Personal representatives or executors can typically rely on an estate for baseline financial support. The estate is responsible for probate court costs. Estate resources can help pay for the attorney who supports the personal representative throughout the administration process.
Typically, personal representatives should not incur any direct costs associated with estate administration and may even receive payment for their services. However, there are some scenarios in which personal representatives could face direct liability, including the three below.
1. Failing to address obligations
Personal representatives generally need to file income tax returns and publish creditor notice. They may need to empty financial accounts or liquidate assets to fulfill those obligations. The failure to identify and address financial responsibilities can lead to direct claims against personal representatives.
2. Mismanaging insolvent estates
Sometimes, the person who died owed more debt than they could reasonably pay. The estate may be insolvent. In such cases, personal representatives must pay debts in a specific order of priority. The wrong payments or inappropriate distributions to beneficiaries could make them directly financially liable for the value of the improperly-distributed resources.
3. Breaching their fiduciary duty
Personal representatives have an obligation to act in the best interests of the beneficiaries of the estate. If they embezzle, engage in self-dealing or otherwise put their own interests ahead of what is best for beneficiaries, they may then be legally responsible for the consequences of that conduct. People can seek to remove them from the role and may demand that they reimburse the estate.
Understanding the risks that come with estate administration can be beneficial for those who have agreed to act as personal representatives. An attorney can help personal representatives avoid common mistakes that could lead to financial liability later.