One of the most important estate planning decisions you will make is choosing who to appoint as your executor.
In general terms, an executor is responsible for identifying, locating, managing and protecting assets and arranging payment of any debts and taxes before distributing the balance of the estate to the beneficiaries in accordance with your will. The executor is also responsible for ensuring all of the valid liabilities of the estate are paid from estate funds.
Here are our top 5 things to consider when considering the appointment of an Executor:
1. Who should I appoint as my executor?
The role of executor is one of trust and needs to be carried out with care and honesty. You should consider their intellectual abilities, emotional resilience, integrity, honesty and their trustworthiness.
Careful consideration should also be given as your executor may become personally liable if they make an error or do not fulfil their role as executor properly.
There are three groups who may be appointed as your executor:
- Family and friends
- Professionals such as lawyers and accountants
- Trustee companies
Executor’s duties can be burdensome so you must ensure the person you choose is reliable, responsible, and competent. If you choose a family member or a friend, to ensure everything is dealt with correctly they may find it helpful to seek assistance and guidance from lawyers, accountants, and other professionals, with fees payable from the balance of your estate.
The importance of a back-up executor
To protect your estate from unexpected future events where your initial executor is unable to act due to death or illness, or being based interstate or overseas; you should consider appointing a substitute executor.
2. Willing and able?
An executor is not obliged to accept their appointment and can choose to step down (or renounce). It’s a good idea to discuss your intended choice of executors with them before you make the appointment. By discussing their appointment in advance, this gives them a chance to decline and for you to appoint someone else from the outset which can save problems further down the line.
3. Consider the health, well-being, and location of your executor
Careful consideration should be given to the health and well-being of your executor. Given that your executor will be dealing with your estate in your absence, it is important they are someone who is likely to outlive you.
The current and future location of your executor should also be taken into consideration. Appointing executors in different locations or not located in the state or territory where your assets are located will increase costs and time to get things done, particularly if an executor needs to be physically present to complete some tasks.
It is also important to consider the likelihood they may move overseas in the future as this may have tax consequences for the Estate.
4. Conflict between executors
What most people do not realise is that an executor can be held liable for delay or error, especially if there is a direct loss as a result of their actions. With the beneficiaries having the ability to take action against the executors, it is essential to make the most conflict-free choice available to you.
In a perfect world the appointment of more than one executor would enable the executors to have a sounding board when decisions are made and increase the likelihood of fair decision making. In reality, the appointment of more than one executor can lead to conflict; which usually results in delays in the administration process, increased costs, and stress to all interested parties.
5. What if my estate is complex?
An executor’s duties can be complex and overwhelming, even in a simple or modest estate. A good executor must have knowledge of the law and taxation and they should possess some business acumen. If your circumstances are complex or there is the possibility that your will may be subject to litigation, you may need to consider appointing a professional executor i.e. an accountant or a lawyer who has experience in Succession Law. A sole executor might be overwhelmed by the task if the estate is large and complex.
Again, and individual sole executor can seek assistance and guidance from lawyers, accountants, and other professionals, with fees payable from the balance of your estate.
How can Walsh Accountants help you?
Walsh Accountants Estate Administration team can assist you with the process of working through the planning of your estate along with administration from an accounting and taxation perspective once the estate commences.
The appointment of an Executor should always be done in conjunction with a lawyer who specialises in Estate Planning and to that end we are able to bring the background knowledge of your circumstances and wishes to the legal team ensuring that your wishes are being met and the final results meet your expectations.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practising lawyer in your area. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Walsh Accountants accepts or assumes responsibility, or has any liability, to any person in respect of this article.