Actions that executors should avoid taking
Executors should avoid withdrawing any funds from the deceased’s bank account even if they have a signed check or debit card with pin. They should inform the bank as soon as possible that the account holder has passed away and provide a copy of the death certificate. The deceased’s bank accounts are part of their estate and will either be paid directly to the executor or frozen awaiting a grant of probate. There is one exception, the money to pay for the funeral. This can be accessed immediately by obtaining an invoice from the funeral director and sending it to the deceased’s bank.
Executors should not allow the attorney/representative under a Lasting Power of Attorney to continue to act for the deceased. A Lasting Power of Attorney ceases upon the death of the donor the representative should stop acting for the deceased. The original LPA document and a copy of the donor’s (deceased’s ) death certificate should be sent to the Office of the Public Guardian. Dealing with the deceased’s affairs now becomes the responsibility of the executor named in the Will.
Executors should avoid mixing the deceased’s funds with their own. It is executor’s responsibly to safeguard the deceased’s finances and they should be put into a separate executors account. The executor may be required to draw up a set of accounts to demonstrate what the estate comprised and what was paid out.
Executors should avoid distributing the estate to the beneficiaries until all creditors have identified, contacted and paid. If the estate is distributed and a creditor subsequently makes a claim this becomes the personal liability of the executor. They then have the embarrassing task of asking the beneficiaries for some of their legacy to be repaid. If they are unwilling the claim will have to be met by executor.
Executors should avoid giving in to the demands of creditors. No doubt they will receive letters and phone calls demanding payment of outstanding debts. All creditors should be informed of the deceased’s passing and that there may be a legal process (probate) to follow before they can be paid. The executor should inform all creditors that payment will be made as part of the administration of the estate.
Executors should avoid paying any creditors until they have established a priority order for them. Secured creditors, such as mortgages and secured loans have first call on the estate followed by the payment of expenses associated with the funeral and administration of the estate. Then comes unsecured debts, such as utility bills, unpaid rent, Council Tax and other taxes, repayment of overpaid benefits/pensions and credit cards.
Executors should avoid distributing legacies to beneficiaries where an estate is suspected to be insolvent i.e. an estate where the deceased’s debts exceed the value of their assets. In this case the executor’s duty is to act in the best interests of creditors rather the beneficiaries.
The rules of bankruptcy apply to insolvent estates, in that groups of creditors must be paid in a specific order of priority. All creditors should all be contacted and the money in the estate offered to them in the appropriate percentages. If there is anything left in the estate after all the creditors have been satisfied, the executor should distribute legacies and bequests before distributing to residual beneficiaries. Where the correct procedure is not followed creditors may hold an executor personally liable.