There are many unknowns for those who agree to act as Estate Trustees. Many Estate Trustees are not paid and are willing to “volunteer” their time, but would not do so if it may put their own assets at risk. If you are named as an Estate Trustee, you may want to know whether you might be personally liable for the Estate's debts if the Estate cannot pay its debts.
Generally the answer is no, the Estate Trustee will not be required to pay the Estate's debts if the Estate runs out of assets to pay its debts, however, there are some rare instances where the Estate Trustee could run into trouble such as:
- if the Estate Trustee fails to determine and pay all of the debts of the deceased before the Estate Trustee distributes the Estate, then creditors can sue the Estate Trustee personally for payment;
- if the Estate Trustee fails to pay debts in priority as prescribed by law (for example, reasonable funeral expenses get paid in full first), then the Estate Trustee could be found to be personally liable for debts;
- if the Estate Trustee pays some bills (for example, some debts to some creditors) in full such that there is insufficient money to pay other creditors, then the Estate Trustee may be found liable for some of the unpaid debt.
Society needs people to act as Estate Trustees and as a result, the Courts do not want to discourage people from acting as Estate Trustees unnecessarily and so there are defences that Estate Trustees can use to avoid personal liability even where they get into trouble. For example, if the Estate Trustee can convince the Court that he or she acted honestly and reasonably to protect or conserve the Estate assets, the Court can relieve the Estate Trustee from personal liability.
If you are named in someone's will to be the Estate Trustee, you can always pass and avoid even the slightest risk that you could be held responsible for any debts. If you accept the appointment as Estate Trustee, then provided you administer the Estate properly, you should not be responsible for its debts. To learn how to administer the Estate properly, Estate Trustees can retain a lawyer to advise them on how to do so and avoid becoming personally liable for the deceased's debts.