The executor or personal representative of an estate has a lot of responsibilities. They manage the entire process, communicate with the probate courts and distribute property to beneficiaries. In addition to having a lot of personal responsibility, the executor of an estate also takes on some legal and financial liability.
There are risks involved in estate administration if you do not handle the probate process appropriately. While there are numerous minor risks, including the potential for people to challenge you over the decisions you make as executor, there’s also the possibility that you could be financially responsible for a mistake that you make while handling the estate’s assets.
You could be responsible for unpaid taxes and debts
Not everyone passes away with enough resources to fulfill their obligations to others. When someone dies with a significant amount of personal debt, their executor has to tread carefully when managing and distributing assets.
It is crucial for an executor to file necessary tax paperwork and notify creditors about the probate proceedings. Those who have valid claims against the estate, ranging from private creditors to the Kentucky Medicaid estate recovery program, will require repayment from estate assets.
Typically, you are not responsible for debts that exceed the value of the assets in the estate. If someone dies with no major property and significant debt, their executor is not responsible to repay those debts on their behalf. However, if they do have property, the executor has to use those assets to pay creditors and taxes before you distribute anything to the beneficiary.
If taxing authorities or creditors can prove that assets went out to family members or heirs despite their valid claims, the courts could hold the executor responsible for the value of assets that they distributed before paying those debts in full.
Understanding your obligations will help you protect yourself
When you understand the duty that you have of the executor of an estate, you can do a better job of upholding it. Executives who learn about the law and have proper support are less likely to make mistakes that could have financial implications.
Learning more about the probate process can help you plan to manage the estate of a loved one if you agreed to serve as their executor.