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Executor Liabilities & Insurance: Protect Yourself

Executor liabilities are a valid concern for those charged with managing and distributing an estate. There are a number of ways executors are at risk of being held personally liable.

(Note: the term “personal representative” is the current legal term used to refer to an executor/executrix, administrator/administratix, and judicial trustee.)

Many people dislike spending money to have a will done by a lawyer. Unfortunately, this results in wills that are unclear and don't cover everything that should be covered. The executors of such wills can run into difficulties as a result.

For example, if the will doesn't state how household and personal items should be distributed, the executor may allow family members to just take things. This can lead to both disputes within the family and accounting issues for the executor, who is responsible for accounting for all the assets in the estate.

If the executor unwittingly sells or gives away a valuable asset, he or she can be held responsible for the money the estate did not receive for that asset. Other issues executors may face include being accused of preferential treatment of certain beneficiaries, causing the other beneficiaries to experience losses, and perceived conflict of interest.

Executors can be held liable for any monetary losses they cause the estate, whether they purposefully cause the loss or not. In simple cases of inexperienced executors neglecting to carry out their duties properly, they may only lose the executor fee. Sometimes, however, these matters get taken to court, resulting in the executor having to pay legal fees and possibly being order to pay back the monetary loss.

Executor Liability Insurance

The best way to protect yourself is to immediately take the will to an estate lawyer and ask how risky taking on the job of executor is going to be. If there is an asset that is going to be hard to sell, illogical provisions, beneficiaries living overseas, or the will may be invalid, you will want to consider renouncing so you don't have to act as executor.

If you proceed as the executor, commit to being honest, communicating with all involved, and moving the process along as quickly as you can. Get professional advice when you don't know the answers from your lawyer, accountant, etc., and meticulously track all financial transactions. You should be able to significantly reduce your risk and get the estate distributed relatively easily.

You also have the option of purchasing executor liability insurance. It can help protect you in the event of errors or negligence and help with legal fees if you are taken to court. Executor liability insurance will cover all executors listed on the policy so it can also protect co-executors.

Executor Bond

If you reside outside of Alberta but are the executor of the estate of someone who lived in Alberta, you will likely have to get an executor, or probate, bond. This is to ensure you do not take the estate's assets and leave the province with them, protecting the beneficiaries and creditors of the estate. This bond must be for the full amount of the estate.

An executor bond is insurance that the executor buys. If the executor defaults on the estate, he or she loses the bond. It is not designed to protect the executor against liability but to protect the beneficiaries and creditors.

The Bottom Line

Executor liabilities are very real and there are many people who deeply regret acting as an executor because of the losses it caused them. Talk to your lawyer as soon as you can and take the required steps for reducing your risk so you can protect yourself.


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