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2012 Report Shows Nearly 50% of Executors and Estate Administrators of a Will Seek No Professional Advice At All 

Those of us who agree to become the executor of a will often simply want to help carry out the final wishes of a friend or relative to the best of our ability – but very few executors realise that they may be leaving themselves open to unlimited personal financial and legal liability because of the Statutory Care placed on them through the Trustee Act 2000.

90,000 ordinary people agree to become an executor every year in England and Wales –  a legal role that was at one time only undertaken by solicitors and banks.   In 2010 the Probate Service confirmed that there had 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).

While more and more of us accept the duties of an executor a surprising number take on the role without any form of legal or financial advice, or protection. The Legal Services Board Report (Janury 2012) showed that 46% of the people who had gone through the probate process sought no professional advice at all.  Even a very straightforward estate distribution can be difficult to manage and as we become more litigious, mistakes can have more serious consequences for executors.

The growth in un-regulated will writing has generally made life more difficult for executors because poorly written wills are often difficult to interpret. In addition inheritance tax and probate regulations have become more stringent – with the statutory duty of care placed on the executor or estate administrator.  HMRC are pursuing an increasing number of executors over the valuation of property for probate, seeking to increase inheritance tax revenue and impose penalties. STEP Chief Executive, David Harvey said in June 2011 that the The extensive powers now available to HM Revenue and Customs pose a serious financial risk to lay executors who make honest mistakes when getting a house valued” .

In fact a combination of factors now mean that both professional and non-professional executors can find probate perilous – but while professional executors are protected by indemnity insurance most lay executors have no liability protection at all and there are plenty of documentated cases where executors have been subject to legal and financial claims.

In 2007 Mr Lever, acting as an executor for his late mother-in-law, paid £400,000 in Inheritance Tax, closed the accounts of her estate and distributed the remaining assets to beneficiaries. He had paid additional tax on the main property because it had sold for just over £2 million rather than the original £1.4 million quoted at the start of probate (the initial valuation had been given by a local estate agent who had sold several similar properties in the area).  4 months later he received a letter from HMRC saying that they had re-assessed the higher sale value of his mother-in-law’s property and were going to enforce a personal penalty of £44,000 because they considered he (as the executor) had been negligent in failing to give the corrrect valuation at the start of probate – this was in spite of the fact that he had informed HMRC when the property sold for more than orginally valued and paid the correct inheritance tax on the final sale value.

So began a 15 month battle with HMRC which Mr Lever has described as: ‘…the kind of Kafkaesque nightmare that I believed occurred only in totalitarian states. I was appalled, as was everyone I have told about it.’ Eventually HMRC were forced to admit that Mr Lever had not been negligent but they still tried to pursue a reduced penalty of £17,500 before eventually dropping the case in March 2009. Other lay executors have not been so lucky. In 2010 HMRC challenged more than 9,000 Inheritance Tax property valuations, and this isn’t the only pitfall that lay executor’s face.

Executors Insurance is the first indemnity insurance designed specifically for lay executors and offers both legal and financial protection