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An executor is the person named in a will to carry out the administration of the deceased’s estate in accordance with the provisions of that will.
When making a will, you are free to appoint anyone you wish to act as your executor provided they are an adult and of sound mind. In this regard, you can appoint a relative, a beneficiary under your will, a lawyer or even a bank or professional trustee – the choice is yours.
It is also possible to appoint more than one person to act as your executor. Where more than one executor is appointed, these co-executors can act separately (each one with full authority to act on behalf of your estate) or they can be required under the terms of your will to act jointly in which case both executors (or all executors, if there are more than two) must agree to a course of action before taking that action.
Upon your death, your executor will have the legal responsibility and fiduciary duty to handle, safeguard and distribute your property in accordance with the terms of your will. In addition, your executor will also be responsible for procuring the payment of any debts or taxes owing by you or your estate at the date of your death and arising from your estate. These debts and taxes, if any, will be paid from your estate (using the assets of the estate) before the distribution of the remainder of the estate property to the beneficiaries named under your will.
When making your will, it is always a good idea to appoint one or more alternate executors. An alternate executor is someone who will perform the duties of the first named executor should they be unable or unwilling to do so (for whatever reason). If the alternate executor is required to act, he or she will be bound by the same legal responsibilities and fiduciary duties as the original executor.
An executor’s duties will usually include locating, collecting, assessing and managing the estate’s assets; arranging the discharge of debts and taxes owing by the estate; distributing cash gifts and specific item gifts in accordance with the terms of the deceased’s will; and entering into appropriate contracts to effect the transfer of real property from the estate to the relevant beneficiary named under the testator’s will. It is also the executor’s duty to report the testator’s death to insurance companies, banks and other institutions that might owe money to or hold money on behalf of the estate.
Choosing an executor is one of the most fundamental tasks associated with making a will. Getting the choice right can mean the difference between a smooth administration on one hand and a tardy administration with unexpected delays and costs on the other hand. It is therefore important to take your time and make the correct choice. Typically, the characteristics to look for in a good executor include good common sense, excellent organisational skills and integrity. A more detailed list of characteristics is set out overleaf.
Of course, many people tend to choose their spouse, a sibling, an adult child or a good friend as their executor. Others choose professionals such as a lawyer, accountant or professional trustee.
The challenge is to select the most appropriate person and to not simply take the easy way out by selecting a family member. Keep in mind that the process can be quite complex and time is often of the essence. So, you should still ensure that you choose someone who is organisationally reliable and generally up to the task.
It is not enough, however, to simply appoint someone who has all the hallmarks of a good executor. You must actually appoint someone who is willing to take on the role as it is always open for a person to refuse to accept the role despite being nominated in a will. In fact, many often refuse to act as executors because they are either too busy to take on the task or feel daunted by the prospect of becoming overwhelmed.
If your chosen executor refuses the appointment, an application can be made to the Supreme Court to appoint someone else to fulfil the role. Usually, this will be a relative, a beneficiary under your will or a creditor of your estate.
Once you have decided on who you would like to appoint as your executor, it is important that you actually discuss your choice with them before actually naming them in your will. You will need to explain to your proposed executor the nature of his or her role and that it may not be a straight forward and easy process. If, after explaining the role, your nominee is willing to take on the task, then you should be free to formally appoint them under your will.
Be trustworthy, businesslike.
Be capable of undertaking the task of Executor.
Be capable of exercising discretionary judgment in the administration of the estate. For example, if the estate comprised property, shares or superannuation funds, to have sufficient experience in the administration of those assets pending distribution.
Have the time and be available to do all of the things that need to be done in the administration of the Estate.
Understand what the job of Executor entails.
Be capable of seeking and understanding advice given by the solicitor handling the Estate and the family Accountant.
Be capable of being relied on to do what the Testator wanted, rather than what he/she thinks should be done in the circumstance.
Be accessible to the beneficiaries particularly where teenage beneficiaries may need to express their special needs.
If there is no surviving parent and no guardian appointed, be in a position to act as counsellor to the young beneficiaries (if guardians are appointed it may not necessarily include the Executor).
Have knowledge of the family and the wishes of the Testator.
Have the capability to deal with potentially dissident beneficiaries
There is no end to the type of dispute that will end up in the Court as a result of the appointment of an ‘Imperfect Executor.’
A very frequent area of dispute arises after the death of the Testator when the family members have failed to address discord within the family during the life of the Testator. An example of this is where there has been a breakdown in the family relationship and some of the children have cut off contact from their father or mother and then when the parent dies and they consider they have been left an inadequate bequest, such a person will bring an application seeking a share or a larger share of the estate.
Most frequently, the Testator has appointed as executor/s one or more of his/her children who have remained in contact. It is not uncommon that the Executor is the son who has been running the family business if the parent has retired or diminished his role in the management of the business. If one or two of the children have in effect been running the business, it might seem like a good idea to appoint them to be the executors because they have been loyal and they have been helping maintain the assets of the testator and as a just reward they are appointed Executor and left the lion’s share of the estate leaving the other children to decide whether to make a claim.
Is it a good idea to appoint one or more of the children who have been running the business to be the executor??? In selecting the Perfect Executor, the Testator would need to identify conflicts of interest situations which unless addressed will be passed on to the next generation and a likely open battle between all of the siblings. An Executor in a conflict situation would be tempted to prefer his own situation to that of the other beneficiaries, for example by depriving them of information regarding the income and expenses being incurred in the estate. An often overlooked rule is that the Executor should meet those expenses and then seek re-imbursement from the estate. If the executor is the same person as the Trustee, no challenge will be issued, but if the Trustee of the estate comprises an extra person, then the Executor might be challenged to provide full records covering the expenses for which he seeks re-imbursement.
The Executor has a duty to create and maintain separate accounts for all Estate assets. An imperfect Executor will fail in that duty and mix the Estate monies with his own, so when it comes time to have tax returns prepared, there are no clear records of what is Estate money and what is the Executor’s personal money.
If the Testator owned the controlling interest in a company, those shares must be transferred to the Executors of the Estate and the Executors then run the company as majority shareholder. This situation gives the imperfect Executor the opportunity to act against the interests of the minority shareholders.
On the other hand, if the Executor was left a bequest of share of the Estate in a percentage less than what he had expected, he has a right to make a claim and be in a direct conflict situation in regards to his duty as Executor. The Executor’s job is to uphold the Will.
If the Executor/ beneficiary was in a tight financial position, there would be a strong temptation for him to make premature advances of money out of the Estate to solve his personal dilemma at the direct expense of the Estate and or the other beneficiaries. There should be no preference in regard to distributions so an imperfect Executor would prefer his own need for money ahead of the remaining beneficiaries’ right to receive their legacies.
In a family of four or five beneficiaries, it is possible that the imperfect Executor would fail to uphold the rights of a minority beneficiary until forced to do so.
The Executor’s role concludes when all action necessary to complete the administration of the estate has been undertaken. At that point the Executor becomes the trustee and holds the funds of the estate in trust to be dealt with according to the terms of the will.
It is most frequently the case that the person or persons appointed as executor are also appointed to be the trustees.
Less frequently than should be the case it is possible to have an additional person appointed as trustee. In that circumstance an imperfect executor would have to deal with a trustee who is more likely to make the imperfect executor do his job according to law. In a case where there is an existing family dispute, the solicitor drafting the will and advising the testator really should address the cause of the dispute and ascertain whether it is possible to mediate that dispute during the lifetime of that testator, ensuring if possible that the unresolved issues do not carry on to the next generation.
Please note that this memorandum is not legal advice but may help you understand the law. If you have a query regarding testamentary discretionary trusts, contact our dedicated team at Kenmore Mediation and Law Centre on (07) 3378 4006, or at jnod@kmlc.com.au