Executor Liability Insurance
WE UNDERSTAND ESTATE RISKS
What Are Estate Problems?
Estate Problems are circumstances that existed before, or which develop following someone’s death that:
- Often cause tension and hard feelings in families that can last a long time; and
- Result in legal problems that can negatively impact the value of your estate; and
- Slow down the administration of your estate and the distribution of the inheritance to your beneficiaries.
What Causes Estate Problems?
Each family, and any extended family, is unique. ERAssure has identified many causes of estate problems. The following is the tip of the iceberg, but some may sound familiar to you:
- Wills that don’t reflect the realities of the family situation. This is usually the result of an outdated will. Many people are unaware that marriage, remarriage, divorce or separation are appropriate times for a new will to be prepared or an existing will to be updated.Sadly, many Canadians don’t have a will, which can leave the division of your estate to government rules. This can be seriously at odds with what you are planning for your family at your death, or expecting as a beneficiary from a parent’s estate.
- Family law – governing marriage, divorce and child support – can be a surprise to beneficiaries when a loved one has left loose ends in terms of spousal or child support obligations. Some people – perhaps many – wrongly believe that death will allow them to escape family law obligations. An unfortunate estate executor may have to try to negotiate settlement of these obligations with an uncooperative ex-spouse or estranged child.
- Executors are personally liable for errors they make in administering an estate. Many executors only learn of this when they receive a letter from the lawyer of an unhappy beneficiary or excluded family member demanding money.
- Executors are entitled to be paid by the estate for the work they perform. The time and effort to complete an estate administration is usually greater than executors ever expected, yet this work is often given little or no value by the beneficiaries. Often the person writing their will doesn’t consider the size of the task that they are asking a child or close friend to perform. The agreement between beneficiaries to a fair executor fee can be difficult; it sometimes results in hard feelings even after the distribution of assets. Sometimes, these matters end up in court.
- Estate liquidity problems. In many cases, estates are tied up awaiting probate, a process that is required for accessing bank and investment accounts and necessary in most cases for transferring real estate title to other than a spouse or other joint owner. It can sometimes take months for an executor to organize information required for probate, and for the court-prepared documents to be issued when the probate fee or estate administration tax is due. In Ontario, the Estate Tax is approximately $15,000 per $1 million of estate value.Many executors find it necessary to temporarily fund the expenses of the estate personally, including the funeral and payment of estate tax. This can be a financial burden that may be difficult for the executor to afford, as well as difficult to convince the beneficiaries to contribute to the short-term expense.
- Lawsuits that arise during the course of administration can be a problem for the executor and the beneficiaries of the estate. Estate litigation legal fees can run as high as $800 per hour, so protecting against the potential legal defense costs is an area that every executor needs to be aware of at the start of an estate settlement process.
- Family Dysfunction. Some families have trouble getting along. Petty grievances that rise to the surface after the death of a parent can frustrate the executor’s efforts to conduct the affairs of the estate… and a slow-moving estate creates even more tension among the family beneficiary group.
- Sometimes excluded family members or those that have been treated differently in the will may initiate some legal action against the executors to gain some standing in the estate administration.
- Undocumented or poorly documented loans to beneficiaries may require collection by the executor. The executors may be legally obligated to resolve such matters, no matter how distasteful.
- The executor who has previously acted as Attorney for Property or Personal Care for the deceased person is often named as an executor of the estate; this can result in hyper-vigilance by beneficiaries that may be suspicious of the executor’s previous role as Power of Attorney. Sometimes the executor needs to justify every estate action, no matter how small… and failing to satisfy one or more beneficiaries can drive the entire administration into a legal action.
Let us help arrange protection
If you are now acting as an executor (or expect to be doing so shortly), you can arrange an ERAssure Executor Liability Insurance and Estate Protection policy.
Executors can be held personally liable for mistakes they make in settling an estate. If the beneficiaries suffer a loss, the executor may be required to reimburse the financial loss… or cover the cost of the beneficiaries’ legal costs to collect.
This is an insurance policy that protects against the costs of legal fees and restitution orders from a Court because the executor has made an unintentional error managing the estate which impacted estate assets.
This protection can be difficult to access if the estate has been open for some time, or if there are problems that suggest a lawsuit is looming. It needs to be applied for as close to the date of death as possible. Not all estates will be eligible for coverage.
How to Buy
To arrange this protection, download an application form here or call our office at 1-855-636-3777 to speak with one of our licensed consultants.
|Value of Estate||Approximate Cost per Year|
|Estates up to $500,000||$795|
|Estates $500,000 to $1,000,000||$975|
|Estates $1,000,000 to $1,500,000||$1,200|
|Estates over $1,500,000||$1,500 to $2,400|