In 2023, over 300,000 people in the UK acted as an executor. What an executor can and cannot do is important to understand before you appoint someone in your Will, or before you agree to take up the position on someone's death.
This article covers an executor's powers, responsibilities, and limitations, helping you fulfil the role effectively and avoid legal issues.
What is an executor?
An executor administers a deceased person's estate, gathering in assets, identifying and repaying debts, completing paperwork, calculating and paying taxes, and distributing the remaining estate to beneficiaries.
In other words, as the executor, you act as the deceased's personal representative, carrying out their final wishes as outlined in their Will. The role of executor carries significant legal and financial responsibilities.
What legal authority does an executor have?
The Probate Registry, part of HM Courts and Tribunals Service, grants probate, legal powers to act on behalf of the estate, to access the deceased's bank accounts and investments and to distribute them to the beneficiaries. An executor has legal authority granted by the state (through the court) to perform specific tasks. But remember that as well as having legal authority, you're also legally responsible for the estate.
Aside, a 'grant of probate' is the legal document that confirms the executor's authority to manage the deceased's estate. Some institutions require sight of the original document to release funds or to transfer ownership.
What are the tasks an executor must perform?
An executor's key tasks include securing assets, creating an inventory, valuing the estate, paying debts, reporting the value of the estate to HM Revenue and Customs ('HMRC') and paying taxes, and distributing assets to beneficiaries according to the estate plan.
Longer term, they may also act as trustees of settlements (trust funds) set up under the Will.
Administration tasks typically take 9 to 12 months for an average estate, but complex estates can take much longer.
The executor's role begins immediately after the person dies.
Bear in mind some assets might need to be sold to pay debts and taxes, or to distribute the value of the remainder of the estate to the beneficiaries.
How should an executor secure and inventory estate assets?
The tasks of the executor start immediately after death.
The first task of an executor is to identify and locate all assets belonging to the deceased's estate.
Create a comprehensive inventory listing all property owned, bank accounts, investments, personal belongings, and digital assets. Some of these may be listed in the Will. Others might be more difficult to identify.
Secure physical assets by changing locks on property, notifying banks, and ensuring valuable items are safely stored. Inform insurance companies about the death to maintain coverage, protecting the estate from theft or damage during the probate process.
Place a deceased estate notice to advertise the death to potential creditors and encourage them to come forward.
Gather relevant documents such as property deeds, bank statements, and other financial assets. This inventory forms the basis for estate valuation and distribution.
How is an estate valued?
Estate valuation involves assessing the worth of the assets.
In 2021, the average UK estate value was £350,000 - just above the value of the Nil Rate Band, the value above which inheritance tax is paid.
You should seek professional valuations for high-value items or unique assets to ensure compliance with HMRC requirements.
The total value of the estate determines whether inheritance tax is due. The current threshold is £325,000 for individuals, but there is also another allowance, called the Residence Nil Rate Band, which increases the value before tax becomes liable.
Estates valued above the thresholds may be liable for inheritance tax at 40% on the excess amount.
How does an executor handle debts and taxes?
You must settle outstanding debts and tax liabilities using estate funds before distributing assets to beneficiaries.
Pay creditors in order of priority:
- secured debts;
- funeral costs;
- administration expenses; and
- unsecured debts.
Deal with inheritance tax by completing and submitting the appropriate forms to HMRC, even if no tax is due. You must typically pay inheritance tax within six months of the person's death to avoid interest charges.
How are assets distributed to beneficiaries?
Distribute the remaining assets to beneficiaries according to the Will's instructions.
You can make partial distributions before the estate is fully settled, but you should retain enough assets to cover any unexpected debts or taxes.
Obtain receipts from beneficiaries for all distributions.
For the final distribution, prepare final accounts for the estate and have beneficiaries approve these before making the final distribution. Keep clear records of all distributions to ensure transparency and help prevent future disputes.
What are the limitations on an executor's powers?
Executors have significant authority but face restrictions.
- they cannot change the will;
- they must act in the estate's and beneficiaries' best interests;
- they cannot use someone's estate assets for personal benefit; and
- they must keep estate assets separate from personal assets.
Can an executor change the will or remove beneficiaries?
Executors cannot alter the Will or remove beneficiaries.
A Will might change after death through a deed of variation, requiring agreement from affected beneficiaries within two years of the death.
In 2023, only about 2% of wills were altered post-death. Seek legal advice if beneficiaries request will changes, as unauthorised alterations could lead to personal liability and legal challenges.
How should an executor handle conflicts among beneficiaries?
Beneficiaries have certain rights that executors must accommodate.
As executor, manage disagreements between beneficiaries through clear communication and impartiality. Document all decisions and reasoning to show fairness. Regular updates to beneficiaries can prevent misunderstandings and reduce tensions. Family meetings, mediation, or court directions offer effective conflict resolution strategies - 87% of mediated inheritance disputes reach a resolution.
Seek legal advice if conflicts escalate beyond your ability to manage.
What happens when there are multiple executors?
Wills often name multiple executors - 40% of wills in the UK appoint more than one executor. Provided there are people to share the work, this is a good idea - it reduces the burden of work on one person, protects the executors against claims of unfair treatment and ensures the estate funds will be distributed as intended.
Joint executors must act unanimously when making decisions about the estate, unless the will specifies otherwise or executors formally delegate tasks. Banks and other financial institutions typically require all executors to sign documents.
Disagreements between executors can occur; mediation often resolves conflicts. To minimise the possibility of conflict, appoint fewer executors. We recommend two.
In extreme cases, executors may apply to the probate court for direction.
What is an executor's fiduciary duty?
Fiduciary duty in estate administration means the executor must act in the best interest of the estate and its beneficiaries. This legal obligation dates back to 19th-century English law.
Fiduciary responsibilities include loyalty, care, impartiality, and accountability.
Breaching fiduciary duty can lead to personal liability for the executor, as beneficiaries may take legal action if they believe the executor has failed in their duties.
Can an executor also be a beneficiary?
Yes, executors can be beneficiaries of the will.
About 60% of executors are also beneficiaries, often close family members of the deceased. A family member serving as executor must handle this dual role carefully to avoid conflicts of interest. Transparency and clear communication with other beneficiaries are vital.
To mitigate potential challenges, seek independent advice for significant decisions and document your reasoning thoroughly.
In your Will, if you make a gift to an executor, you must do so 'absolutely', which describes that you intend that the executor becomes the owner of that gift, rather than holding it on trust for others.
What rights do executors have regarding property sales?
Executors possess the authority to sell land and property belonging to the estate. Property sales feature in about 25% of probate cases.
Executors might sell property to pay debts or taxes, distribute cash instead of assets to beneficiaries, or comply with specific instructions in the Will. It isn't always possible to inherit a property, even if the Will directs it. The process involves obtaining professional valuations, achieving a fair market price, keeping beneficiaries informed, and securing necessary permissions if specified in the will.
What are the time constraints for estate administration?
Estate administration typically takes 9-12 months, with complex estates potentially taking several years.
You must pay inheritance tax within 6 months of the death and file income tax returns by 31 January following the tax year of death.
Manage beneficiary expectations about timelines by giving regular updates on estate administration progress to prevent misunderstandings and potential disputes.
How is executor compensation determined?
Executor compensation in the UK varies based on whether you're a professional executor or lay executor (someone who is not in the business of estate administration).
A professional executor, such as a solicitor, typically charges an hourly rate or 1-5% of the estate value.
A lay executor can claim reimbursement for reasonable expenses incurred while administering the estate. But if you while you're acting, keep detailed records of all costs. You can charge for your time only if the Will specifically allows it - most don't.
What liabilities can an executor face?
Executors bear personal liability for mistakes in estate administration, such as distributing assets before paying all debts and taxes, failing to identify creditors, or miscalculating tax payments.
But they can only be sued by the beneficiaries or by creditors (including HMRC).
To mitigate these risks, keep meticulous records of all estate transactions, seek professional advice for complex estates, place statutory notices to protect against unknown creditors, and consider executor's insurance for added protection.
What records must an executor keep?
Executors must maintain comprehensive records of the deceased's estate, including:
- the original Will;
- the death certificate;
- estate planning documents;
- the grant of probate;
- asset valuations;
- bank account statements;
- tax returns;
- HMRC correspondence;
- receipts for all expenses and distributions; and
- final estate accounts.
Keep records for at least 12 years after final distribution to protect against accusations of mismanagement and simplify answering beneficiary queries.
When should an executor seek professional assistance?
As an executor, seek professional help in complex estate situations, including estates with diverse assets, where there is an inheritance tax liability, business assets, beneficiary disputes, or unclear wills.
Executors also seek professional help if they are in ill health, or simply unable to do the job fully.
About 40% of executors get some form of professional assistance.
Solicitors or banks can act as professional executors, offering expertise and impartiality but charging fees and potentially lacking personal knowledge of the deceased's wishes.
Also consider a professional estate administrator - they usually charge less.
Another solution to the issue that professional executors might not have personal knowledge of the deceased is to appoint both a family member and a professional as executors. Or appoint a family member and let them use professionals as and when needed.
What are common mistakes executors should avoid?
Executors often make errors that lead to legal disputes, including:
- failing to identify all assets;
- distributing assets too quickly before paying debts;
- keeping inaccurate records;
- misinterpreting the will; and
- not communicating effectively with beneficiaries.
These mistakes account for over 50% of executor-related legal disputes.
To prevent these mistakes, conduct thorough asset searches, exercise patience in distribution, keep meticulous records, seek clarification on unclear will clauses, and communicate regularly with all parties involved.