The role of an executor is crucial, and a will-maker should give a great deal of consideration to whom they choose, writes Estate Litigation Senior Associate, April Kennedy.
When discussing a Will, the focus tends to be on who gets what or, more often, who has been left out. Most people tend to overlook the most important person – the Executor. The term ‘Executor’ is usually confused with ‘attorney’. An Executor is appointed in someone’s Will to administer the estate after they pass away whereas an attorney is appointed to act in that person’s place when they are alive.
The role of an executor is crucial, and a willmaker should give a great deal of consideration to whom they choose. An Executor essentially steps into that person’s shoes to act in their place after they pass away. It is important that, when choosing your Executor, you have a great deal of trust in that person to do the right thing and carry out your wishes because it is a complex and demanding role.
What are the Executor’s duties?
A Will-maker should give a great deal of consideration to whom they choose for this responsibility. An Executor essentially steps into that person’s shoes to act in their place after they pass away. It is important that, when making a decision, you have a great deal of trust in that person to do the right thing and carry out your wishes because it is a complex and demanding role.
Executor duties can take up a considerable amount of time. Usually, when we see an Executor for the first time, what we often hear is “I’ve never had to do this before and I don’t know what I need to do”. It can be quite daunting.
Executor duties include but are not limited to:
- Locating the Will;
- Arranging the funeral;
- Advising beneficiaries of their entitlement under the will;
- Identifying all assets and liabilities of the estate;
- Protecting the assets, and paying the liabilities;
- Applying to the Court for a grant of Probate or other grant of representation;
- Keeping accounting records and finalising the deceased’s taxation affairs;
- Distributing the assets of the estate to beneficiaries (keeping in mind statutory time periods to protect them from claims against third parties);
- If necessary, the executor might also have the difficult task of defending an estate in litigation (contest or challenge to the will).
What should you consider when choosing an individual for this role?
This will vary depending on your personality, beliefs, and values. It is important to remember that this role is often a thankless job. It is open to scrutiny by third parties and beneficiaries, and it carries quite a bit of personal liability and risk for certain actions. Some people consider it a compliment to appoint a child, relative or friend, failing to comprehend that it is a huge task for someone who may be grieving and distressed. Generally speaking, a person should consider the following personal attributes when choosing who to appoint:
- Personality – are they reliable? Do they act responsibly? Are they competent? You should consider their intellectual abilities, emotional resilience, integrity, honesty and trustworthiness;
- Geographical location – their location is important. We do not recommend choosing an executor who is located interstate or overseas as this may delay the administration of the estate and incur unnecessary costs. For example, obtaining a Grant of Probate is a court procedure, and court documents can only be signed by certain persons, and the original documents must be signed, returned and physically filed with the Court;
- Age – we recommend choosing someone who is over 18-years-old. It is also more practical to choose someone who is younger than you to safeguard against your Executor losing capacity or passing away before you.
How many executors should you appoint?
The laws in Queensland and New South Wales limit the number you can appoint to four persons at any one time (but we certainly don’t recommend appointing four in the first place!).
It is not unusual to appoint more than one executor. An Executor’s duties are burdensome so it can be helpful to appoint two people so they can support each other. However, sometimes the appointment of multiple people can cause issues, especially if there are underlying issues between those two people or if there is a conflict of interest.
We tend to see difficulties with blended families or second marriages where both husband and wife have adult children from a previous marriage. The will-maker wants to ensure equality and protect the interests of their children and their current spouse. With this in mind, they appoint their husband or wife alongside their child or children. This creates difficulties if the relationship is not tenable or a potential conflict of interest if the Will does not provide adequately for the spouse or the children (resulting in possible litigation).
We always recommend choosing a substitute, in case one of the primary Executors is not willing or not able to act, or if they predecease the Will-Maker.
What happens when the Executors cannot get along?
This is more common than most people realise. The will-maker should seriously consider whether their chosen executors can work together harmoniously. We have seen far too many estates reduced because the executors are at odds, and legal costs are incurred to deal with them.
A classic example of this where a surviving parent has three children. He or she wants to appoint all three children as executors (usually, to be fair and not play favourites). This is not advisable if the children cannot get along. In this situation, the surviving parent might have been the peacekeeper; when they are gone, family tensions tend to bubble to the surface because death and money can do strange things to people. We have seen instances where one sibling will purposely delay signing documents out of spite. On the other end of the spectrum, a sibling will rush the others to finalise the estate simply because they would like to receive their inheritance sooner rather than later, without any regard for the consequences or time limitations imposed on distributing assets in an estate.
If they cannot get along, and their actions are causing delay or unnecessary wastage of the estate assets, then the beneficiaries may have a cause of action against them. Most people do not realise that an executor can be held liable for delay or error, especially if there is a direct loss as a result of their actions.
What happens if a person that you have appointed as an Executor is unwilling or unable to fulfil their duty?
If an appointed Executor does not wish or is not able to act, then they can choose to step down (or renounce). In that case, the role will fall to the substitute. If there is no substitute named in the Will, then there are provisions in the Succession Acts that set out who can step into that role. Usually, a beneficiary of the Will can do this.
What problems can occur when carrying out this role?
An Executor’s duties can be complex and overwhelming, even in a simple or modest estate. A diligent individual in this role must have knowledge of the law and taxation and they should possess some business acumen – they are required to wear many hats. Usually, they are unsure of what is expected of them, and sometimes they do not receive correct advice as to how to properly discharge their duties
As mentioned, an executor can be held responsible for delays or mistakes, and they can be sued by beneficiaries or third parties. Recently, the ATO issued a ruling which places a considerable amount of liability on the executor with respect to the deceased’s taxation affairs.
In essence, they can be personally liable for any outstanding tax owed by the deceased i.e. they may have to pay the deceased’s unpaid tax and they can be sued for not adhering to proper taxation procedures! It is imperative for an executor to not only obtain legal advice but proper tax advice to ensure the deceased’s affairs are dealt with properly.
If a beneficiary or an eligible person contests or challenges the Will, then the Executor could become part of expensive and time-consuming litigation.
What happens if you don’t want to appoint your family members?
A Will-Maker is not required to choose a family member. An alternative choice may be a close friend or another distant relative. Otherwise, if your circumstances are complex or there is the possibility that your Will may be subject to litigation then we recommend appointing a professional executor ie. an accountant or a lawyer who has experience in Succession Law.
Is an Executor paid?
Many people don’t realise the role is considered gratuitous. However, the court may authorise the payment of commission to an executor for their services as it thinks fit. This is referred to as ‘Executor’s commission’. The Court awards commission on a case-by-case basis having regard to “the pains and trouble” incurred in the administration of the estate. It is not a right; it may not always be appropriate in the circumstances and it can be a costly process.
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Some law firms treat Estate Litigation as an add-on to their list of generalist services. Attwood Marshall Lawyers are different. We recognise the complexity of succession law and are highly reputed in the legal industry for our expertise in this multifaceted area of law. Our dedicated team of Estate Planning lawyers, who are supported by Estate Planning paralegals, practice exclusively in the areas of Elder law and Inheritance disputes. We’re not generalist lawyers and our clients are never ‘just a number’. Most importantly, we deliver excellent legal results. If you need a good lawyer, call us today: 1800 621 071.