Yesterday’s announcement that there will be new regulations applied to will writing follows hot on the heels of the Legal Services Board Report in January which looked into professional probate services and whether people were getting value for money.  While badly written wills pose problems for  probate professionals there are even more serious implications for lay executors, who can be exposed to personal and unlimited liability if they make a mistake during the management or distribution of a deceased person’s estate.

Two years ago the aptly named ’Red Tape of Death Survey ‘ (One Poll Limited ) revealed that one in five adults dread dealing with the legal affairs of a deceased relative or friend and yet nearly 90,000 people a year choose to take on the role and responsibilites of an executor - a legal duty that was once largely the preserve of solicitors and banks.   

Those who accept this serious legal responsibility usually do so with the best of intentions – to carry out the last wishes of a friend or relative – but very few people realise that they leave themselves open to unlimited personal liability and until recently there hasn’t been a specific insurance policy to protect their interests. 

Castleacre Insurance, are the first financial services business in England and Wales, to launch an online insurance policy designed specifically to protect the growing number of non-professional executors and estate administrators.

Hugo Johnsen, Director of brokers Castleacre Insurance and executorsinsurance.co.uk, explains why they felt now was the right time to develop an online policy for non-professional executors:

‘We realised that more and more people were taking on the role of executor without any form of legal or financial protection – this was backed up in the Legal Services Board Report (January 2012),  examining how we use professional probate services. The report showed that 46% of the people who had gone through the probate process sought no professional advice at all.  We found that although most of our clients are financially and legally astute they simply had no idea they could be held personally liable as an executor.  Solicitors are protected by Professional Indemnity Insurance but there really hasn’t been any insurance available to help non-professional executors, estate administrators and personal representatives.  We felt that where people are choosing to work through probate themselves they really need some form of protection because they potentially face unlimited personal liability. In addition those who are pehaps dealing with more complex estates, where inheritance tax applies, often do seek professional advice but don’t necessarily relinquish their role as an executor and as result they can still be held personally liable if the deceased estate is mismanaged. ‘

Data released by the Probate Service confirms that there has been a net increase in applications by private individuals for Grant of Probate against a 30% fall in solicitors’ applications since 2006 (Judicial and Court Statistics 2010). The reasons behind the increase in non-professional executors are not entirely clear but the Society of Trustee and Estate Practitioners (STEP) admitted that rising professional probate fees, which often stand at around 1.5% of the total value of the estate, could be a significant factor. ‘Which Money’ calculated that the average amount charged for administering a modest estate valued at £270,000, was £5,199 for solicitors and £10,830 for a bank (Which Money- Get your will your way – Survey 2010), although the recent Government survey suggested a much lower figure of between £1200-2500 (though the estate value in this survey wasn’t specified). The LSB Government survey concludes that the perceived fear of high charges or unknown professional fees has been significant in encouraging more people to take on the role of estate administrator or executor.

While many private individuals are now choosing to take on the role of executor often with the intention of saving the estate and beneficiaries money, few people realise that they can be held personally liable if there is a wrongful act in administering the estate with potentially unlimited legal and financial claims.  The Trustee Act of 2000 stipulates that all executors have a statutory duty of care over the management of an estate and that an executor can be held personally liable if they make mistakes. In addition the Limitation Act of 1980, has meant that, in theory, claims by beneficiaries or creditors, including the Tax Office, can be made against the executor for up to 12 years after the death of the estate owner.

Hugo Johnsen, Director of Executors Insurance continues:

‘Even the most straightforward of wills can prove to be a headache when it comes to probate and with an increasingly litigious society it is an area that should be treated with caution. The growth in un-regulated will writing hasn’t helped - making it difficult for the wishes of the deceased to be interpreted correctly. In contrast inheritance tax and probate regulations have been tightened – with the onus placed on the executor or estate administrator to “get things right” – both professional and non-professional executors can find themselves tip toeing through a minefield.

There are so many potential pitfalls - from failing to identify all creditors of the estate, missing foreign banking accounts, failing to insure the estate correctly to mis-managing investments of the estate during the process of probate. There is no doubt that being an executor is a complex and serious legal responsibility and non-professional executors and estate administrators should at least be given the option of protection. We worked closely with the insurer, WR Berkley (Europe) Limited, to devise a straightforward, affordable annual insurance policy. We think this policy, which includes legal and financial protection, will give people the reassurance they need to carry out their duties effectively.’

Executors Insurance http://www.executorsinsurance.co.uk/