An executor is responsible for the administration of an estate upon the death of a person. The executor/s are bound to gather in the estate, which means that the assets owned by the deceased person must be placed in the legal name of the estate.
As part of the administration of the estate, it may be necessary to sell assets so that all debts and estate expenses may be paid. In some cases, it is very unhelpful for assets to be sold as part of the administration of the estate and it may be more helpful for them to be kept intact and appropriated to beneficiaries as part of their inheritance.
Many people don’t know that failure to administer the estate appropriately may result in the executor being personally liable for their oversights.
[Tweet “Did you know that executors can be held personally liable for any mistakes?”]
What if the executor of an estate doesn’t like the beneficiary?
An entire estate plan can be unravelled because an executor doesn’t like the beneficiary and doesn’t behave in a professional way.
Thomas and Anna were married and had one child, Tara, who was diagnosed with Asperger’s syndrome. They divorced while Tara was still a child, and Anna assumed the day-to-day care of Tara. Thomas and Anna became estranged and did not maintain any kind of relationship over time.
Thomas died when Tara was 18, and he had appointed his only living relative as his executor: his brother Garry. In his estate plan, Thomas wanted to ensure that Tara would be taken care of and set up a testamentary discretionary trust under which Tara was a beneficiary. Garry was the sole trustee of the trust and executor of the estate.
The estate took a long time to wind up and more than nine months passed. Garry and Tara had a volatile relationship, and during one particular argument, Garry told his niece: “I’m going to make sure you don’t receive anything from the trust!”
Because Garry was the sole trustee of the trust, he could very well have acted on his threat to ensure that Tara didn’t receive anything from the trust. Furthermore, because Tara had no control over the trust or its activity, she could have ended up with nothing from her father’s estate. Nor was she the sole beneficiary of the trust, which meant that others could potentially receive benefit from the trust.
Alarmed, Tara sought legal advice. She launched a family provision claim, arguing that the trust was set up with the intention of providing for her care, and despite this, her uncle could ensure she received nothing.
The court viewed the claim as a zero-percentage provision from Thomas’s will and her claim was successful, even though her claim had been brought outside of the required time frame of nine months.
It’s important to note that Tara wouldn’t have sought advice if her uncle hadn’t threatened to cut her out of the trust benefits. He could have reduced or cut her out of the trust at any time during the years following.
[Tweet “Who you pick as the executor of your estate is a crucial decision.”]
The moral of this story is to ensure that you have picked executors who are able to put aside personal differences in order to administer the estate properly. Thomas thought he had done everything he could to take care of Tara, setting up a testamentary discretionary trust for her benefit. But his plan fell down in the choice of executor. To avoid this, Thomas could have chosen a trustee company or a professional person to administer his estate.
When having a conversation about choosing an executor, remember:
- People who don’t have financial skills now won’t suddenly acquire them upon your death
- People who don’t like your potential beneficiaries won’t suddenly like them upon your death
- People who refuse to seek professional advice are unlikely to suddenly seek it upon your death
An unprofessional executor can be particularly disastrous for beneficiaries with disabilities, substance abuse problems, psychological illness or personality disorders. The outcome for beneficiaries in this position is almost always bad and it is even more imperative that an objective professional administer the estate for their benefit.
Ultimately, it’s important to always seek legal advice regarding the administration of an estate.
We offer a free, 10-minute phone consultation so if you have any questions, please don’t hesitate to call us.