Being asked to act as an executor is usually taken as an honour. It is also one of the hardest jobs anyone can accept: you are being asked to grieve for someone and administer their affairs at the same time. What most people do not realise when they accept the role is that it carries personal legal risk, particularly around the deceased’s debts. Get this wrong and creditors can come after you personally, not the estate.
What debts does an executor have to deal with?
As an executor, you do not simply distribute what is left of the estate. You are responsible for identifying, managing and paying the deceased’s liabilities before any final distribution is made.
Those liabilities commonly include:
- outstanding personal loans and credit cards;
- unpaid tax liabilities;
- mortgages and other secured debts;
- unpaid rent, rates or utilities;
- business debts; and
- contingent liabilities, such as guarantees given by the deceased.
Your personal liability is capped at the value of the estate, but that protection disappears the moment estate assets are distributed before those debts have been properly dealt with.
How personal liability can arise
Personal liability most commonly arises where an executor:
- distributes the estate too early;
- relies on informal agreements with beneficiaries to pay debts;
- fails to identify or allow for contingent or unresolved liabilities; or
- ignores statutory processes designed to protect executors.
The executor’s job is easy to underestimate. You are the person the law holds responsible for the deceased’s liabilities, and if you distribute what is not yours to give, the creditors’ claim shifts from the estate to you personally.
The case of Harris v HMRC
The UK case of Harris v HMRC is an oft-cited cautionary tale. The administrator of the estate agreed to distribute the whole estate to the sole beneficiary (the deceased’s brother) on the understanding that the beneficiary would pay the inheritance tax liability of £341,278. After receiving the inheritance, the beneficiary moved to Barbados (just to rub salt into the wound) and ceased contact. The tax was never paid.
The court held the administrator personally liable, it was their responsibility to ensure the tax was paid out of the estate before any distribution, and a private, undocumented understanding with the beneficiary counted for nothing once HMRC came looking.
Late-emerging debts and guarantees
Some liabilities do not arise until long after a death. Guarantees are a common example. A guaranteed debt may not crystallise for many years, and even where the borrower is meeting repayments at the time of death, the guarantee continues to operate. If the borrower later defaults, the estate may be called upon to meet the liability.
In these circumstances, an executor may need to retain or set aside estate funds to cover a potential future claim, rather than distribute the estate immediately. If an executor distributes the estate without making provision for that risk and the guarantee is later enforced, the executor may be personally liable.
Statutory protections across Australia
Recognising the need to provide a statutory protection mechanism for executors and trustees who want to distribute an estate without later becoming personally liable for unknown or late-emerging claims, several Australian states provide statutory protections. However, in all cases, executors must follow the process set out in the legislation carefully.
By way of example, section 29 of the Trustee Act 1936 (SA) allows an executor who has properly advertised for creditors and waited the required period to distribute an estate without personal liability for unknown claims.
However, this section has limits – it does not protect an executor against known or foreseeable liabilities, nor does it prevent creditors from pursuing assets already distributed. In short, it does not protect an executor who:
- knew about a claim but ignored it,
- distributed prematurely; or
- failed to make reasonable enquiries.
It does not extinguish the debt itself, and it does not protect beneficiaries who have already received estate assets. It is a shield for careful executors, not careless ones.
If you have been named as an executor and are unsure whether the estate is ready to distribute, call us on 1300 654 590 or email us to book a consultation. We will help you identify what still needs to be dealt with before you sign anything.
How executors can protect themselves
The practical takeaways are consistent:
- Do not distribute the estate early.
- Identify all known and potential liabilities.
- Retain funds for contingent liabilities such as guarantees.
- Advertise for creditors where statutory protection is available.
- Get legal and tax advice before making the final distribution.
How we can help
You did not agree to be an executor expecting to be chased personally by a creditor. The role is enough of a job without that risk sitting quietly on top of it, and most of the executors we meet are trying to do right by someone they loved while learning what the job actually involves.
We assist executors to identify and assess estate liabilities, determine whether funds should be retained before distribution, and take advantage of statutory protections available in the relevant jurisdiction. Where appropriate, we can guide executors through creditor notification processes, advise on managing disputed or contingent claims, and help ensure distributions are made safely and in accordance with the law. Early advice can significantly reduce the risk of personal liability and provide executors with confidence that they are administering the estate properly.
If you would like assistance about managing estate liabilities or any other aspect of probate or estate administration, please contact us on 1300 654 590 or email usto discuss your situation.
The information contained in this post is current at the date of publishing – 13 August 2026.
