An important part of making a Will is deciding who should act as the executor of your estate.
An executor acts as your representative and will make sure that your wishes, as detailed in your Will, are followed.
The job of an executor initially appears quite straightforward and in simple Wills, with few assets and beneficiaries, it can be. When an estate is larger, contains a variety of assets, liabilities and a number of beneficiaries the job becomes more complex. In these situations, it’s important to choose an executor who is equipped and prepared for the challenges they will face.
When someone dies without a Will, their assets will be distributed to beneficiaries according to a specific legislative formula that varies depending upon which state you live in. In cases where you have no beneficiaries to your estate your assets will be given to the state government.
What does an executor do?
An executor’s responsibilities are broad but some of the major duties include:
- preserving, protecting and identifying all estate assets including business interests, property and investments
- paying all debts and liabilities, finalising income taxation affairs and lodging estate trust tax returns until the estate is finalised
- estate administration, which involves detailing all receipts and payments made to or by the estate until it is finalised
- ensuring that beneficiaries receive what they are entitled to under the terms of the Will.
What are the risks of getting it wrong?
The major risk is that the executor makes an error in the administration of the estate and exposes the estate to a loss. An error can also cause a delay in how quickly beneficiaries receive their inheritance or bequest. The damage that can be caused by an error can be severe and, considering many non-professional executors have no experience, the chances of an error occurring are higher than would be the case if a professional executor was appointed.
Pain and troubles
This phrase sums up the burden that is sometimes faced by an executor. A court will generally allow an executor to be paid an executor fee when a Will didn’t make any provision for this. The court describes this payment as being for the ‘pain and troubles’ faced by the executor in undertaking that role.
Liability is extensive
An executor is personally liable if it can be shown that they were negligent in carrying out their duties and a financial loss to the estate was incurred. In taking on the role of executor this risk must be considered before being appointed. In situations where there
is family conflict it might be a wise choice for a family member to decline an appointment in the first place.
Once a court has granted probate, if the executor wishes to resign from their position they have to ask a court for probate to be revoked. This is not straightforward and the court will need a good reason for them to do it – simply finding the role too difficult will not be considered an adequate reason.
Who should you choose?
Deciding on who to choose depends on a combination of the complexity of the estate, family circumstances, potential family conflicts in acting as executor, the ability to act impartially in the interests of all beneficiaries and the ability to act in a timely manner. A modest estate with a limited variety of assets, basic tax affairs and a small number of beneficiaries could be handled by a person of average ability, who takes appropriate professional advice where necessary. For a larger estate with more complex affairs, it makes sense to appoint an experienced professional executor. Selecting a professional as your executor rather than someone without the required skills helps to minimise the risks your estate could face.
To find out more about how to choose the right executor, contact our friendly Financial Planning team in Gatton today on 5462 2277.