Being asked to act as an Executor carries with it some serious responsibilities. Often the person is not aware that they have been appointed to act as Executor until after the Testator has died. Before accepting your appointment as an Executor, you need to consider whether or not you are prepared to accept the responsibility.
The role of the Executor
It is the role of the Executor to administer the estate in accordance with the terms of the Will. An executor is placed in a position of trust and has a duty to act in the best interests of the estate. There may be occasions where the interest of the estate and the Executors own interests conflict and an Executor must be very careful to ensure that they do not compromise the interests of the estate.
Acting with a Co-Executor
If more than one person is appointed to act as Executor they must consult with one another and reach agreement with respect to their course of action. If there is a dispute between Executors, and the will does not provide a means of resolution then an application can be made to the Supreme Court for directions as to the appropriate course of action. This is not usually necessary and in most cases Co-Executors are able to reach agreement and act cooperatively.
One of the first duties of the Executor is to arrange the funeral. Occasionally a Testator will leave instructions in their Will as to the type of service they would like and whether they wish to be buried or cremated. If possible it is a good idea to follow these directions. The Executor should of course liaise with the Testators family members to ensure that any specific religious or other preferences are respected.
Identifying and Protecting the Estate Assets
It is up to the Executor to identify the assets of the estate and secure them. The Executor is responsible for protecting the estates assets until such time as they are distributed to the beneficiaries. The Executor is also responsible for ensuring that any debts are identified and paid. It is important that the Executor has good records of all assets and how they were redeemed and all liabilities and the manner in which they were paid. An Executor can be called to account for their activities and must be able to show the beneficiaries of the estate how the estate has been managed.
Dealing with Disputes
Throughout the administration of an estate, an Executor may have to deal with disputes between beneficiaries or claims being made on the Estate. In these circumstances Executors need to be very careful not to prefer one beneficiary’s position over the others. It is important that Executors get specific advice in relation to any disputes, conflicts or claims to ensure that they do not compromise their position.
Departing from the Terms of the Will
On occasion it may be necessary to depart from the terms of the Will. An Executor is able to do this provided all the beneficiaries affected by the departure agree. This is usually done by a Deed of Family Arrangement. The beneficiaries are parties to the deed and agree to indemnify the Executor with respect to any claims that may arise due to the departure from the terms of the Will.
If as a result of a claim that is made on the estate the Executor is required to depart from the terms of the Will, the Order of the Court provides the necessary authority for the Executor to depart from the terms of the Will.
Dealing with the ATO
It is responsibility of the Executor to ensure that a final tax return is lodged for the deceased. It may also be necessary to obtain a tax file number for the estate and to lodge tax returns for the estate throughout the conduct of the administration. Depending on the nature of the assets the Executor should also liaise with the deceased’s accountant to ensure that any capital gains and GST issues are addressed. The nature of the assets will dictate the level of involvement an accountant would need to have.
A beneficiary under the age of 18 cannot accept a gift under a Will. In most cases, the Executor is also appointed as Trustee to hold the gift for any infant until such time as they turn 18 or reach such older age as may be specified in the Will. When acting in the capacity of a Trustee all the usual obligations and responsibilities of Trustees apply and an Executor should be ready to accept legal, financial and accounting advice to ensure that the beneficiaries’ funds are appropriately invested.
This overview is by no means a comprehensive list of all of the responsibilities of an Executor. You can find more information in the Guide for Executors or you can contact Ann Eagle or Wendy Cleaver at our office.