 25. In such cases the appointed Executor is often also the appointed Trustee and if they were to make an absolute payment to a beneficiary they would be in breach of Trust. If unable to reclaim the monies they can then be personally liable to make good the monies themselves.
Notwithstanding the above, a Trustee has duties to invest trust funds and make payments of income if necessary, depending on the type of Trust. The Trust clauses within a Will may span several pages containing important terms that the Trustee/s must also adhere to together with accompanying documents such as Letters of Wishes. Without professional advice it is very easy for Trustee to unknowingly be in breach of their position.
See next week’s article for further liability that may arise against a Personal Representative on tax issues arising during both the deceased’s lifetime and on death.
For more information and help with this issue or a similar issue you can contact Sam Corse.