The Role of the Executor
Here we outline some of the complexities of the role so that you can determine if who you have appointed is appropriate.
Overview
An executor is the title given to the person or entity named in the Will as being responsible for the administration of that person's estate, covering the handling of their assets.
The role of executor of a Will is one with a multitude of responsibilities and the handling of assorted assets and interested parties. The role of an executor can be complex, time-consuming and require experience in finance, business and law. These hefty requirements are exacerbated by the emotional heartache and legal implications which could come from failing to carry out the role properly.
Appointing an Executor
Many people appoint a friend or relative as their executor. Appointing an executor is an important personal responsibility that can be time consuming, challenging and requiring complex decisions. When appointing an executor, the appointer should ensure the chosen executor has the time and capability to carry out the required duties.
Often, it is advisable to avoid appointing someone who is a beneficiary and who therefore may have a conflict of interest. An executor can be more than one person or it can be a third party - for example, estate lawyer or state trustee. The executor is the person named in a Will as being responsible for the administration of the Will-maker's estate.
Who to appoint?
The Will-maker will need to apply considerable consideration to which person to choose for the role of executor of their entire estate. It is important to find someone you trust and know will take advice.
Administering an estate and managing finances can be quite complex and it's important that there are specialist advisers available if needs be. You want somebody who would take the same care as if the money was their own.
It is always prudent to hold discussions with them prior to their appointment to ensure that they're willing and aware of taking on the executor responsibilities.
Obtaining "probate"
Probate is the process of proving and registering in the Supreme Court the last Will of a deceased person. When a person dies, somebody has to deal with their estate.
It is usually the executor of their Will who administers the estate and handles the disposal of the assets and debts. In order to get authority to do this, they usually need to obtain a legal document called a "grant of probate".
Where the person has died without a Will (intestate), an application must be made to the court for "Letters of Administration" rather than a grant of probate. This application is usually made by the deceased's closest relative or personal legal representative.
Once granted, they become the estate administrator and fulfil the same role as that of executor and are responsible for administering the estate in accordance with the intestacy formula in the relevant Australian state or territory.
Fulfilment requirements
While it is entirely up to the potential executor if they wish to take on the role, once the process has started, it is a difficult one to withdraw from.
They have a window of opportunity to renounce before the grant of probate issues, but once they intermeddle with the estate it can be very difficult for them to step out of that role.
Other considerations
Separate areas of consideration for the executor include the following:
- They must be prepared for the tough challenges of the role
- They must be well versed in conflict resolution
- There are many legal obligations, including the risk of being sued.
An executor is unlikely to be held personally liable for any actions that the deceased took during the course of their natural life. However, once the Will-maker is gone and the executor has accepted the responsibility to administer their estate, from that point on the executor can be held personally liable for any actions that result in a loss to the estate and/or the beneficiaries.
The Executors Obligations
There are a series of differing obligations for executors, including:
- Obligations to the deceased person
- Obligations to the beneficiaries
- Obligations to the court
- Obligations to creditors of the deceased person.
Obligations to the deceased person
Once all the liabilities including taxes have been met, an executor must then distribute [the assets] according to the terms of the Will. The executor's obligations to the deceased are to get a grant in the first place which means making detailed enquiries, locating assets, insuring assets, seeing lawyers, completing forms and signing affidavits. "They also need to dispose of the deceased's body and that can be problematic if there are different views amongst the family whether somebody should be cremated or buried or where the remains should be placed.
Obligations to the beneficiaries
Executors must manage the requirements of those at the receiving end of the assets. It should be noted that before an executor is in a position to distribute any assets of the deceased, the property belongs to the executor once a grant of probate is made. Furthermore, because property and assets do not belong to a beneficiary before distribution, there generally are no avenues for a beneficiary to obtain property before the executor is in the position to dispense the assets.
An executor carries a fiduciary duty to always act in the best interest of the beneficiaries. Failure to act in the best interest of the beneficiaries can often lead to the executor becoming personally liable for any loss to the estate.
Obligations to the court
Executors commonly have three potential issues where they might, or will, have to deal with the courts. These are:
- Applying for probate
- A further explanation of the asset value
- A further explanation of the distribution of assets.
Along with the application for probate, the executor will need to "furnish" the Will and an affidavit to the courts listing all the assets and their approximate value to get probate.
There are two further issues which may arise that would require the executor's interaction with the courts.
If there are any claims against the estate, the courts might ask the executor to furnish further evidence regarding the assets and the beneficiaries of the estate. The other issue is if the beneficiaries of the estate are not happy with any of the actions of the executor, they may approach the courts and stop them [the executor] from maybe selling an asset or doing something that the beneficiaries think is not in the best interest of the estate. Again, in those circumstances the courts can call the executor to provide evidence and address whatever the issues might be.
Obligations to the creditors of the deceased person
The deceased may have outstanding obligations to creditors and the executors may have to:
- Notify the creditors of the death
- Put in a "Notice of Claim"
- Pay the debts of the deceased prior to distribution of the estate.
The law is very specific when it comes to the executor's obligations to the creditors of the deceased person. There is an order in which the money has to be dealt with, in particular where the estate is solvent. The executor is legally bound to pay the creditors prior to making any distributions from the estate. Failure to pay the creditors may result in executors becoming personally liable for the debt.
Notice of Claim
A Notice of Claim is a party issuing a notice to the executor saying that they have a claim on the estate. In most cases, the notice may be issued directly to the executor or to the courts.
What happens if someone lodges a notice of claim?
The lodgement of a claim precludes the executor from distributing the estate assets for at least 12 months from the date of death of the deceased, or until such period specified in the court orders.
Executor Payments
A person can be paid for taking on the role of executor, but if they are going to charge a fee, the Will needs to have a clause which specifically authorises the payment of those fees.
Applying to the court for a commission is a long drawn-out process and requires the consent of all the beneficiaries, so sometimes it may be preferable to speak to the Will-maker and ask whether they would consider leaving a gift of money to this person in lieu of an executor's commission.
Disputes and Conflicts
Dealing with such an emotionally charged process, where wealth is at stake, means the role of executor is rarely straightforward and can often be laden with disputes and conflicts.
The types of disputes that may occur include:
- Various conflicts of interest
- Disputes over fees and charges
- The beneficiaries being unhappy with the performance and decisions of the executor
- If one or more of the beneficiaries challenge the estate allocation of the deceased
- If there is more than one executor, disagreements between the executors.
Resolving the conflict
As it is the duty of the executor to administer the estate, it falls to them to resolve differences of opinion between the various parties. There is a legal framework that deals with disputes and often the parties involved will need to approach the courts for guidance. Example The courts may ask the executor to furnish affidavits and any other information that might be relevant
Traps For Executors
The types of traps that may catch executors out include the following:
- Pressure from beneficiaries if they deem the executor is acting too slowly
- If the deceased has made promises to interested parties
- If there has been a financial gift, interest is applied
- The law around the collection, maintenance and distribution of assets is strict
- The executor should ensure they have the appropriate insurances prepared.
Making a mistake
As the executor is responsible for distributing to the correct beneficiaries, they are liable should they make a mistake.
Professional help
An executor also has the option to work alongside other professionals such as solicitors, accountants or financial advisers when performing their role.
How can a solicitor help an executor?
A solicitor can:
- Inform the executor in detail about the rights and responsibilities of an executor
- Prepare and help the executor to complete the forms needed to apply for probate
- Assist the executor to identify and collect the deceased's assets
- Advise the executor on the possibility of tax liability
- Advise the executor about the legal order in which debts must be paid and the remaining assets distributed
- Explain the legal order of distribution of the estate in a case where there is no Will
- Assist the executor with any claims that may be made against the executor over administration of the estate
- Help the executor draw up a statement of assets for realisation and distribution to the beneficiaries.
How financial advisers can assist
With the many financial implications resulting from the potential sale and distribution of assets to name a few, advisers are well placed to provide assistance to executors through their role.
In Conclusion
The role of executor is a challenging one for several reasons, from the personal skills, the conflict management, to the many legal obligations. Serious consideration must be applied before agreeing to take on the role and once accepted, preparations need to be made well ahead of time. Executors must also give serious consideration to which other professionals they can engage with to ensure the process is fulfilled correctly.
If you require legal services and wish to establish a family will please call our In House Solicitor, Sarah Hatch on (02) 9411-4161 or email sarah@taurusfinancial.com.au
Securitor Financial Group Limited is not responsible for advice provided by Solicitor Sarah Hatch of Hatch & Associates Pty Ltd.