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Being an Executor

The role of an executor (now called a personal representative) can be daunting, filled with legal responsibilities, financial decisions, and the delicate handling of a deceased person’s affairs. Among the most critical concerns for anyone serving as an executor is understanding their potential liability regarding the debts of the estate. A common question arises: Is an executor personally liable for the debts of the estate they manage?

The short answer is no—executors are generally not personally liable for an estate’s debts. However, this doesn’t mean their role is without significant responsibilities or potential risks. Executors have a legal duty to ensure that debts are paid from the estate’s assets, and mishandling this duty can lead to an executor becoming personally responsible for debts. 

The Executor’s Personal Responsibilities and Role

An executor is personally responsible for administering the estate of the deceased according to the terms of the Will (or, in cases of intestacy, according to the law). Their key duties often include the following:

  1. Collecting the assets of the estate: This includes identifying and gathering all property, financial accounts, and other holdings.
  2. Paying taxes and debts: The executor must ensure that the estate’s outstanding debts, taxes, and liabilities are paid from the estate’s assets before distributing any remaining assets to beneficiaries.
  3. Distributing assets: Once debts and taxes are settled, the executor can distribute the remaining estate in accordance with the deceased’s wishes or legal guidelines.
Hands are seen holding a phone that shows an online banking program while the other works on a tablet. A calculator is nearby. The caption reads "the role of an executor includes collecting the assets, paying taxes and debts and distributing assets.

Estate Debts: The General Rule of Liability

Under most legal systems, an executor is not required to pay estate debts out of their own pocket. Instead, the estate itself is responsible for covering its obligations. In Nova Scotia, this means that any debts owed by the deceased at the time of their death must be paid out of the assets they left behind. If the estate lacks sufficient funds to pay off all debts singularly owed by the deceased person, the creditors may be out of luck, and certain debts may remain unpaid. In such a case, creditors must follow the law and can’t go after the executor’s personal assets. The executor is not personally liable for the debt if there are not enough assets.

Potential for Personal Liability

Though an executor is not automatically personally liable for estate debts, there are circumstances where they could become personally liable for mismanaging the estate. Here are some scenarios where that might happen:

  1. Improper Payment of Debts: Executors must follow specific legal procedures when paying off debts. For example, some creditors have priority over others. If an executor pays a lower-priority creditor before satisfying a higher-priority debt (such as CRA taxes or secured debts like a mortgage company), the executor could be held personally liable for the shortfall.
  2. Distributing Assets Before Paying Debts: Executors must not distribute the estate to beneficiaries until all known debts and liabilities are paid. If they distribute assets prematurely and there is not enough left to satisfy the creditors, the executor may be required to pay the outstanding debts from their own funds.
  3. Negligence or Breach of Fiduciary Duty: As a fiduciary, the executor must act in the best interests of both the estate and its creditors. If an executor fails to exercise reasonable care or acts in bad faith, they could be sued for breaching their fiduciary duty, which might result in personal financial liability.
  4. Co-Signing on Debts: In some cases, an executor may also be a co-signer on a debt, such as a loan or mortgage. In such cases, their responsibility is separate from their role as executor, and they may be personally liable for that specific debt. However, this liability arises from their role as a co-signer, not as executor.
A woman is holding her bank card and looks as though she is imputing numbers on a computer. The caption reads "personal liability arises when the executor improperly disburses funds and assets, without following the Probate Act regulations.

Best Practices for Executors to Avoid Personal Liability

Given the significant responsibilities and potential risks, executors must be diligent in managing estate debts. Below are some best practices to help executors avoid personal liability:

  1. Create a Detailed Inventory: Executors should begin by creating a comprehensive list of the deceased’s assets and debts. This allows for an accurate assessment of the estate’s financial position and ensures that nothing is overlooked.
  2. Prioritise Debts According to Legal Requirements: Certain debts must be paid before others, such as taxes and funeral expenses. Understanding and adhering to the priority rules is essential to avoiding personal liability.
  3. Notify Creditors: Most jurisdictions require executors to formally notify creditors of the death and allow them to submit claims against the estate. This process should be followed precisely, and the executor should not begin distributing assets until the claims process is complete.
  4. Seek Professional Help: Executors are not expected to be experts in estate law or financial management. Many choose to hire probate lawyers, accountants, or other professionals to assist in fulfilling their duties. This can help avoid mistakes that might lead to personal liability.
  5. Communicate with Beneficiaries: Executors should keep beneficiaries informed throughout the estate administration process, especially when it comes to the payment of debts. Transparency can help prevent conflicts or misunderstandings.

When the Estate is Insolvent

If the estate does not have enough assets to cover all of its debts, it is considered insolvent. The rules of how to handle an insolvent estate are laid out in the Nova Scotia Probate Act. Executors must be particularly cautious in these situations, as insolvency increases the risk of missteps. In many cases, an executor may need to seek court guidance or hire a probate lawyer to help navigate the complexities of settling an insolvent estate. 

Executor Liability: Responsibilities Without Personal Financial Risk

Being an executor involves significant responsibilities, but it does not automatically make an executor personally liable for the estate’s debts. Executors should ensure that debts are paid from the estate’s assets in the correct order and only distribute what is left after debts and taxes are settled. By following the proper procedures and seeking professional help when necessary, executors can fulfil their duties while protecting themselves from personal financial liability.

Your Nova Scotia Estate Planning and Administration Partners

Teryl Scott Lawyers has experienced estate planning lawyers who understand the importance of securing your legacy. Our team is dedicated to providing personalized, comprehensive advice tailored to your unique circumstances, ensuring that your assets are protected and your wishes are honoured, all while explaining the processes and responsibilities to you. At Teryl Scott Lawyers, we are committed to delivering peace of mind, knowing your future and your loved ones are in capable hands.

A photo of Teryl Scott's estate lawyers, Lisa Teryl and Tandiwe Nyajeka, is shown next to their award from Three best rated for "2024 top 3 estate lawyers in Halifax"

The above is provided for informational purposes only and does not constitute legal advice — contact a lawyer to discuss your personal circumstances and learn your options.



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