The obligations and responsibilities of an executor are serious. Yet it is common for will makers to nominate a family member as the executor of the will without thinking about whether that person has the capabilities necessary to carry out their duties.
Briefly, the executor must:
- Notify all beneficiaries named in the will.
- Manage the property or goods left in the will to:
- take care of any business interests
- safeguard any income
- invest money not needed immediately
- collect any valuables
- insure all property.
- Value the estate and keep a list of the valuations. The estate includes all:
- business interests
- personal effects
- real estate
- sale of property
- debts due
- debts owing.
- Complete income tax returns and get a clearance from the Australian Tax Office.
- Obtain authority to administer the estate:
- Apply for a grant of probate or letters of administration if necessary.
- Pay all debts owing, including selling assets, if necessary, to pay any liabilities.
- Divide the estate:
- Prepare statements for each of the beneficiaries.
- Distribute cash and or assets to beneficiaries according to the provisions in the will.
An executor must act with great care. The general rule of thumb is that a year is a reasonable time to finish things up in.
The Know It All Executor
When Ursula was made the executor of her father’s will, she was very proud. She was a professional woman and felt that she was intelligent enough to act as executor. She also had a history of being very frugal and took great pride in her ability to save money at every turn.
Therefore, when it was suggested that she seek legal advice in relation to her duties as the executor, she refused. For one thing, she didn’t want to spend the money to see the lawyer. For another thing, she was sure she would be able to carry out her duties properly.
What Ursula didn’t realise was that being an executor requires a knowledge of the law. The law is not straightforward and is poorly understood by most people. It took Ursula six months to work out that she needed to obtain a grant of probate, and how she could do that. It would have taken an experienced lawyer only a few minutes to solve this problem.
Next Ursula decided that because her father had several investment properties, she would sell them. It would make everything easier to administer, she thought. So she sold three properties for $1 million, and immediately incurred an enormous tax bill. Had she sought advice, she would have known that selling assets unnecessarily and paying a lot of tax is avoidable.
Ursula had now the cost the estate both time and money.
Ursula didn’t want to pay an accountant to finalise the estate taxes, and decided to do it herself. Because completing the tax returns is also not a straightforward task, it took Ursula another six months to complete the job. It would have taken an accountant only a few hours.
The home in which her father had lived prior to his death had fallen into a state of disrepair. Ursula didn’t want to pay tradespeople or cleaners to fix the house up, and so she did the work herself. It took her another six months to rip up moldy carpets, replace fittings throughout the house and tidy up the garden.
By now, the other beneficiary – her brother – was starting to get annoyed. It was now well beyond the reasonable time frame for an estate to be administered, and he felt helpless watching Ursula make mistakes that cost the estate dearly.
The relationship between Ursula and her brother deteriorated over time. She refused to take his help when he offered to paint their father’s house, insisting that she would do it. When he asked her why it was taking so long to administer the estate, she hung up on him and refused to speak to him for several weeks.
Eventually, Ursula’s brother sought his own legal advice and asked the court to remove her as executor from the estate. His reason for doing so was because he had lost trust in her ability to complete the job, and that she was wasting time and money. It is likely to cost the estate further now that an estate dispute has been lodged.
What To Consider When Appointing Your Executor
In truth, it is reasonable and proper for an executor to seek legal advice when it comes to administering an estate, and to follow that advice.
When thinking about who to appoint as an executor, make sure it’s a person who will reasonably seek advice and do what’s in the best interests of the estate. A person who believes that they know everything or refuses to seek advice will make the process of administering the estate a nightmare.
A person will not change their personality or a lifetime of habits just because you’ve died. It’s a mistake to think that a person like this will change.
So think carefully about your executor and avoid this common executor horror story.
If you need assistance with your duties as an executor, if you have concerns about an estate’s executor or if you need to review your estate planning, please contact us. We offer a free, 10-minute phone consultation.