By James Daw

Two Kitchener brokers have developed a new insurance policy to protect you if you become an executor or trustee and you fear being sued by dissatisfied heirs. The Waterloo insurer that backs the insurance would pay for a lawyer to defend you against allegations you sold property or investments at the wrong time or price, played favourites with heirs or put your own interests ahead of others’.

It would provide the cash if a judge ever ordered you to make up for an error or omission.

The new ERAssure policies are only for estates of up to $5 million, and may only be purchased for a three-year term within 60 days of a person’s death.

The risk of legal disputes over an inheritance is higher when there are estranged former spouses and stepchildren, the will is vague, some heirs are treated differently or are in more need of money, when the heirs are not getting along or are left to agree on the division of possessions amongst themselves.

“For a typical estate valued at less than $1 million, the approximate cost would be $1,700 for a three-year term,” according to a sales brochure.

The exact cost depends on the size of the inheritance, the number of executors and their qualifications, and in some cases the number of wills.

Scot Dalton and Myron Neufeld of Estate Risk Protection Plan Inc. worked for two years with the Economical Insurance Group of Waterloo to develop the new insurance.

Dalton says they have been informing lawyers about it since March 1 and are now ready to sell to the public through a single call centre. He believes demand will be driven by a number of factors.

More is at stake with the rise in value of real estate and retirement portfolios relative to incomes. Families divided by second and third marriages may be less tolerant, and more comfortable with suing in court.

The potential for extreme price changes was highlighted by two major stock market crashes in a decade, and the plunge in U.S. home prices. Meanwhile, the Internet has spawned a generation of instant “experts.”

“It used to be the executor would say: How could I have known (to expect a sharp change in the price of an asset)?” says Dalton. “Now, with the Internet, beneficiaries are able to say: How could you not have known?”

Lawyers, accountants and other professional advisers have long been able to buy protection in the case of an error or omission. But the liability coverage available to most consumers comes with the insurance for a home, rental apartment or automobile policy, and will only protect policyholders who negligently cause personal injury or property damage, says Dalton.

Not every amateur executor will need the insurance, of course.

The coverage would not be required if an executor or trustee could never make a mistake, or if a beneficiary could never be disappointed, Dalton quips.

Honouring the will of a parent who has nothing but bank deposits to divide equally among respectful, adult siblings would be about as safe a situation as one could imagine.

To ensure you have time to properly consider such an insurance purchase, consult a lawyer familiar with wills and estates and read the policy carefully soon after your friend or family member dies. For more information, visit the website, or call 1-855-636-3777.