As the executor or personal representative of an estate, you have a lot of responsibility. It is your job to file paperwork with the courts, communicate with parties who have an interest in the estate and settle the affairs of the recently deceased testator.
Not only is estate administration stressful and time-consuming, but it leads to a certain degree of personal financial risk. While the estate will typically cover probate costs and even attorney fees for your representation during estate administration, mistakes that you make during the process might lead to personal financial liability.
What are two forms of liability that executors must protect themselves from during estate administration?
It is quite common for people to die without paying off everything they owe to their creditors first. If the testator did not have enough property in their own name or enough money in their bank accounts to settle all of their financial debts, you don’t have to worry about covering the remainder of what they owe unless you cosigned on those accounts.
However, if you make mistakes during estate administration, then creditors could potentially bring a claim against you later. When you improperly distribute estate resources by letting beneficiaries take assets before you pay creditors what they should receive, you may become personally responsible for the value of the asset you distributed improperly.
You could also be to blame if you fail to send proper notices. Ensuring that you have notified all creditors as required by state law and that you pay them off in the appropriate order of priority will protect you from debt-related liability.
When someone dies, they may still owe money to the federal or state government for income taxes. This risk is especially high for self-employed professionals. It is your responsibility to file the final income turn for the deceased and to resolve any outstanding tax obligations that they have.
You may also need to file an income tax return for the estate itself if you conduct an estate sale. For estates worth millions of dollars, there could be significant estate taxes that apply. As with debts, when there are resources that could help pay taxes that you improperly distributed, you may be responsible for assets you distributed while there were still taxes owed.
Having appropriate support during estate administration will reduce your chances of making a mistake that results in financial consequences.