Executor liability insurance aims to cover increasingly risky role

Those of you who read this blog regularly are already aware that being an executor carries with it personal liability for mistakes and omissions on the part of the executor. Personal liablity goes beyond a slap on the wrist and maybe being kicked out of the executor role; it means you could end up paying out of your own pocket for mistakes you make during the administration of an estate.

This article from www.canadianunderwriter.ca talks about executor insurance. I know that most of you out there have had no exposure to executor insurance, as it's a fairly new product. Not to mention that your typical executor who works without a lawyer tends to do things as cheaply as possible, and would consider things like insurance to be "extras". But this article is interesting in terms of how executor insurance works and what it covers, so click here to check it out. You may still choose not to have this insurance, of course, but at least you'll know more about your personal liability.

Why do executors get sued?

I received a newsletter this morning from my friends over at ERAssure (Estate Risk Assurance). These are the people who offer executor's insurance, and they have first-hand knowledge of the trouble executors get into. The newsletter included a list entitled "Why do executors get sued?", and I was interested to see that the reasons very much correspond with my own experience of estate litigation.

When you read the list, which I've reproduced below, you will notice that the very first item on the list is lack of communication leading to frustrated beneficiaries. Executors take note! Every day I receive comments on this blog and emails telling me about how the executor simply won't answer questions or reveal anything. It seems to be a pretty common practice for executors. The executors who think this is ok should probably know that often they will end up in court for behaving that way.

Another point that I found interesting is that one of the problems is "perception" of favouritism or conflict of interest. To me this leads right back to communication. If there is a perception that an executor is behaving incorrectly or dishonestly, and the executor chooses not to address the concern, the perception will only be reinforced. However, if the executor addresses the perception by explaining why he is taking certain steps in a certain way, there is a pretty good chance that the issue can be resolved.

The lesson for executors here is that you can get into trouble not just for what you're doing (or not doing) but also for what the beneficiaries believe you are doing (or not doing).

I hope that by reading this list, executors will understand how important it is that they do the best job that they can, and that they remain transparent and accountable to beneficiaries.

Why do executors get sued?
- communication challenges - frustrated beneficiaries
- acrimony with beneficiaries and/or executors
- perceptions of favouritism or conflict of interest
- individuals that are treated differently in the will
- executors that had Power of Attorney for Care or Property for the deceased
- failing to properly value assets
- improper management of financial assets, like stock portfolios
- failing to protect the assets
- improper division of assets between beneficiaries
- failing to recognize debts due from or to the estate
- family law issues
- charities that may challenge the executor
- do-it-yourself real estate transactions

If you want to know more about executor's insurance, visit www.ERAssure.com. There is a lot of good information for executors on their site.