Executor's duty to invest estate funds

[SilverBirch]

Hello LegalBeagles. Is there any precedent to state that an Executor should invest estate funds until the administration is complete and the residue distributed? In my case, the principal asset, a house, was sold in May for £570,000. These funds are just currently sitting in a solicitors regular client account when it would be more prudent if the funds were placed into an interest bearing account so the the estate does not lose the benefit of interest on this sum. Even at 1% the estate would earn £5700 per year, enough to offset some of the legal fees. Does the Executor have a duty to invest these funds and if so, is there a legal precedent I can point to? Thanks

[des8]

Re: Executor's duty to invest estate funds

The EXECUTOR is under no duty to invest the funds, but if a TRUSTEE (following the admiistration period) does he can only invest in those nominated in the will or set out in statute

[SilverBirch]

Re: Executor's duty to invest estate funds

Thanks Des8 for your reply.

Perhaps it is just in the US and Australia that an Executor has this duty.

For instance this website - http://www.henricocommissionerofacco.../estate/duties - says:

"If the assets on deposit exceed $10,000.00, the account must be an interest bearing account (unless the bank charges a monthly fee in excess of the interest that will be earned on the deposits), otherwise you may be charged interest lost to the estate."

and Wikipedia says "The personal representative must understand and abide by the fiduciary duties, such as a duty to keep money in interest bearing account and to treat all beneficiaries equally."

An Australian website says "..failure to lodge tax returns, delay in paying legacies, failure to pay interest on legacies, failure to invest moneys in interest bearing account" are things a beneficiary could complain to a Court about.

[des8]

Re: Executor's duty to invest estate funds

Yep, in UK executors only have to safeguard the assets, not invest them!

[SilverBirch]

Re: Executor's duty to invest estate funds

Understood that it might not be a legal requirement as such but maybe expected as 'good practice'? What is your opinion on this UK website - http://death-duties.co.uk/content/executor-liabilities - where it says "if large sums of money are involved - entirely likely if a house is involved - you are expected to invest the money appropriately"?

[des8]

Re: Executor's duty to invest estate funds

There is a difference between what is expected, and what has to be done.
Later that same site lists the executors obligations as:

• To safeguard and collect assets
• Pay the debts of the deceased
• Distribute the remainder of the estate to the beneficiaries

In another section it lists the executor's liabilities as including "Diminishing the estate through imprudent investment"

In the normal course of events I would not expect a lay person acting as executor to make investments, as there is a need to access the funds and if all runs smoothly there should be little or no delay in distribution,
However, you said Post 1 that the funds were currently sitting in the solicitor's client account.
Is the solicitor also the executor, and are you thinking he should be opening a separate deposit account?
Presumably you are one of the residual beneficiaries, so why don't you ask the solicitor about this?


PS to obtain the bank deposit protection (limit £85,000 )the cash would have to be split.

[SilverBirch]

Re: Executor's duty to invest estate funds

Yes Des, I am a residual beneficiary. The problem is a bit complex as both the Executor (who was the deceased's accountant) and his solicitor seem to be in cahoots, refuse to communicate with the beneficiaries (or with our solicitor) and have possibly between them mismanaged the administration. For instance, it seems possible that the Executor took from the estate what he claimed was owed to him by the deceased as unpaid accountancy bills which then left no money to pay the first installment of IHT which then led to possible late payment interest and penalties and then the Executor borrowed some money from some undisclosed source at an interest rate he wouldn't disclose in order to pay the first installment of IHT. It would have been more prudent of him to wait until the house was sold before taking the cash out of the estate. If this is true, then my argument is that the Executor is personally liable for these penalties and interest payments - he was about 18 months late.

His solicitor also did the conveyancing and so about £1/2 million has been sitting in the solicitors client account since May with no date yet set for distribution. I also suspect they have worked out some very lucrative deal for themselves regarding Executor fees and legal expenses. As I mentioned in an earlier post, I have successfully obtained a Court Order to have them present an interim account and the Judge agreed that there were some questions about this Administration that needs answering. I would like to be able to suggest to the Judge when I'm back in Court at the end of December that the Executor/solicitor should have put this money into an interest bearing account since the interest could have offset some of the legal fees which will be drawn out of the estate - so in my mind, this would have been a prudent move to not diminish the estate funds.

The solicitor in question has already been admonished by the Solicitors Ombudsman in a previous probate case and a remedy was awarded against him and so he doesn't have a very good track record.

[des8]

Re: Executor's duty to invest estate funds

Doh!....I didn't connect with your previous thread.

IHT is payable before probate is granted, all other debts should wait until then.
IMO the unpaid accountancy bill should have been deferred.
Would that amount have been sufficient to cover the IHT?

If we were currently suffering rampant inflation, I could see an argument for investing the assets to lessen their diminution, but as it stands I don't think it is an imperative. However there is no reason why you shouldn't bring the matter up.

At the moment your problem appears to be that in the main you have strong suspicions, but little hard evidence.
The only evidence is in the hands of those you suspect, and you can only hope that when they release the details you can spot the inconsistencies.
Are you a forensic accountant by chance?

[SilverBirch]

Re: Executor's duty to invest estate funds

I agree, the unpaid bills especially as they are with the Executor should have waited till the main asset was sold - certainly it would have been more prudent for him to have waited. There would have been enough cash to have paid the initial 10% IHT if he had left it alone - as he was late, HMRC tell me they would have charged interest on the whole outstanding tax which amounted around £75k - so at 3% interest would be over £2k per year plus a penalty which I'm not sure of at this stage.

Looks like one could get an instant access account paying round 1.25% - even at 1% it should yield about £5000 per annun which would help with legal fees.

I'm not a forensic accountant although I'm comfortable with numbers but I think I have an option to ask the Judge for the Court to prove the accounts if it does look like something odd is going on when I do get to see whatever the Executor produces in answer to the Order although the Judge did give him an option to produce a witness statement to explain why he is unable to produce the accounts which I suspect he might try to do. It seems it is up to me to consent to having the next hearing vacated if I'm satisfied with the answers - likelihood is that I will be back in Court though.

[des8]

Re: Executor's duty to invest estate funds

I wish you well