Executors can be held personally liable if a creditor comes to light long after an estate has been distributed but it isn’t always easy to identify potential creditors, particularly in an age when we conduct so much of our personal business online.

Personal Indemnity or executors insurance will protect an executor against an unknown creditor claim, as well as other liabilities but lay executors are not always aware that a clause in the Trustee Act 1925 (England and Wales) can establish a firm time limit on personal vulnerability to creditor claims.

The Trustee Act acknowledges the potential risk of creditors coming forward after an estate has been distributed and includes the provision to establish a time limit for claims, helping executors to protect themselves. A legal cut-off point is put in place through a Deceased Estate Notice, but this still relies on the executor having a full understanding of their duties and liabilities – not always easy if you have never been an executor before.

If the executor places a Deceased Estate Notice in the official public record –The Gazette, along with a further notice in a relevant local newspaper, creditors have two months to come forward with claims; once that period has ended the executor can distribute the estate and they are only required to pay claims that have arisen during the two month notice period. If a creditor makes a claim after the cut-off point the executor is no longer held personally responsible although the debt can still be enforced against the beneficiaries of an estate.

If an executor has neglected to place a Deceased Estate Notice then they remain liable for further debts that arise against the estate. The executor will only be protected in these circumstances if they have obtained indemnity insurance at the outset.