When a person dies, there has to be someone who can deal with their estate which may consist of assets such as their home, personal belongings, finances and outstanding liabilities. The person who has the right to deal with the estate is the deceased’s personal representative (PR). If the deceased left a valid will the PR is known as an executor. If there is no valid will the PR is known as an administrator. Their role is to:
- Collect in all the assets of the deceased
- Pay the liabilities
- Distribute the balance according to the deceased’s willor the intestacy rules, in the absence of a will
This process is known as the “administration of the estate” and can be a straightforward process. Indeed, a well-meaning friend or relative who has been appointed may look to administer an estate without employing professional assistance where they believe it is straightforward and wish to save costs for the beneficiaries.
What if you make a mistake?
It may come as a surprise to you that PRs can be held personally financially liable for any mistakes made administering the estate. This means that you could end up paying the bill for any financial or legal claims that occur as result of your actions.
There are three main ways in which a PR can become personally responsible:
- Any losses caused by the PR which affect any of the beneficiaries and which could reasonably have been avoided
- Fines or interest imposed by HMRC
- Expenses which are reclaimable out of the estate (e.g. funeral expenses etc.) must be paid by the PR if there are not enough funds in the estate to pay them
Inexperience is no excuse
In the recent case of Usher & Perkins v HMRC 2016 executors were held personally liable for an income tax bill after administering an estate without taking professional advice. Importantly, it was held that no “allowances” will be given to PRs by HMRC or other creditors for inexperience, lack of knowledge or any of their mistakes, which may not become apparent until well after the estate has been distributed.
The case acts as a warning for those who administer an estate without the help and advice of professionals and that inexperience is no defence. If you are faced with administering an estate, knowing when your own expertise is lacking and when to employ the services of a professional is important. You should think long and hard about taking professional advice to assist you with the administration. Ask yourself; is it worth the risk to potentially incur a personal liability to save a few quid?
At Beswicks Legal we offer a range of probate services from simply obtaining the grant of representation to full estate administration.
If you are affected by any of the issues raised in this blog, please contact Sarah Mellor on 01782 205000 or firstname.lastname@example.org to arrange a free, no obligation, consultation to see which of our probate services is right for you.