Attwood Marshall Lawyers Wills & Estates Senior Associate Debbie Sage joins Robyn Hyland on Radio 4CRB to talk about the issues that can arise if someone chooses to appoint an executor who lives outside of Australia to manage their estate affairs after they die.
The role of an executor
An executor’s role is not an easy one – it can be time consuming, and it can be complex depending on the circumstances and complexity of the estate.
When someone executes a Will and appoints an executor, they are granting that person the responsibility and permission to carry out their wishes as stated in the Will and complete the administration of the estate.
Some of the main duties an executor looks after are:
- Locating the original Will
- Arranging the collection and disposal of the deceased’s body, which includes working with next-of-kin, funeral directors and providing relevant information to complete the Death Certificate
- Securing and protecting the assets of the deceased
- Finding and notifying beneficiaries named in the Will
- Notifying family members, government departments, banks, service providers and other relevant entities of the death
- Obtaining a grant of probate or letters of administration from the Supreme Court, if required
- Calling in the assets of the estate and making sure debts and taxes are paid prior to distribution of the estate
- Defending any litigation or claims made against the estate
Being an executor can be an onerous job for anyone who steps in to take on this role. However, for those living overseas taking on such duties, it can make a difficult job almost impossible to fulfil.
Overseas executors are likely to be unfamiliar with Australia’s systems and government entities. There may also be language barriers and time differences to work through, which can make it more difficult for the executor to fulfil their obligations.
If the executor is located outside of Australia, the Supreme Court can refuse to issue a grant of probate or letters of administration, especially if they are not legally represented or do not have an address for service within their jurisdiction. There are provisions for an overseas executor to be able to appoint an attorney under a Power of Attorney who would then be able to act on their behalf to proceed with applying for a grant of probate or letters of administration. It is important to note that the NSW Supreme Court has the power to pass over an executor or administrator of an estate if it believes an alternative executor is required.
When appointing an executor, you must consider if the person is up to the task. Not everyone has family or friends who live locally that they would entrust this role to, so if your next of kin or loved ones live overseas and you were considering appointing them to be executor in your Will, it might be time to seek legal advice from an experienced estate planning lawyer to discuss alternative options that may be more suitable.
Consequences to consider when appointing a foreign executor
There is nothing stopping anyone from appointing a non-resident of Australia as their executor in their Will if that is what they wish to do. However, it’s important to understand the issues that may arise in such circumstances and to make an informed decision when executing your Will.
Some of the primary issues to consider are:
1. Tax disadvantages. If your chosen executor is considered a non-resident of Australia for tax purposes, then this means that the estate will be subject to the same rules and tax rates of a foreign resident, for example:
a) The estate may not be able to access the income tax free threshold
b) The estate may not be able to obtain franking credit refunds
c) The estate may not be able to obtain the 50% capital gains tax discount on your assets
d) The estate will also attract higher tax rates for the estate if there is income to declare.
2. Impracticality. The practical issues that must be considered when an executor lives overseas and must administer an estate in Australia, such as:
a) Distance – it may be difficult and costly for the executor to travel if needed
b) The inconvenience of time differences
c) Logistical issues if the executor is unfamiliar with Australia’s systems, particularly dealing with banks and government organisations
d) Language barriers – understanding, or misunderstanding, different terminology can cause delay and confusion along the way.
e) Securing and protecting assets – If the estate has chattels and a car, or valuable items in the home, it can be very difficult to secure and protect these assets if the executor lives overseas.
Alternative options – appoint an independent professional as executor or attorney
There are steps people can take if they are certain they want a foreign resident to be the executor of their estate. However, it does involve very careful consideration of the specific circumstances. Anyone considering this should obtain legal advice from an experienced estate planning lawyer in conjunction with accounting advice to ensure they plan for any adverse tax consequences.
Alternatively, there are great benefits in appointing a professional independent executor, such as a lawyer or a licensed trustee company, to take on the role and to avoid any delays or issues arising throughout the estate administration process.
Professionals have a comprehensive understanding of the processes to follow and steps to take to ensure the administration of the estate is completed in the most efficient and timely manner. They also have the experience and skills to defend any litigation that arises, which can be extremely stressful and overwhelming for executors who have had no prior experience facing these types of disputes.
Being supported by a professional can help the loved ones left behind who are already mourning and dealing with the loss of their family member or friend and share some of the burden that comes with winding up the estate’s affairs.
Attwood Marshall Lawyers regularly act as Executor in estates and are often appointed by clients who do not have family members to fill the role or wish to appoint someone independent if they believe their children or family members would be unable to carry out the role without conflict.
Foreign executors also have the option of appointing a lawyer as their attorney specifically for the purpose of obtaining a grant of probate and administering the estate. We also have experience carrying out this role, having assisted many foreign based executors over the years.
Foreign beneficiaries – what to consider when leaving a gift to someone who is not an Australian resident
It is not uncommon for people to leave gifts in their Will to family members or friends who do not live in Australia.
When doing so, the Will-maker and their chosen executor need to be aware that if a beneficiary of an estate is a non-resident of Australia for tax purposes, then an estate tax return must be lodged for the estate regardless of the income tax free threshold that may apply.
This is an extremely important duty to note for executors, as many executors that opt to proceed to administer an estate without seeking advice or engaging an experienced Wills and Estates lawyer can easily miss this requirement and in turn take on personal liability as a result.
In 2018, the ATO released a Practical Compliance Guideline which stated that a legal personal representative, or executor, may be personally liable to pay any outstanding tax-related liabilities of a deceased person up to the value of the deceased’s assets that come into the hands of the executor or administrator.
This means the executor may have to meet those liabilities personally if they distribute estate assets and fail to properly discharge the estate’s tax obligations where required.
When preparing your Will, if you are considering including foreign executors or beneficiaries, then financial and legal issues should be considered right from the start as part of the estate planning process.
There are different strategies that can work in these circumstances and planning properly from the get-go will help ensure that after you pass away, the estate administration process can proceed smoothly without delays or financial consequences, and who you want to benefit from your estate ultimately will.
Attwood Marshall Lawyers – Leading Wills & Estates Law Firm
Attwood Marshall Lawyers have one of the largest and most experienced Wills and Estates departments in Australia, with dedicated teams who practice exclusively in estate planning, estate administration, and estate litigation.
Our team can provide expert advice during the estate planning process to tackle any issues head on if a Will-maker intends to leave assets to foreign beneficiaries or appoint a foreign executor.
We can support executors in their role and help them navigate the many obstacles that can arise during the administration process.
Estate administration can be extremely complex, and in many cases the family who are trying to assist with wrapping up the deceased’s estate have more than enough to focus on with grieving the loss of a loved one. We can help carry the burden and deal with the paperwork and relevant organisations to ensure the estate is administered as quickly and efficiently as possible.
To discuss our estate planning and estate administration services, please contact our Wills and Estates Department Manager Donna Tolley on direct line 07 5506 8241, email email@example.com or book an appointment instantly using our online booking app.