When Can an Executor Be Personally Liable? Protecting Yourself

Being appointed executor is an honour, but it comes with real legal responsibility. Unlike a trustee of a charity or a company director, an executor’s personal assets are at risk if the estate is mismanaged. Understanding where the risks lie — and what steps protect you — is essential reading before you begin distributing.

Distributing Before Paying All Known Debts

The fundamental rule of estate administration is that debts must be paid before any distribution to beneficiaries. If an executor distributes estate assets to beneficiaries and there are insufficient funds remaining to pay a creditor, the executor is personally liable to that creditor for the shortfall.

This applies to all known debts: the mortgage, any unsecured loans, credit card balances, utility bills outstanding at the date of death, outstanding income tax, and — critically — any tax that falls due during the administration period.

The correct order of payment is:

• Secured debts: Mortgages and charges over specific assets — these must be satisfied before those assets can be sold free of encumbrance
• Funeral expenses: Reasonable funeral costs are a priority claim against the estate
• Costs of administration: Including probate fees, solicitors’ and accountants’ fees, and reasonable executor expenses
• Preferential debts: Certain employee-related debts in insolvent estates
• Unsecured debts: Credit cards, loans, utility arrears, and all other general creditors
• Legacies and residue: Paid only after all debts are settled

Paying a beneficiary before all debts are covered is technically a breach of duty and potentially a criminal offence under the Insolvency Act 1986 if the estate turns out to be insolvent.

The Section 27 Trustee Act Notice: Protection Against Unknown Creditors

Even if you have paid every debt you know about, there may be creditors you are unaware of — a forgotten loan, a disputed invoice, a tax underpayment that only comes to light later. If such a creditor makes a claim after you have distributed the estate, you could face personal liability.

Section 27 of the Trustee Act 1925 provides a statutory protection: if an executor places a formal notice in the London Gazette (and typically also in a local newspaper covering the area where the deceased lived or owned property), they are protected against claims from creditors who do not come forward within the stated response period (at least 2 months from the date of the notice).

After the response period expires and provided you have paid all creditors who responded, you can distribute the estate without personal liability to any creditor who failed to come forward, even if their claim is later discovered to be valid.

The section 27 notice does not protect you against known creditors — only unknown ones. You must still pay everyone you are aware of. Placing the notice in the London Gazette costs around £100 and can be done directly via the Gazette’s website (thegazette.co.uk).

Distributing Before Probate Is Finalised

There can be legitimate reasons for making interim distributions before the estate is fully wound up — for example, giving a beneficiary an advance against their eventual share while asset sales are pending. However, these interim distributions carry risks.

Best practice is to obtain a written receipt from the beneficiary acknowledging the interim nature of the payment and that they may be required to repay part of it if the eventual estate accounts show that less is available than anticipated. This receipt protects the executor if the estate proves to have been overvalued or if unexpected debts or liabilities arise.

Be particularly cautious about interim distributions if there are ongoing disputes (such as a claim under the Inheritance (Provision for Family and Dependants) Act 1975), a pending HMRC query, or assets whose value is uncertain. Making premature distributions in these circumstances can expose you personally if the claim or liability crystallises at a larger amount than anticipated.

Protection Under the Trustee Act 1925: Paying Into Court

Where a beneficiary cannot be located, or where their entitlement is genuinely uncertain (for example, because of a dispute about the validity of the will), an executor has the option of paying their share into court under section 63 of the Trustee Act 1925.

Paying into court has two effects: it relieves the executor of personal liability for that share, and it protects the beneficiary’s entitlement so that they can claim the money from the court when they are found or the dispute is resolved. The procedure is through the Senior Courts Costs Office.

This procedure is used less commonly in practice (missing beneficiary insurance is often a more practical alternative — see our guide on missing beneficiaries), but it is a genuine option where the executor needs absolute certainty that they have discharged their obligations before distributing the remainder of the estate.

Using a Solicitor or Obtaining an Executor’s Bond

For complex or high-value estates, using a professional solicitor to administer the estate on your behalf can significantly reduce personal exposure. While you remain the executor in name, the solicitor acts as your agent and their professional indemnity insurance provides a layer of protection if errors are made.

An executor’s bond (also called an administration bond) is an insurance product that can be obtained from specialist insurers. It guarantees the faithful administration of the estate and covers the cost of any claims made against the executor as a result of errors or omissions. The premium depends on the value of the estate and the level of cover required.

These protections are particularly worth considering if:

• The estate is large or complex (multiple properties, business interests, foreign assets)
• There are disputes between beneficiaries or potential legal challenges to the will
• You are the sole executor without a co-executor to share decisions
• You are administering the estate without professional assistance and are uncertain about the correct procedure

The costs of professional administration and insurance are legitimate expenses of the estate and can be paid from estate funds. They are not a personal cost to the executor.