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The Executor guide

Understanding the role and responsibilities

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Introduction

A substantial number of people act as an Executor every year; however, many people are still unaware of the responsibilities that come with the role. This guide aims to explain what it means to be an Executor, as well as what tasks could be involved. It will also share the risks you’ll face in the role, and inform you of your options when it comes to acting as an Executor.

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You've been named as an Executor

What does this mean?

If you’ve been named as an Executor in someone’s Will, you are responsible for handling that person’s affairs when they die. You will be required to carry out the instructions in their Will and take care of all the legal and financial affairs that need to be handled after death.

This means dealing with all their assets (such as property, shares, and personal possessions), paying debts, paying any Inheritance Tax and Income Tax, and transferring the inheritance to the beneficiaries (those who are inheriting from the estate). The process of dealing with the affairs of someone who has died is estate administration. 

How do you know if you're an Executor?

When someone creates a Will, they will typically inform their Executor(s) that they have chosen them. However, there are no legal requirements for the creator of a Will to inform the Executor(s).

This means that although many people are aware that they will be taking on the role of Executor in advance, there is a chance that you could find out after the person has died.

When the Will is retrieved, it may be discovered that you have been nominated for the role. 

Understanding the role

The role of an Executor is not one to be taken lightly as you are financially and legally responsible for administering the estate of the person who has died. This means that an Executor can be held accountable for any mistakes, such as distributing the inheritance incorrectly or paying the wrong amount of Inheritance Tax. The role of an Executor is an unpaid role but you may be able to claim for reasonably incurred expenses. Any expenses should be paid from the estate before distributing funds to the beneficiaries.

An Executor may also be referred to as a Personal Representative, which is the collective term for Executors and Administrators. An Administrator is an equivalent role to an Executor when someone dies without a Will.

You might not be the only Executor, as up to four people can be named as Executor in a Will. It’s advisable to name two Executors in a Will, as one may be unable to act when the time comes. If there are multiple Executors named in the Will and more than one of you are willing to act, you can share the responsibility and handle the estate administration together. Additionally, you have the right to instruct professionals to help. 

Responsibilities

Your responsibilities as an Executor 

As an Executor, you have many responsibilities which come with a number of risks due to the legal liability associated with the role. 

Estate administration can be incredibly complex, and these additional responsibilities can cause unnecessary stress at an already difficult time. It’s important to consider the risks and responsibilities before accepting the role. You are not obliged to take on the responsibility and can renounce the role if you wish.

1
Maximising inheritance

Maximising the estate for the beneficiaries.

2
Correct distribution

The correct distribution of the estate. This includes making sure that all beneficiaries receive their rightful inheritance.

3
Assets and debts

Ensuring that all assets and debts of the deceased are identified and dealt with. Debts must be settled before distributing the inheritance to beneficiaries.

4
Probate application

Applying for the Grant of Probate, if required.

5
Inheritance Tax

Paying any Inheritance Tax due on the estate within the appropriate timeframes. If there are any errors on the Inheritance Tax return, the Executor(s) are personally liable and may face a fine for errors or late submission.

6
Income Tax

Ensuring that the Income Tax position of the deceased is finalised, up to the date of death and for the period post-death until payments are made to the beneficiaries.

Case study

How to avoid a hefty Inheritance Tax bill

A case reported by The Telegraph revealed how a Personal Representative was left with a staggering Inheritance Tax (IHT) bill of £341,278 when he was administering a £1.2 million estate. Mr Harris misguidedly distributed the assets to the beneficiaries before all of the Inheritance Tax had been paid. He did this with the understanding that one beneficiary (who received the majority of the estate) would pay any Inheritance Tax that was still owed. However, this did not happen as the beneficiary left the country without paying, leaving Mr Harris to foot the bill.

In this case, Mr Harris was personally liable for paying any Inheritance Tax that was due on the estate, as he had taken on the financial and legal responsibility for the estate when he became the Administrator. When a Will has been left, a chosen Executor is stated, and if they choose to accept the role, they will have this same financial and legal responsibility.

Executors and Administrators are by no means obliged to take on the responsibility. They have a choice of whether or not to accept the role, the right to seek advice from a professional, and can even ask a professional estate administrator to manage the estate on their behalf.

Mr Harris attempted to appeal his responsibility to pay the £341,278 owed to HM Revenue and Customs (HMRC) on the grounds that he no longer holds the estate’s funds. Harris’ attempt was unsuccessful as Judge Nicholas Aleksander rejected the tax appeal, stating that “Inheritance Tax is clear. It is the Personal Representatives of the deceased (in this case, Mr Harris as Administrator) who have the obligation to account for any Inheritance Tax arising in respect of the deemed transfer on death.”

He added, “It is no defence to any Inheritance Tax determination that Mr Harris may have transferred the assets of the estate to a beneficiary on the basis that the beneficiary would be responsible for payment of the Inheritance Tax due. Nor is it a defence that Mr Harris was ignorant of his obligations, as a Personal Representative, to pay the Inheritance Tax owing.”

This case highlights the lack of understanding amongst the public about what to do when someone dies and more specifically, the liability that is associated with administering an estate. Incorrectly distributing the assets or making mistakes whilst handling the deceased’s affairs can be of great consequence, as highlighted in Mr Harris’ case.

Your options as an Executor

If you’ve been named as an Executor, you are by no means obliged to take on the responsibility. You have a choice of whether or not to accept the role, the right to seek advice from a professional, and you can even ask a professional estate administrator to manage the estate on your behalf. Let’s take a look at your options…

Instructing a professional estate administration provider