Agreeing to be the executor or personal representative of someone’s estate could be a thankless job. If the testator does not have substantial personal property, they may not have any way to compensate you for your duties.
However, you may still feel compelled to step into that role to fill your loved one’s last wishes. You may be able to count on even the limited resources of the testator’s estate to cover legal fees and even necessary attorney costs related to the administration of the estate.
However, your role does not come without its own financial risks. If you make certain mistakes during estate administration, you could be financially responsible for them.
What financial liabilities result from serving as an executor?
You have an obligation to handle the probate process appropriately. As the executor of an estate, you are ultimately the one with control over the distribution of assets. One of your first responsibilities is to notify creditors and pay off all accounts in the deceased party’s name.
Even debts with no cosigner or collateral property can still bring a valid claim against the assets in the estate. You will have to notify all creditors and make sure that you pay off all valid debts before you start distributing any remaining assets to the beneficiaries named by the testator.
Failing to do so could mean that the creditors eventually have a claim against you. Creditors could hold you personally responsible for the value of any assets you distribute to beneficiaries before repaying them. Even if the beneficiaries have already used or sold those assets, the creditors can make a claim against you and your personal property for the same amount.
Executors have tax responsibilities as well
You may have to file tax returns for the deceased individual and their estate. Generally, repaying tax debts will be one of the highest priority that’s that you have to handle as the executor of an estate, regardless of whether it’s income tax or estate tax. There could be a liability involved in unpaid taxes just like with unpaid private debts.
Learning about your obligations during estate administration and getting the right support can decrease the likelihood of a mistake leading to financial liability for you as the executor.