What are the principal responsibilities of an estate executor?
An executor is the person selected by the testator (deceased person) and named in the will to manage the deceased person’s estate within the terms of the will and to protect the assets of the estate. The executor of an estate must comply with various laws and rules that govern the administration of deceased estates.
An executor’s responsibilities may include organising the testator’s funeral, locating the will, keeping the assets safe (eg securing properties and valuables, paying insurances etc), paying debts and taxes, selling properties and distributing the assets in accordance with the will. If any beneficiaries are under 18 years of age, the executor may be responsible for preserving assets, managing trusts and making investments on behalf of these beneficiaries.
The responsibilities of an executor are demanding and detailed. Some estates can be complicated and executors may need to consult a legal practitioner to assist them in finalising an estate.
Why do I need insurance as an executor of an estate?
Acting as an executor can sometimes be a thankless and stressful task often performed in benevolence of a past family member or close friend, who has entrusted you to distribute their estate in accordance with their will.
While the role of the estate trustee has always been complex, and that hasn’t changed. The composition of a typical estate also remains the same, with perhaps a house, vehicles, household contents and some financial assets. What has changed and continues to change – dramatically – is the environment in which the estate trustee must perform his or her duties.
But, doing your best isn’t necessarily enough; society in general is more litigious today than in past. Individuals no longer look at a lawsuit as a last resort, rather these days it’s their first port of call. Indeed, the proportion of people who use litigation to reach a divorce settlement is an obvious testament to this trend.
Indeed, the “modern family” is now often characterized by second marriages and the blended families that accompany them. In this context, relationships between beneficiaries tend to be more complex resulting in a wide disparity of views and expectations.
Navigating the course without estate executor’s liability insurance puts you and your family’s future at unnecessary risk. Talk to your solicitor for more information about executor estate liability insurance.
What does estate executor insurance typically cover?
Estate executor insurance typically covers executors for the costs of defense and indemnity for damages awarded against them that arise out of errors and omissions committed during the administration of an estate.
Who does estate executor insurance cover?
Estate executor insurance was developed to cover estate executors, estate trustees, or estate administrator clients. Estate executor insurance can also protect a lawyer who is appointed as an executor, provided he or she is not concurrently representing the estate.
What size of estate will estate executor insurance cover?
Estate executor insurance is available for estates of up to $5 million in assets.
Can an executor obtain this type of protection without the advice and counsel of a solicitor?
No, executors cannot purchase RGIB’s estate executor insurance without the advice of a lawyer because estate administration is a complex process and lawyers provide essential expertise during the process of estate administration.
Who pays the premium for estate executor insurance?
The question of who pays the premium may relate somewhat to whom the insurance policy benefits. While the executor, estate trustee, or estate administrator is afforded primary coverage, the estate is also beneficially protected since, in the absence of insurance, estate assets may be liquidated to pay the costs of defense when the executor is sued for negligence.
Like many other estate expenses, it may be decided during the passing of accounts whether the insurance premium is an appropriate expense of the estate, the executor, or a combination. In some circumstances premiums can be paid when the estate is finalised.
How are claims processed?
The policyholder must notify RGIB of any circumstances that may reasonably be expected to or actually result in a claim for damages. When RGIB receives a notice from a policyholder, a claim will be submitted to the underwriter and a representative will contact the policyholder for more information to determine the appropriate action, whether it is further investigation or a required legal response.
Are errors in tax liabilities covered by the insurance?
Provided the estate tax returns have been completed by a qualified professional, the cost of defending a charge or claim brought by the Australian Taxation Office against the executor is covered; but, unless noted as covered in the policy as an endorsement to the standard cover, claims in relation to superannuation matters are not covered.
Payment of the actual tax liability is not covered under any circumstance.
Is there a time limit to when a policy can be issued?
A policy must be ordered within 30 days of the date of testator's death or the date of appointment of the executor.
This period may be extended under some circumstances.
Will the policy work in the case of multiple co-executors?
Yes, the insurance cover can provide protection for multiple executors subject to the policy Limit of Liability, but it does not defend or indemnify for cross-suits between executors.
In a situation of multiple co-executors, can the policy cover only specified executors?
No, the insurance policy must cover all executors.
How much does a policy cost?
Estate Executors insurance premiums depend on the estimated value and complexity of the estate, type of assets, number and qualification of executors, and the amount of coverage. For a typical estate valued at less than $1 million, the approximate cost would be around $1,700 [plus statutory charges] for a 2-year term but, it is important to note, that premiums can and do vary considerably.
It costs nothing to make an application for a premium quote from RGIB or the underwriter; however, your solicitor may charge a fee for doing so.
Why isn’t estate executor insurance available from an Australian insurance company?
Because its only a relatively new product to Australia. While Australia’s insurance industry is exemplary it is only a small industry in world terms, accounting for less than 1% of the world’s insurance premium.
A lot of insurance required in Australia, but not provided by Australian insurance companies is arranged with foreign overseas based insurance companies. RGIB has promoted this estate executor insurance to a number of underwriters and it is hoped that in the no too distant future the insurance cover will be made available by an Australian insurer at competitive prices to that otherwise available in the world market.
I know my clients very well and drafted their wills. Why would I recommend an insurance policy, in addition to my past efforts to help their estate planning?
Even when you know your clients well, you probably are not as familiar with the executor, beneficiaries, and the people who influence the expectations and reactions of the beneficiaries, such as their spouses and children. While a well-written will is essential, the reality of emotions and reactions of beneficiaries can be difficult to predict — and a well-written will doesn't pay the cost of litigation against the executor in the event of a claim for damages.
Why would I recommend estate executor insurance for a simple estate?
You can't predict when a simple transaction may result in a significant loss for the client – if the insurance is available it should always be considered because, you can't predict if, when, or why a significant claim for damages against the executor may arise.
How can my clients obtain an estate executor insurance policy?
Completing an application with your client is fast and simple. Call us on 1300 620 520 and we’ll help you complete the application in just a few minutes. Or you can email us at office@rgib.com.au and we’ll email or post you an application form.
Can the direction to purchase estate executor insurance be written into a will?
Yes, including RGIB’s estate executor insurance as a direction for executors is a sound decision to protect the executor and the estate in case of litigation.
Can the insurer subrogate against the lawyer for the estate if a claim is paid on behalf of the estate or executor?
Provided the lawyer cooperates in the investigation of the claim, has not been involved in a fraudulent or dishonest act, nor been disciplined by the governing authority for professional misconduct in the administration of legal affairs for the insured estate and executor, the insurer waives its right of subrogation against the solicitor for the estate. |
