Acting as an executor is burdensome – the numerous duties that an executor is required to perform must be carried out in a timely and proper manner. It involves much more than organising the will-maker’s funeral or ascertaining the identity of beneficiaries. An executor has to take steps to ascertain the assets and liabilities of the Estate, determine whether an application for a grant of probate is required, pay Estate debts and then distribute the balance of the Estate in accordance with the terms of the Will.
A mistake can be costly for an executor because he/she is personally liable for errors and oversights. Because the role of executor can be quite involved, and the possibility of being personally liable a very real one, detailed legal advice should be obtained from the outset.
As asset-holding structures are becoming more complex – companies, family and unit trusts, self-managed superannuation funds and the like – the administration of Estates is becoming correspondingly more complex. Obtaining proper legal and financial advice is essential if an executor wants to minimise his/her potential liability.
The risk of being personally liable is not even offset by the knowledge that some form of financial compensation will be paid to the executor upon completion of the administration process. Unless a gift or the right to charge a commission is contained in the will, an executor must hope that all beneficiaries will agree to the payment of a commission. If such agreement is not forthcoming, an application to the Court – which is not always successful – will be necessary.
Most people accepting the role of executor have no idea of the tasks they must perform. The following is a list of some of the duties that an executor might have to perform. It is certainly not an exhaustive list:
- Seek advice regarding the Will itself.
- Steps should be taken to ensure the Will is the deceased person’s final Will.
- Sometimes, especially when the Will-maker makes his or her own will without legal assistance or advice, there can be problems such as the failure to comply with signing and witnessing requirements; or the pinning or clipping the Will to other documents;
- Seek advice regarding the correct interpretation of the terms of the Will.
This can include correctly identifying parties named as beneficiaries and property being gifted to individuals. For example:
- a person may be referred to in the Will by a nickname rather than his/her correct name, raising issues as to whether that person is the intended beneficiary;
- there may be two family members with the same name but the Will does not make it clear which person is the intended beneficiary;
- a gift may no longer exist because it has been gifted away or sold by the Will-maker during his/her life – does the gift automatically fail?
It can also involve determining the nature and intent of a gift, eg, is it an absolute gift or is it a life interest only;
- Ascertain all the assets and liabilities of the Estate.
For example, does the Will-maker actually own the house property he/she is gifting in the Will or does it automatically pass to a co-owner upon the death of the Will-maker?
Similarly, are there any contingent tax liabilities for which the Estate might be liable – eg Capital Gains Tax? If the Estate is distributed and another Estate debt (tax or otherwise) comes to light, the executor will be personally liable to pay the debt;
- Ascertain whether Estate assets are or ought to be insured;
- If the Will-maker operated a business, ascertain what steps need to be taken to ensure it continues to operate;
- If the Will-maker was a shareholder or office-holder in a family company, ascertain what happens to the share or vacated office upon death;