The executor of your Will is a very important position and choosing the right person or people can make the difference between the administration of your estate being a smooth and simple process as opposed to being a very unpleasant family experience that ends up being costly, time-consuming and results in the breakdown of family units. Attwood Marshall Lawyers Wills and Estates Lawyer, Natalie Comerford, explains the role of an executor and what you need to consider when selecting someone for this role.
Introduction
Mortality is a complex and sensitive topic to think about and it is no easy task having a conversation with our loved ones about our wishes for after we are no longer here. It is however a very necessary conversation that we need to have and to be educated about so that when the time comes for you to say goodbye, your family and friends are not left with a bureaucratic mess to have to work their way through.
There is a lot to think about including what is going to happen to your body after you pass away, who is going to inherit the assets that you have accumulated throughout your life, what is going to happen to your pets or who will look after your dependent children and these questions is just the tip of the iceberg. One of the major decisions that you will be faced with is choosing the right person or people to represent you and ideally step into your shoes to carry out your end of life wishes and ensure that the bureaucratic procedures that are required are dealt with are done so in a timely and effective manner. Whomever you appoint should be someone you know and trust and whom you feel confident will affect your wishes as outlined in your Will. Some people may have family members that would suit the job and have the skills required to make their way through the administration minefield, others choose Solicitors so as not to burden family members with the difficult task.
What is an executor?
An Executor of an estate is a legal appointment made within a Will that appoints a person or people to act on your behalf to manage and finalise your affairs and carry out your wishes after you pass away. Unfortunately administering an estate is rarely straightforward and involves a skill set that not everyone has so the person or people who are appointed needs to be given careful consideration.
There are many undertakings to perform including looking after investments, dealing with taxation matters and making hard financial decisions. From a personal viewpoint, the executor needs to be able to communicate effectively with all beneficiaries which sometimes involves wearing a mediator’s hat, managing the emotions of people in a gentle yet firm manner and if required having the backbone to stand up to protect the deceased’s wishes. Choosing the right person for the job is paramount to ensure a smooth and timely administration process.
Requirements to be an executor
First and foremost, the person or people that you appoint must be 18 years old or older. In addition, the person needs to be mentally capable of fulfilling the duty and preferably not be bankrupt although a court may consider an executor if they are bankrupt if they disclose it to the court.
Family members that suit the role, are trustworthy and have the diplomacy skills can be a good choice and the more organised they are the better because it can become a bit of a juggling act at times.
Although we do not have a crystal ball, it would help to consider whether there is any likelihood of conflict or disputes arising concerning your estate after you die. If a disagreement does arise, your executor will play a significant role in managing the dispute, including representing your estate in court if necessary. Mainly, you should not appoint an executor who you think might dispute your Will, as they will be in a position of conflict.
You can also choose a professional person to be your executor if you would prefer someone take on this role who is independent of your family and loved ones, such as your lawyer or accountant. People often select this option where they have no trusted family member or friend whom they can appoint, if their estate is complex, or if they believe there is a high likelihood of a dispute arising over their estate after they die.
How many executors do you need?
It is critical to nominate one or more backup executors in your Will. You may designate up to four executors to distribute your estate in conjunction. However, the more executors you appoint, the higher the scope for disagreement. Not to mention, the higher the cost and more time that will be involved in administering your estate. Typically, we encourage clients to appoint a maximum of two executors but with the option of appointing “back-ups” to the primary executors.
Executor duties
Initially, an executor must locate the Will to carry out any wishes regarding the deceased’s funeral. The executor may need to release funds from the deceased’s bank account to pay for the funeral. Another critical task is to inventory all liabilities and assets of the estate and ensure the assets are secure, insured, and protected from theft, damage, and any form of deterioration whilst the administration process is taking place.
There is potential for family disputes to arise during this time, and it may be prudent for the executor to change the locks on the family home and store valuable items like jewellery in a safety deposit box. The executor must also assess the immediate needs of the beneficiaries to ensure they do not suffer any unnecessary financial hardship. Finally, the executor must obtain probate of the Will by applying to the Supreme Court to be granted authority to administer the estate.
Some of the other essential duties of an executor include:
- To determine who the beneficiaries are. Should the Will bequeath assets to non-specified people, such as ‘my children’, the executor must determine the persons being referred to. This may not be an easy process if there is a blended family, a family rift, estranged children, or if certain family members are living overseas.
- Before an estate can be distributed, the executor must lodge a tax return on behalf of the deceased for the current financial year and previous years if the deceased failed to lodge a return to obtain a clearance from the Australian Tax Office.
- In most states and territories, the executor must provide notice of death to potential claimants against the estate, most often creditors and beneficiaries. This can be satisfied by placing advertisements in newspapers and government gazettes. If a claim is received, the executor must decide whether to pay it or defend it.
- Value the estate – the executor must obtain valuations on all estate assets from licensed valuers or estimates from recognised sources.
- Distribute the estate – once all debts have been settled and specific gifts handed on, the executor may distribute the remaining assets according to the directions laid out in the Will.
- Proceed with funeral arrangements.
- Apply to the Court for a grant of probate if necessary.
- Represent any legal proceedings on behalf of the estate.
- Manage the inheritance of beneficiaries who are under 18 if they are appointed to do so.
The estate itself represents a separate taxpaying entity. Accordingly, the executor must apply for the tax file number and lodge a tax return every year the estate receives income, including capital gains on the estates’ assets sold. Notably, the executor has several strategies to utilise to minimise capital gains tax, including selling assets over two financial years, distributing assets in species, and maximising valuations at the time of death. These strategies can significantly affect the estate’s value that is eventually distributed to the beneficiaries.
Downsides of being an executor
While it can be an honour to be appointed as someone’s executor, the appointee may not have the time, expertise, or inclination to conduct the duties required. In addition, many people who are nominated as executors of a Will do not know what is required. For this reason, some people appoint a lawyer or a trustee company to act as executor, or they suggest to the executor that they ask a trustee company to assist them in their executorial duties.
The role can be emotionally draining, particular dealing with family disputes, legal claims on the estate or overly demanding beneficiaries. As many executors are known to the beneficiaries, or even related to the beneficiaries, this can put the executor in a difficult position when making decisions that need to be in the best interest of all beneficiaries and whilst trying to fulfil the wishes of the deceased
If the executor makes an error in administering the estate, they can be held liable for the financial loss. Also, an executor may be personally liable for any outstanding tax owed by the deceased, i.e. they may have to pay the deceased’s unpaid tax and sue them for not adhering to proper taxation procedures! Therefore, it is imperative that an executor obtain legal advice as well as proper tax advice to ensure the deceased’s affairs are dealt with appropriately and that they successfully fulfil their duties.
How to mitigate personal liability when acting as an executor
An executor must ensure all tasks are completed in an appropriate timeframe. One of the main reasons why executors end up in the crosshairs of beneficiaries is when they cause undue delay to the administration process.
As an executor, you must do everything feasible to protect the estate assets from damage or theft. For example, if the deceased owned a business, take immediate action to maintain the business activities. The executor should ensure they facilitate the sale or winding up of the business – if stated in the Will – as soon as practicable. Ensure all taxes are paid before distributing the estate. If taxes are still to be paid post distribution, the executor has no legal right to ask the beneficiaries to pay them. The executor will be personally liable.
Section 44 of the Succession Act 1981 (Qld) states some legal protections for executors distributing the estate.
For example, a person cannot take action against an executor for distributing part of the estate if that distribution was adequately made to maintain and support the deceased’s spouse, child, or dependent. This is applicable even if the person notified the executor of their intention to bring an application against the estate.
An executor is also protected against claims relating to the distribution of the estate if:
- The distribution was made correctly (i.e. it is correct according to the Will); and
- The executor made it at least six months after the deceased’s death, and no notice of an application or intended application against the estate was received; or
- If received notice of an application was at least nine months after the deceased’s death unless the executor received written notice that the application had commenced in Court.
What happens when no executor is appointed?
If someone dies and does not have a Will (dies intestate) in place or the executors nominated in the Will are unable or do not wish to carry out the role, other people interested in the estate’s administration can make an application to the Court for ‘letters of administration’. If there is not another suitable person to appoint as executor or administrator, the Court may decide to appoint the Public Trustee of Queensland as the ‘administrator’. In this situation, you risk leaving a lot of stress and heartache behind for your family to deal with, and the hard-earned assets you have acquired throughout your life may not go to those you expect them to.
Frequently asked questions regarding executors
Can an executor also be a beneficiary?
An executor of a Will is permitted to be a beneficiary of that Will. Often, spouses appoint one another as their sole executor and beneficiary.
However, circumstances may arise, making it best not to appoint an executor who is also a beneficiary. For example, where there is the potential for disagreement between family members regarding the administration of your Will, it may be best to appoint someone independent to avoid possible conflict between executors and beneficiaries. Speaking about your family situation and estate with an experienced estate planning lawyer will help you pinpoint the best person for the role to suit your circumstances.
Does an executor receive payment?
Executors are generally only paid a commission if it is specified as such in the Will. Executors are entitled to apply to the Supreme Court for payment, however, the Court generally does not grant payment if the executor is also a beneficiary under the Will.
Most lawyers will charge for professional services to administer a Will and include the amount charged under a ‘charging clause’. The charges relate to work undertaken as an executor that requires professional skill. This is also the case if The Public Trustee is appointed administrator of an estate and performs these duties, although many people are unaware that The Public Trustee do charge exorbitant fees for this service which often are well above what a lawyer would charge to do the same job.
Is the executor responsible for any minor children?
If a beneficiary is a minor or under the contingency age (meaning they are under the age in which they are entitled to receive their inheritance, which is generally set at 18, 21, or 25 years of age). In that case, the executor must hold those funds or assets on behalf of the minor beneficiary until the age they are to receive their inheritance.
The executor has additional obligations to minor beneficiaries, particularly in maximising the beneficiaries’ entitlements. The executor may also have obligations to release the funds to the minor’s guardian for their maintenance, education, and life support. Therefore, it may be advisable for an executor to obtain financial advice from a suitable person before investing the trust funds to ensure the beneficiary’s best interests are protected.
Due to these stringent responsibilities and personal risk a person exposes themselves to as an executor, executors have the right to apply to the Court for a commission. The estate assets pay the commission for the executor’s “pains and troubles” in administrating the estate.
Can an overseas relative be an executor?
Firstly, there are pragmatic issues to consider, particularly during the Covid-19 pandemic, which has resulted in significant restrictions on overseas travel. It can be arduous enough to act as an executor of an estate when you are based locally on the deceased, and it is important to understand that additional burdens could arise if your chosen executor is based internationally.
At a minimum, time differences can pose complications for an executor overseas to execute your wishes for funeral arrangements and finalise all your personal, legal, and financial affairs.
In addition, there may be logistical difficulties with opening bank accounts and filing your tax returns in a foreign system. There is also the possibility of challenges arising from using different terminology or different languages in dealing with the sale of real estate.
Another essential fact many are unaware of is that if an executor of an estate is not an Australian resident the estate may become subject to taxes that would not ordinarily apply.
These taxes include:
- Foreign resident capital gains tax, withholding on property sales
- Privation of the 50 per cent capital gains tax discount
- Exposure to higher rates of tax
- Privation of the tax-free threshold and the marginal individual tax rates apply to deceased estates
Removal of an executor
The choice of an executor is not necessarily intransigent. Circumstances change and what may have been a suitable appointment in the past may no longer be. Therefore, Will-makers should review their estate plan at least every three to five years to consider whether they remain appropriate. While you retain the capacity to do so, you are free to update your choice of executor at any time and this is usually also an inexpensive process.
There are a number of reasons to remove an executor of a Will. However, the Court will only do so if it can be sufficiently established or demonstrated that the executor is unable to perform the necessary duties and demands and is not suitable for the role or has become disqualified since appointment.
An executor’s predominant duty is to administer the deceased’s estate honourably and with integrity. The Court will generally consider the following circumstances as a reason to remove an executor:
- A failure to account
- Unwarranted delays in the administration of the estate
- A lack of mental capacity
- Failure to converse with the beneficiaries
- A conflict of interest that tarnishes the administration of the estate
The Supreme Court of Queensland can permit an executor to voluntarily renounce their position or order the withdrawal of an executor when it is in the best interest of the estate and the beneficiaries.
Attwood Marshall Lawyers can help you plan, protect, and preserve your wishes.
Our experienced estate planning lawyers take great pride in helping people plan for the future and document their testamentary wishes to ensure these can be fulfilled after they are gone.
Our team understand what needs to be considered when appointing an executor to ensure that you make a choice you are confident in and that your executor will be suited to the role.
With a dedicated estate administration team, we are well-versed at assisting executors with their duties and ensuring estates are administered quickly and effectively, to protect the interests of the estate’s beneficiaries and honour the deceased.
If you haven’t updated your Will in quite some time, the new year could be an excellent opportunity to review these integral legal documents. You can have your estate planning documents drafted at any of our conveniently located offices at Robina Town Centre, Coolangatta, Kingscliff, Brisbane, Sydney, or Melbourne.
Please book an appointment with our friendly team online, or alternatively you can contact our Wills and Estates Department Manager, Donna Tolley, on direct line 07 5506 8241, mobile 0423 772 555 or email dtolley@attwoodmarshall.com.au
Read more:
Executor’s Commission – Being an Executor of an estate can be a stressful and time consuming role, but you can be compensated for your ‘pains and troubles’
Executors behaving badly – how should an Executor conduct themselves
The issue of testamentary capacity when making your Will
How to defend a claim against an estate when you are appointed Executor in a Will
