Law Talks Episode: Why choosing the right executor and attorney matters

Robyn: Good morning and welcome to law talks here on 4CRB. Well, today we’re talking about one of the most important and often misunderstood parts of estate planning; choosing your executors and attorneys.

Joining us today from Attwood Marshall Lawyers, Legal Practice Director Jeff Garrett is here to walk us through the legal duties of executors and enduring power of attorneys and the real-life consequences of choosing poorly. Thanks for being here, Jeff.

Jeff: Thank you, Robyn. Pleasure.

Robyn: Jeff, there are two key documents that form part of estate planning, a will and an enduring power of attorney. When it comes to wills, what exactly does an executor do?

Jeff: Yes, the executor has the most important job of administering an estate.

When you die, your executor or executors step into your shoes legally and act on your behalf in accordance with the provisions of your will. And it’s up to them to properly administer the estate. First up though, they have control of your body and your funeral and how your funeral service will be. So, they need to step in and attend to that first up and then, you know, once the death certificate issues they usually obtain a grant of probate for the will, assuming that you do have a will. And once that grant of probate is issued, that gives them the legal authority to then call in the assets of the deceased and distribute them to the beneficiaries in accordance with the will.

Robyn: And for an enduring power of attorney, what powers does the attorney actually have?

Jeff: Well, that depends on the terms and conditions of the power of attorney that’s done. Usually, people will have what’s called an enduring power of attorney. And that just means that it continues to operate even though you may lose capacity to make your own decisions. That’s an enduring power of attorney. So, the attorney in most cases, steps into the shoes of the person who’s given the power of attorney legally to make decisions for them. And sometimes it’s an immediate appointment. So as soon as that document is signed, you can go and sign for someone. Other times it could be, for instance, not until that person loses their legal capacity or their mental capacity. So, if someone gets dementia and can no longer make their own decisions, et cetera, you step in then.

But most couples appoint each other as their attorney and it’s immediate. So, if someone’s got two broken arms and can’t physically sign something, if you’ve got a power of attorney in place, then your attorney can sign for you.

Robyn: And can you nominate the same person to be your executor in your will and your attorney in your power of attorney?

Jeff: Yes, and most people do. So again, back to the husband-and-wife situation, they will normally appoint each other as both the executor in their will and their attorney.

Robyn: So Jeff, that leads me to my next question, why is it so important to choose the right people for these roles? People tend to, as you just said, appoint each other, but they may not necessarily be the best candidate for the job.

Jeff: No, and that often happens. People separate. People have unusual relationships and may not trust one another to do the right thing. Your partner or spouse may not be that responsible in relation to managing money or those sorts of things.

It just depends. And that obviously extends to single parents who have adult children. Normally they would appoint you know one, or all of their adult children to step in if something happens to them, whether it be as executor in the will when they die or as their attorney if they lost capacity.

But again, a lot of parents don’t trust their adult children. And some of the children might be okay, but others aren’t. Some children don’t get on, and fight like dogs and cats and have done since they were young. And some of the children have issues with being responsible and managing money and their lives generally. Whichever way you look at it, whether it’s an executor administering an estate, or being an attorney while someone’s still alive, but they’ve lost capacity, it’s a very onerous responsibility to take on.

You’re pretty much stepping into their shoes legally and taking over all of their decision making and doing everything for them, and I mean everything. People have busy lives.

Robyn: Or they often live away.

Jeff: Well, people have trouble running their own lives, let alone imagine if a friend has appointed you as their attorney and they lose capacity, you’ve got to step in and look after everything. If they’ve got a house and pets and accounts. They might have a business, self-managed Super Fund, company or a trust or something like that. It potentially can be a nightmare.

Robyn: What can go wrong, Jeff, if you do appoint someone who just isn’t up to the job?

Jeff: Well, in the case of an attorney, it can be an absolute disaster because as I said, they step into your shoes, they can sign anything and do anything that you could do legally. So, they can walk into your bank and withdraw all of your bank account the day after they’re appointed. They can sell your house. They can mortgage your house and take out loans. And this has all happened. This has all happened with attorneys who’ve gone rogue. So, the answer is sometimes you should appoint more than one so they can keep an eye on each other. But we’ve had cases where siblings have rorted their poor old parent. They’ve been in cahoots and fleeced Mum or Dad’s estate before they’ve even died and spent it on gambling or you know, their own expenses and things. Terrible.

The same can happen if they’re an executor, because you’ve died. So, executors have control of the assets and the estate. We’ve had situations where family members have stepped into that role and pretty much rorted the assets that have been in the estate and their siblings who are entitled to a share. Don’t see any of it.

Robyn: Wow. Jeff, can you give us give us an example if say someone didn’t have any family or friends that they believed were suitable, can you explain how appointing a professional as an executor or an attorney works?

Jeff: Look, there’s people who have appointed their lawyer or their accountant, or even their financial planner, they’re professionals, and they know what they’re doing. If you know a firm like ours, we’ve been doing this for as long as I can remember. And you know, when you are acting in an executor role or even in an attorney role, whether you’re a co-executor or a co-attorney, or single, you know, professionals have insurance. So, if they do make off with the trust account, it’s covered by insurance. That doesn’t happen too often. There are rogue solicitors as well and rogue accountants, but it’s usually covered by the insurance.

But probably the best way is to appoint a family member and a professional, or you could have two professionals, you might have the accountant and the lawyer. It’s pretty unlikely that the two of them are going to raid the trust account or take the money, and most lawyers don’t do that. You know, I’ve lost count of how many matters we’ve administered here in the capacity of the executor, even as attorney, and you know, no one’s going to go and risk their reputation or their practising certificate. And they always get caught. It’s the first file that the Law Society auditors look at when they audit the trust account and things like that.

But the best thing is that you’ve got someone there who’s reputable, who’s going to do the right thing, but they can also keep all the family members under some form of control and give them the right advice in relation to what needs to be done with either looking after someone’s affairs as attorney or executor in an estate. It’s done properly.

And it’s so complicated these days. As I said before, it’s a very onerous responsibility on anyone to go and do this. Depending on the complexity of the estate and what they have going on, you know the tax issues and dealing with beneficiaries and claims brought against the estate, it can be a nightmare.

Robyn: Yeah. And Jeff, what about appointing a public trustee as executor or as an attorney?

Jeff: Well, the public trustee, they love doing it because they get control of the estate.

Robyn: Is there ongoing fees associated with that?

Jeff: Absolutely. And you know don’t get me wrong, there’s fees with lawyers who act in administering estates. So normally whoever’s executor takes the will to the lawyers and the lawyers usually already have the will and they get the lawyers to administer the estate, obtain the probate, etcetera.

It just depends on what the lawyer charges. Usually, they’ll do that as per their hourly rates. And you get charged for whatever the work is. And if it’s a big estate and it’s complicated, then you get charged however long it takes.

The difference with the public trustee, and this is across the board, they have a lot of ways of charging, but a big component of it is a percentage of the value of the assets under management.

So that goes on how much they’re worth. It’s got nothing to do with the actual work that’s being done. So, you know, we’ve had countless examples of where the public trustee is the executor charging outrageous amounts of money just because there’s a lot of assets in the estate. The work that they’ve done, it just doesn’t correlate with the percentages that they’re charging.

Because everyone thinks, oh, it’s going to go to lawyers, lawyers do it, you know, they’re going to charge much more. The public trustee, they have their own charges that they charge the estate, but then they have an in-house lawyer section as well that does the legal work and charges, so you know it’s a bit ridiculous and that that’s all been investigated and reported on and, there’s plenty of information out there about the trouble that they got into about how they were doing those things.

So, appointing a professional lawyer, accountant, financial planner, and sometimes two of them together or whatever, it costs you, but you will only pay for the work that they do. You don’t pay percentages.

Robyn: And Jeff, if a will includes a trust, what extra responsibilities does the trustee have?

Jeff: Yeah. Well, look again, most people appoint the executors. They’re also the trustees of any trusts that are created. Now, that can be an ongoing issue that creates ongoing fees to administer the trust as it goes along.

But again, it depends on what it is, and let’s say it’s for a child to mature when they reach 21 or 25 or something like that. Let’s say you’ve got $1,000,000 to put into a trust for that child. Again, if a lawyer is a co-trustee, they will usually be there with a family member. It’s pretty much set up; the advice is obtained and what is the best way to invest that money is. Not set and forget, but you would review that probably annually depending on how long it is and how old the child is, etcetera.

So again, the fees are kept to a relative minimum because the lawyer’s only charging for the time that they spend on assisting the family member in the administration of the trust.

Robyn: All right. And to finish up today, Jeff, what’s one piece of advice you’d give someone who’s about to either update their will or enduring power of attorney or potentially completing their estate plan for the first time?

Jeff: Go and see lawyers who specialise in estate planning, please, because appointing the executors, although it’s one of the most important things to do when you’re making your will or carrying out your estate plan, there are plenty of others, and it goes hand in hand with properly drafting a will and making sure that it suits your family and your circumstances. Don’t get a do it yourself will, don’t get an online will, don’t go to a free will for the public trust office. Go and see a lawyer who is experienced in estate planning.

Robyn: Well, that wraps up today’s episode of law talks. Jeff, thanks for helping us understand the roles of executors and attorneys and why who you choose matters just as much as what you actually put in your will.

Jeff: My pleasure, Robyn. Thank you.

Robyn: You’ve been listening to law talks here on 4CRB, which you can hear every Friday morning from 9 o’clock. And if you missed any part of today’s show or you think it might be helpful for a friend or family member, it will be available on our website 4crb.com.