Whenever you owe what the common law recognises as a “duty of care”, you are at risk of failing in that duty. There is always the possibility of your being sued by someone who has suffered a loss because of your alleged breach of that duty.

Of course, there are many situations in which you have a duty of care and acting as the executor of someone’s will is just one such occasion. As an executor, you must exercise a duty of care in that role and take all reasonable steps to ensure that no one suffers any loss as a result of the decisions you make, or fail to make, as an executor.

The Trustee Act, 2000, places upon the executor a statutory duty of care to act in the best interests of the beneficiaries and to take every reasonable precaution against financial losses to or claims against the estate.

Risks

The Law Donut describes some of the many risks facing an executor in the exercise of his or her role – all of which might lead to claims for compensation from those who have suffered a loss as a result:

• in interpreting the will you might erroneously distribute too much of the estate to one beneficiary to the loss of another;

• decisions you make about managing the assets of the estate might be held to be unwise investment decisions;

• others might allege that you have sold assets of the estate too cheaply;

• you might have distributed cash and other assets of the estate before making sure that all creditors (including the inland revenue) have been paid in full; or

• you may have failed in your duty to safeguard property assets of the estate by not arranging adequate or sufficient building and contents insurance.

As might be clear, therefore, there are a number of ways in which you might slip up through some unintentioned mistake or oversight. There does not have to be any element of fraud or personal gain on your part, but a simple error or two might lead to your being sued.

Defence

Your defence against such claims for compensation – which may be very substantial – lies in indemnity insurance for executors. It is available from specialist insurance providers.

In a way similar to professional indemnity cover, this type of insurance for executors of estates offers protection against claims by those who allege some breach of your duty of care as an executor. The test of your duty of care is still measured against the actions that would be taken by a reasonable person faced with similar circumstances and with the same knowledge as yourself – if a solicitor is acting as an executor, for example, the duty of care is more onerous than someone without such training and experience.

How much cover?

The amount of indemnity cover you choose as an executor is likely to depend on the value of the estate for which you are responsible and your own estimate of the likely risks of claims made against you.

Although it is unlikely that you need indemnity cover to the same value of the estate, it is not uncommon for this type of insurance to provide a minimum of £1 million of cover.