Many people are unaware of their obligations as an executor of an estate and some do not even know they have been appointed! Senior Associate Lucy McPherson provides an overview of what is required of you as an executor and your duties.
When preparing a Will one of the most important decisions a person must make is who to appoint as executor of their estate.
As professionals within our own families we are often asked to be executor of an estate within the family. Many people will be asked to be an executor of an estate at some stage. But what exactly does the role entail?
An executor’s duties are far reaching. An executor essentially stands in the shoes of the testator after death. The overall duties of an executor include:
- arranging disposal of the body and the funeral;
- obtaining a grant of Probate;
- collecting the assets;
- selling assets (where appropriate);
- insuring and securing assets;
- attending to the payment of debts (including finalisation of taxation matters affecting the estate);
- administering trusts;
- investing assets;
- keeping accounts;
- responding to litigation in the estate;
- settling any claims on the estate; and
- distributing the estate pursuant to the terms of the Will or any applicable Court order.
So you have been appointed as executor of an estate. What do you do?
The first thing you should be aware of when appointed as an executor of an estate is that you are not compelled to accept the appointment. Acting as an executor of an estate can be an onerous job and it’s not for everyone. The role can take up a lot of time and energy. Before you accept the appointment you should be aware of exactly what the role entails. If you accept the role you will be responsible to third parties for your actions (or inactions). If you don’t act appropriately as executor you may be the subject of claims by beneficiaries or creditors. The liability in those circumstances may be personal – that is, your personal assets may, in some circumstances, be placed at risk by accepting the role.
An executor is not only required to collect the assets, pay debts and distribute an estate, but an executor is also the party to be named in any Court action affecting the estate. Unfortunately a number of estates end up before a Court. It is the executor’s role to respond to any Court action taken against the estate and litigation can be emotionally and intellectually exhausting for anyone. An executor may also be required to respond to claims by creditors (including the Australian Taxation Office), or seek the Court’s assistance in the interpretation of a Will (in circumstances where there is an ambiguity in the Will).
As you can see the possibilities are almost endless. An executor cannot simply walk away from these obligations once the role has been accepted. Due consideration should be given to accepting the appointment. It may be more appropriate, for example, for a professional to act in the role as executor where the estate administration is complex in nature. Many people do not realise how serious the role can be with possible personal liability for claims by beneficiaries, legal costs, tax and creditors.
RENOUNCING YOUR ROLE AS EXECUTOR
If a person is appointed as an executor under a Will but does not wish to take on the role, he or she can renounce Probate by filing the appropriate documents with the Supreme Court, providing they have not “intermeddled” in the estate. Intermeddling in the estate simply means any action taken by an executor which may be construed to indicate their acceptance of the office of executor. For example, an executor who has called in assets, or settled a claim on an estate, would be taken to have intermeddled in an estate.
DUTIES OF AN EXECUTOR AND REMOVAL
Ultimately the executor has a fiduciary obligation to the beneficiaries of the estate. Fiduciary simply means a relationship of trust. An executor must act in the best interests of the beneficiaries of an estate in discharging their duties.
Unfortunately sometimes executors don’t act appropriately and beneficiaries are required to seek their removal from office. Examples include where a beneficiary may consider that the executor is not administering the estate properly or expeditiously, or where a beneficiary may consider that the executor is acting in his or her own interests and placing those interests before those of the beneficiaries.
Proceedings for removal of an executor can be taken by any party who has a sufficient interest in the estate. The deliberation and intention of the testator (the Will-maker) in appointing a person as executor of their estate is an important consideration for the Court in considering any application to remove an executor from office. A Court will not lightly interfere with the decision of a testator to appoint a particular person as his or her executor. The Court must be satisfied that the actions (or inactions) of the executor are sufficiently grave to warrant their removal.
Examples of where an executor has been removed from office include where an executor has done nothing in the performance of their duties and misappropriated estate funds, or where an executor was of bad character, where the executor was suffering ill health, where an executor was of unsound mind, and where an executor was not competent to take probate. The Court has the authority to revoke the grant to an executor on the basis that he or she is not fit and proper to perform his or her executorial duties. In those circumstances sometimes the Court will appoint a professional (such as a lawyer or accountant) to act as the administrator of the estate to complete the estate administration.
Many of our clients are asked to act as executors. Sometimes significant emotional pressures can be applied by family members to act in this role. The acceptance of the role of an executor comes with significant burden and there is value in appointing a professional to act as executor in some circumstances. If you have been appointed as executor of an estate you should be aware of the role and what is expected of you. If you have been appointed as executor it is important you receive legal advice in relation to your rights and duties as soon as possible.
Our Wills & Estates department has experienced lawyers who practice exclusively in estate litigation. Please contact Department Manager, Amanda Heather on free call 1800 621 071 or direct line 07 5506 8245 or email firstname.lastname@example.org