Executor’s Duties – Is it really worth going to prison?
Totton & Anor v Totton, 2022 EWHC 2345 Ch
Most people will be asked by a family member or a friend to act as an Executor in their estate and often a sense of duty compels us to agree. However, we may not appreciate the onerous nature of the role and that significant legal duties accompany being an Executor or Administrator of an estate. It may therefore be surprising that in September 2022 an Executor was sentenced to prison for failing to carry out his duties adequately (Totton & Anor v Totton). This seemingly draconian measure shows how serious a role the courts consider a Personal Representative to be and that getting it wrong can have life changing consequences.
The term “Personal Representative” is an umbrella term used to denote both Executors and Administrators. Executors are chosen by the deceased and appointed in a Will whereas Administrators are appointed by the court when a Will does not name any Executors or they are unwilling or unable to act. The same duties apply to both Executors and Administrators and therefore any Personal Representative must proceed with caution.
Personal Representatives act in a fiduciary relationship with the beneficiaries named in the Will. This means that Personal Representatives are legally bound by a relationship of trust and confidence. There are rules which govern this relationship, namely that the Personal Representative must: act only in the beneficiaries’ interests, not place themselves in a position of conflict or potential conflict and not make a profit from being a Personal Representative.
In addition to these equitable principles there are also statutory duties imposed on Personal Representatives. The Trustee Act 2000 requires Personal Representatives to “exercise such care and skill as is reasonable in the circumstances” and also that those with specialist knowledge or experience (or those that state such) have a higher level of care and skill to uphold based on their knowledge or experience.
Personal Representatives are responsible for administering the deceased’s estate in line with the terms of the will. As part of the administration of the estate, the Personal representatives will have to make extensive investigations into the assets and liabilities of the estate including whether the deceased made any gifts in the 7 years prior to their death as gifts made within that timeframe can be relevant to inheritance tax. Insurance and security of valuable items in the estate will have to be considered. The Personal Representatives will then have to deduce whether any tax such as inheritance tax is due from the estate and account to HM Revenue & Customs (“HMRC”) for this within the strict timelines to avoid interest for late payment of any inheritance tax that is due. Further tax such as capital gains tax or income tax may also be payable during the administration of the estate and Personal Representatives have an obligation to report and arrange to pay those tax liabilities to HMRC.
Once the Personal Representatives have obtained control of the assets and converted those that should be converted into money, paid any debts, liabilities and legacies that are due from the estate, collected any payments or debts due to the estate, they then need to ascertain the residuary estate and distribute this according to the Will. Estate accounts detailing the assets that were in the estate at the date of death, liabilities incurred during the administration period and income received during the administration will be crucial in determining the shares due to the residuary beneficiaries. At a practical level, Estate Accounts will reassure all the beneficiaries that they have been treated fairly in particular where there is tension within the family.
The above is a brief look at the practical role of a Personal Representative, however, in reality, they will have to deal with any number of issues arising from administering the estate. Unsurprisingly, administering an estate involves a lot of paperwork and can be very time consuming depending for example on the complexity and volume of the assets held by the deceased.
In the Totton & Anor v Totton case, the Executor had “buried his head in the sand” and had failed to distribute the proceeds of the deceased’s principal asset, a £425,000 house, for over two years after it had been sold. The Executor had no previous criminal record, however, his refusal to administer the estate in a timely manner ultimately meant that he was sentenced to 3 months imprisonment.
The Executor in question had not instructed solicitors to administer the estate and his outcome would have most certainly been different if he had. Many Personal Representatives worry about the cost of instructing solicitors, however, legal fees are an administrative cost and as such are paid for by the estate itself. Therefore, instructing a firm of solicitors should be at no personal cost to the Personal Representatives. Instructing solicitors to administer the estate on your behalf will give beneficiaries assurance that the estate has been administered correctly and in a fair way.
Rollits’ Private Client Team have a wealth of experience in the administration of estates and guide Personal Representatives through the process step by step so that all of their legal duties are discharged. Appointing a solicitor to administer the estate will not only safeguard against potential civil or criminal liability but also provide Personal Representatives time to breathe in what is inevitably a very emotional time. Should you need any advice or guidance in respect of your duties as a Personal Representative please do not hesitate to contact the Team. We are here to help.