Brisbane’s Legal Lowdown: Executor’s personal liability – can you be sued for making a mistake?

Sofie: It’s twenty-five minutes to three and it’s time for Brisbane’s Legal Lowdown with Attwood Marshall Lawyers.

And today we’re talking about something that many people don’t realise when they agree to being an executor is something to consider, and that is that the role also comes with legal responsibilities and even some personal liability if mistakes are made.

So, what does that mean? What do executors need to be aware of? What do they need to get right? How can they avoid there being trouble? We’re being joined again by Attwood Marshall Lawyers, Estate Litigation Senior Associate Duncan McDougall. Good afternoon.

Duncan: Good afternoon.

Sofie: I didn’t know this. I thought when you were the executor of a will, it just meant that somebody really trusted you to figure out their stuff after they’re gone. You’re saying that if you, for some reason don’t get it right, that other people can come after you as the executor.

Duncan: In certain circumstances, yes. And I mean a lot of people treat that role of executor as a bit of a power trip sometimes. I’ve got control. I’ve got the situation. But unfortunately, when you’re in that role, you’ve got a number of legal responsibilities and duties to the estate itself, collectively and to the beneficiaries under that will.

Sofie: Okay. So, let’s start from the very beginning and people might be, you know, inherently have an idea of what an executor is. But can you give us sort of the definition of the executor, how that person or people are chosen, and what their role is in the lead up to somebody you know, just being in their will like and then what happens after the person who they’re the executor for, passes away.

Duncan: Yeah. So, it’s a role that you’re really the person who slots into the deceased’s shoes when they pass away. You’re the representative of the estate itself. So really the one who’s responsible for collecting all the assets, calling all the assets, holding everything on trust on behalf of the estate, so making sure nothing’s going into any sort of personal accounts or anything like that, paying off any existing debts if there are any, arranging that and then communicating with the beneficiaries and then later making distribution to the beneficiaries once all the administrative matters are attended to.

It’s a lot of liaising with banks, the titles office, superannuation funds if there’s life insurance, things like this that they’ll be corresponding with, but a lot of times it’s a lot of people that are involved with it, and particularly with beneficiaries who they may not hold a good relationship with and there’s a lot of issues there where a lot of times it comes down to a lack of communication really and they try to do it themselves. And they take on the role and they have this bit of power trip saying, well, I’m going to do this. I’m going to do that. Well, it doesn’t quite work like that. You’ve got a number of responsibilities to do that.

Sofie: Most people will choose an executor because it’s based on somebody that they trust, a person that they believe will do exactly what they are hoping will happen for them after they’re gone. Like you said, you know, figuratively stepping into their shoes. Often, it’ll be a spouse or an adult child, or maybe close friend, but that job, and what it involves, is probably not something that people fully understand, particularly if what they’re leaving behind isn’t clear, if the affairs aren’t in order, if there’s stuff all over the place. So, there are some key legal duties that an executor must follow.

Duncan: Absolutely. Yes, and that that will involve several different things that will be providing full account to the beneficiaries, making sure that they’re accurately recording every transaction that occurs, making sure they’re fulfilling, making sure that it’s all done by the book, tees are crossed, I’s are dotted. Making sure that they get a grant of probate if it’s required for the estate. So generally speaking, the bank won’t just release money to anybody with a name on a piece of paper.

They’re going to want some sort of court authority, which is that grant of probate, I tell people, think of it like a court stamp of approval saying, yep, that’s a valid will. And that’s a valid person to administer the estate.

And again, a lot of executors will get to that point and say, well, okay, instruct a solicitor to obtain the grant, they’ve got their golden ticket, but then they run into issues moving forward in terms of distributing the estate or otherwise, particularly around distributing the estate. There’s a lot of personal liability that can come back on the executor, provided that they’re not properly advised in terms of all these duties and for example, there may be a risk of a claim against the estate, and they’ve distributed the estate within four months. They’ve wrapped everything up. Somebody comes forward right at the last hour, six months and provides notice to the executor that they’re intending to make a claim against the estate. All of a sudden, the executor could be personally liable for that early distribution.

Sofie: Yeah, that whole personal liability is something I probably was not as aware of, and there might be other people listening who feel the same way when an executor can be held personally responsible for something not going quite right, either in the distribution of the assets and the estate or something comes up.

Duncan: Exactly. And counting for any debts. So, there may be an outstanding ATO payment that have yet to be accounted for. Check that! Check all these things and normally when an executor comes to a solicitor, we’ll go through all of their roles, responsibilities. A lot of the times they’ll give the reins to us and instruct us. I don’t want anything to do it. Just make sure I’m doing things by the book and make sure I’m doing things right.

Sofie: So, can you do that as an executor? If I’m an executor for your estate and I know about that and then you pass away, and I’ve got to step into the executor role. I can actually go to a solicitor and say I’m the executor of this estate, but it’s freaking me out and I don’t want the responsibility. And this is a lot for me to deal with. You can actually, ask the solicitor to step in and be the executor on your behalf, even though the person who’s passed away doesn’t know that you’re going to do that?

Duncan: Well, that’s what’s recommended 9 times out of 10 in a very small simple estate where it’s simply a small bank account. They may have to just write some correspondence to the bank to release funds they held that in trust. They convert that into an estate account and there may be one or a couple of beneficiaries. Happy days, everybody’s amicable.

But when there’s all sorts of things where a grant of probate is required and all these other elements there, yes, the advice there is to go to a solicitor and you’re still the one signing the dotted line because you are the person in that role, but you’re instructing somebody as an agent to do these things on your behalf essentially whilst getting the right advice moving forward.

Sofie: But as the executor you can choose who that person is. It doesn’t have to have anything to do with the estate. The person who has deceased or any of the other beneficiaries.

Duncan: Yeah, like you can go to your own solicitor. You can go to the solicitor who may have prepared the deceased’s will. Generally, that person may have a bit of an understanding of that and there might be a family dynamic there where they’ve provided advice, or they at least have a relationship with the family in some in some capacity.

But yes, it’s they’ve, they’ve got those options available to them.

Sofie: Okay. So, Lynn sent us through a text earlier today. She says she’d like to know what one must do when a relative is single, unmarried, has no children, she says no assets, and importantly, no will. What happens when they pass away?

Duncan: Yeah. So, in that instance. I mean, if there’s no assets, there’s really no estate to administer. There’s no real duty there. And there might be a nominal amount where generally, banks will have a certain threshold, generally, it’s anything under that 20 to 30,000, you can sign what’s called a deed of release and indemnity, put the bank off risk. And then those funds are released.

But when there could be substantial assets there and there’s no will, then it’s going to be dealt with on intestacy. And is going to go down the list of priority of people who have eligibility to apply to be that administrator for the estate. Essentially, that role of an executor, they’re just called an administrator in that sense. And it’ll come down to if there are no immediate dependents, somebody, a family friend or otherwise or perhaps maybe there is a will in place, potentially a beneficiary under that will, provided that there’s nobody even wanting to take on the role.

So, the executor role is not something that you have to do. You can always opt out and say, hey, listen, I’m choosing to renounce my position. And people might not want to take on that responsibility, so these are the conversations you’ll want to have with these people down the line as well on who might be appropriate to do those sorts of things. But to answer your question there, it’s going to be dealt with on intestacy and under the rules of legislation there where you’ve got an intestate estate, there is no will, it’s just somebody’s going to take priority.

Sofie: A brother, a sister, a cousin if there’s no brothers or sisters.

Duncan: Yeah, exactly. It goes down a bit of a list of people who have priority over others to apply.

Sofie: Are in-laws above blood relatives?

Duncan: No in-laws.

Sofie: Yeah.  Like if you if you die without a will and you had a brother, he was married and that woman, she’s still alive, does she rank above like a cousin?

Duncan: If you’re talking about in-laws trying to take control of the estate.

Sofie: Yeah, as in like, you know, my sister-in-law instead of, because my brother is passed on so…

Duncan: It’s going to go down a bit of immediate family members first.

Sofie: So, it’s blood first?

Duncan: Yeah, there’s the blood first. That’s exactly it.

Sofie: That’s where they go the blood is thicker than water line. Can you give us some real-world examples where an executor has been held personally liable? Where things have gone wrong and ended up costing the executor?

Duncan: So generally, issues when it comes to the executors either not acting quick enough and withholding information or acting too quickly. As I said before, where they’ve got a bit of a push from beneficiaries distributing the estate prematurely, etcetera, not accounting for all those extra things. But one comes to mind where an executor was really just withholding doing anything. There was a property there as well. Wasn’t sold within the two years. It was ongoing, the estate for three years, there’s capital gains tax starting to accrue as well. All of a sudden, somebody from a beneficiary under that will, made an application to have this person removed. An independent administrator, generally a solicitor can take on that role.

An independent administrator takes on that role to actually get things done and costs were paid, the court ordered in that instance that costs were born by this person who failed to act. There’s instances where if you are putting up your hand to do the job, be sure to do it right.

Sofie: Yeah, absolutely. And you’ve mentioned before how much family conflict comes up when it comes to administering an estate when beneficiaries are pressured, or feeling pressured, or pressuring the executor, and there can be a disagreement over what the decisions might be.

Duncan: Yeah, there might be a bad relationship where you already have with those beneficiaries, whereas if you instruct a solicitor, for example, they can liaise on your behalf, essentially.

Sofie: They’re bad guy, essentially. For those who are still in that sort of camp of do you just prepare your own will and appoint somebody that you think is just going to get it done right for you, there are obviously some qualities that you should be looking for if it comes to having to pick a suitable executor?

Duncan: Try to find somebody who’s going to be a bit impartial in the whole scheme of thing. Somebody who’s organised as well, somebody who’s going to get the job done. At the end of the day, it’s going to be somebody who just goes in, gets the job done, they fulfil their duties, or you might be appointing more than one person as well. I think we’ve had previous conversations around too many cooks in the kitchen, when you’ve got multiple executors.

Sofie: Sure. So, you say 1-2 max. No more.

Duncan: That would probably be my advice, but it depends on every situation and depends on…

Sofie: But if you’ve got six kids, you don’t want all six being the executors?

Duncan: Absolutely not. You can appoint up to four people, but again, provided where they’re located in family dynamics these days and everything else, it’s easier to appoint one person.

Sofie: I just can’t get over how few people talk about this while they’re still around to have a say. It just blows my mind, and you know, you and I’ve spoken when we’ve been off microphone before, I’m in the process now of, you know, having to do that. You move house. It’s the time when you can reassess everything. And in that conversation, you then realise, particularly people who are in this midlife, just assume that they’re going to keep living, and so you don’t do it because you don’t think it’s going to be you and the unfortunate reality is that we know tomorrow is promised to no one.

Duncan: That’s it. It’s one of these topics that nobody likes to talk about: death is a weird topic. But as we get up to the holidays as well, I tell people, you’re going to see a bunch of family members at one stage and have those open conversations.

Sofie: Hey, come over for Christmas lunch, there’s a few things we ne need to discuss. What could possibly go wrong?

Duncan: Exactly, and I feel like into the new year that’s where we see all the problems, because people have either had those conversations or they failed to have those conversations and now we’ve got a problem.

Sofie: You’ll be back next Friday to answer more questions for us if you’d like to send them through in anticipation, next Wednesday, what am I talking about, next Wednesday. You can always send them through in advance and we can keep them aside for our next legal lowdown with the team at Attwood Marshall. Thank you so much, Duncan.

Duncan: Thanks for having me again.