It can be quite flattering to be selected as the personal representative of an individual after their death. Some of these representatives, referred to as estate trustees (you may know them by the older term – executors) can sometimes regard these duties as a “money maker”. Others simply feel that they owe the deceased a duty to carry out their wishes. Something seldom considered by appointed estate trustee, however, is the liability they might face if the job is not done properly.
Estate trustees must understand that they owe a duty of good faith to discharge their duties under the will AND on behalf of the beneficiaries. It might be the case that a beneficiary did not receive all that they thought they would, or perhaps they were not included in the will as a beneficiary at all. These individuals are referred to as disappointed beneficiaries. To add to the confusion, it is not unheard of for beneficiaries to be ungrateful and untrusting of the estate trustee.
Complexities arise from such situations. Court applications and requests to “pass their accounts” in formal fashion are likely to occur. Estate litigation is becoming ever more frequent especially given the present transfer of wealth from one generation to the next. This is not to mention the frequent claim that an estate trustee has overpaid themselves in administering the estate.
If an estate trustee makes any number of errors in the administration of an estate – for example: does not interpret the technicalities of the will correctly, misses paying a beneficiary, is a bad investor, does not treat all of the beneficiaries equally, among others – they can be personally liable.
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Being an estate trustee does not mean that you are not personally liable in certain circumstances to the estate or the beneficiaries.
The testator should also consider inserting a provision in their wills to permit the estate trustee to purchase insurance from the assets of the estate. The following is one example of such a clause:
“I authorize my Trustee(s) to purchase, at the expense of my estate, such errors and omissions insurance as my Trustee(s) determine(s) in his/her/their sole discretion is sufficient to protect my Trustee(s) against claims and losses arising from errors or omissions in the administration of the estate. The cost of such insurance shall not be deducted from the compensation to which my Trustee(s) is/are otherwise entitled for so acting.”
