I was approached by some one over the weekend who has been named executor of a Will. Will makers usually appoint someone they believe to be trustworthy to carry out the task of distributing their assets in accordance with their Will.
Not only is this an important task with responsibilities, and deadlines – that often means managing beneficiaries expectations, family politics and making sure that you discharge the fiduciary responsibilities of being an Executor.
Executors should avoid the following pitfalls:
- Failing to identify all of the assets of an estate
An application for a grant of Probate should be made within 6 months from the date of death. Although the Probate registry is usually lenient applications lodged after this time require an affidavit explaining the reasons for the delay.
Similarly by moving too quickly executors often overlook assets which later need to be disclosed- costing the estate time and money. In some instances the executor could be held liable to creditors or beneficiaries if the original oversight has caused damage.
- Distributing the estate too early
Executors should aim to complete administration of an estate within 12 months from the date of death (‘the executor’s year’). However this may not be possible if there are complex taxation issues to address.
If the executor is too eager to distribute the estate without accounting for taxation liabilities, only having to later approach beneficiaries, some of whom are overseas, have already spent their inheritance, or are unwilling to assist you with clawing back the missed tax liabilities – this can cause problems.
- Delaying administration
As a corollary undue delay of the administration of an estate may result in unhappy creditors and beneficiaries, who may be entitled to interest once the executor’s year passes.
An executor who doesn’t discharge their duties to administer the estate in a timely fashion or act in the beneficiaries interests, may be personally liable or could be removed from office.
- Manage beneficiaries’ expectations!
Executors often of keep beneficiaries in the dark – intentionally or otherwise. This breeds suspicion. It’s important for executors to communicate with beneficiaries openly however be prudent with the information that you share with beneficiaries as it is important to keep estate expenses to a minimum. Remember communication is a 2 way street!
- Failing to keep proper records
It is vital that executors keep a full and proper record of the expenses of the estate – particularly if they are claiming reimbursement for expenses (funeral costs, court filing fees) that the executor has personally met.
If sufficient records don’t exist, the executor could be personally responsible for the expense(s) in question.
This is not to say that if you are named an executor you should refuse however, if you are unsure of what is expected this can lead to mistakes being made and you as the executor being held liable.
Estates are different and each one can differ in subtle ways. An executor can employ experts and as the work involved is often complex and time consuming – requiring specialist legal, accounting, and taxation knowledge – this is often prudent.