Letter to the Editor - Executor liability insurance offers protection when the best laid plans go sideways

Dear Editor,The last two issues of The Insurance and Investment Journal have produced two wonderful pieces by Rosemary McCracken on the issues surrounding estates, estate administration and the important role the advisor can play in this complex arena.

As the provider of estate and executor liability insurance protection we see the unfortunate side of both good and poor estate planning every day. Emotion and money often bring out the worst in people as noted in the article on Greg Barnsdale’s transition from ‘undertaker to estate planner,’ and ‘choosing a suitable estate executor’ as noted in the February article is important, but our experience would suggest that challenges seldom arise from what is known about the estate and those party to it and in truth even the best laid plans often go sideways and usually for reasons no one forecasted.

In reality estates carry risks that are fueled by emotion and money. They also carry risks because of inequity, real or perceived, executor activity or inactivity, conflicts of interest, legislation that might protect family succession rights not contemplated, disconnected beneficiary groups less inclined to be conciliatory, debt laden beneficiaries pushing for early distribution, and third parties such as charities and creditors less inclined to settle. And while the executor role has always been challenging, the accountability today is significantly greater than in days past for some of the reasons  outlined in the articles and a host more.

Regardless of this risk, the family member and trusted friends will continue to act as executors largely because of who they are and the place they hold in the heart of the testator. These individuals may only handle this complex role once or twice in a lifetime, have little idea of the scope of the role and even less about the liability they are taking on personally as the representative of the estate and need the protection afforded them through insurance.

Evgeniya Pollock of Edward Jones’s suggests in some cases executors should consider liability insurance and while we agree, our 22% application decline rate is due to experts trying to ‘pre-assess’ which estates need insurance and is proving a dangerous game for the experts and their clients. The financial implications and risks to the clients are simply too great and frankly unnecessary given there is an accessible and affordable insurance solution readily available for almost every estate.

Executor liability insurance is a product that specifically insures estate executors against personal liability risk during the course of the estate administration. It covers the cost of defending and settling claims for damages brought by a beneficiary, creditor to the estate, or other third party as a result of negligent performance of the duties of the executor. It contingently protects the beneficiaries by covering defense costs that might otherwise be paid out of estate assets, as well as covered damages that are awarded which the executor may not be able to pay personally.

As Christine Van Cauwenberghe of Investor’s Group suggests, the advisor can add significant value by being a resource to one’s client. Leveraging an advisor’s network of estate specialists for tax, accounting, and legal work to assist their clients is a great start and making sure they are insured will help them avoid costly mistakes and bring the advisor value proposition full circle.

Kind Regards,

Myron Neufeld – President
Estate Risk Protection Plan Inc.
Kitchener, ON
905-977-2810 ex 5269
www.ERAssure.com