One of the most important decisions in estate planning is choosing an executor, and yet often the choice is made without fully thinking through the implications. Most people tend to choose a family member or close friend, without considering whether they have the time, ability or even the interest in taking on the role.
But acting as executor is a hugely important role, that can profoundly affect the lives of those named in a Will, and it is important the right person is appointed to the job. Additionally, being an executor is often a time-consuming and complicated role. Deciding who will take on this responsibility when drafting an estate plan is extremely important.
This article outlines some useful tips to consider before choosing an executor.
Talk to them beforehand
This may sound obvious, but it’s a good idea to talk to the person you want to be executor, before nominating them in the estate plan. Nevertheless, it is always surprising how many people don’t let a nominated executor know in advance.
Being an executor is a huge responsibility, and some people simply may not want to take this on. It’s far better to find this out before finalising an estate plan, so that a more appropriate executor can be selected.
Contrary to common thinking, someone cannot be forced to take on the role of executor, and the person listed in the Will may decide to renounce. If they do renounce the job they can elect to have, for example, a trustee company take over.
A common reason for executors seeking the assistance of a trustee company is that the trustee company is specialised in providing estate administration services and, even if the executor chooses to continue acting as executor, some trustee companies offer solutions to assist them in their role.
One complication that can arise here though is the concept of “intermeddling”. This is when the chosen executor starts to act in the role – for instance, contacts banks or credit card companies in the role of executor – and then decides it is all too hard and chooses to renounce the role. If they have already started to act, then they are considered to have “intermeddled”. What’s more, they may be financially responsible for any losses or expenses that have occurred as a result of their decision to renounce.
This is even more reason to ensure prospective executors have been advised that they are named in the Will. It gives them the opportunity to consider whether they want to take on the position or not, rather than suddenly realise – in a state of grief – that they are listed as executor, and potentially intermeddle without understanding the implications. Once people have started to take steps to manage the estate, it becomes extremely difficult for them to then renounce the role and, if they do not want to continue as executor, their only option is to apply to the Court to be removed.
Consider whether the executor will need to be reimbursed
People often believe that a family member or friend who is appointed as an executor of a Will cannot, or is less likely to, charge a fee, and so conclude that this is a cost-effective option.
Increasingly, however, family members are likely to ask for a payment for acting as executor, particularly if there is conflict and the estate administration is complex.
If the estate is likely to end up paying someone to act as executor, it’s worth considering whether a friend or family member is still the most appropriate person or whether it’s better to go with a professional executor from the beginning. An independent executor will not “choose sides” in a conflict and will act in the best interests of the Will-maker.
Choose an executor for the right reasons
People sometimes decide to choose multiple children as executor, perhaps to avoid any concept of playing favourites, but fail to consider the fact that the children do not get on with each other or wider family conflicts.
This can cause all sorts of problems when it comes to estate administration. While many Will-makers are concerned about the expense of a professional executor, the reality is that there is often a cost saving overall as the estate can then be efficiently and effectively administered, without family conflict.
Furthermore, tensions from these conflicts can be significant and long-lasting and have a major impact on family relationships for many years to come. If Will-makers were truly aware of the impact, they are unlikely to want to put their loved ones through that conflict.
Consider the pros and cons of a professional executor
As mentioned, people tend to think that choosing a friend or family member is a cost-effective way of handling an estate, while a professional executor such as a trustee company or lawyer will be expensive. But this can be a false economy.
Some considerations include:
- If there is family conflict and the executor, is a family member or friend, the executor is less likely to take an objective view, particularly if the conflict arises as part of the estate administration process;
- If the executor is the same age as the Will-maker they may pass away before the Will-maker leaving no executor at the time of the Will-maker’s death. Equally, it is possible that the executor may be too frail or too old to handle the role;
- If the executor is elderly and there are ongoing testamentary trusts the trustee will have to be replaced and continuity may be an issue;
- If the executor obtains probate of the Will-maker’s Will and then dies shortly after, the executor of the executor’s estate will then usually be responsible for administering the original Will-maker’s estate. Not only is this an added burden for the second executor, but this may be a person the original will maker never knew; and
- Finally, not all people appointed in an executorial role have the knowledge or ability to properly administer the estate. Being a faithful friend or a good child, doesn’t mean you should become an executor.
Example of how it can all go wrong
Barbara is a widow with three adult children – Helen, Mark and David – and five grandchildren. She owns her home, worth $800,000, and has investments worth around $100,000.
She has created an estate plan that will establish a trust to leave all her assets to be divided equally amongst her grandchildren, and naming her eldest child, Helen, as her executor. There is no reason to have Helen as her executor, other than the fact she is the eldest. Helen has no particular financial knowledge or background.
When Barbara dies, problems immediately arise. Helen takes responsibility for all arrangements for the funeral and then contacts the bank for payment of the funeral costs. She also advises all the utilities that she is executor and to forward any future invoices to her home address.
Also, Helen’s eldest child has just completed school and is taking a gap year to do some travel. Helen lets him know that she will advance some funds from the trust that will be set up, to help him buy a rail pass. However, when Mark’s eldest child wants some money to book his ‘Schoolies’ trip later in the year, Helen says that she will refuse to authorise the funds.
However, Helen now realises the full range of responsibilities of being an executor and then later trustee of the grandchildren’s trusts, and decides she doesn’t want to take on the role. Unfortunately, by contacting the bank for payment of funeral expenses and already purporting to be the executor to the utilities, Helen has intermeddled.
Further complicating matters, Mark is now very angry with Helen, both because she was named executor and not him, and because he found out that Helen is refusing to provide funds to his child but agreed to fund part of her son’s overseas trip. He insults Helen, causing a serious rift between the two siblings. Helen refuses to do anything further in the estate administration.
Now David is forced to get involved. He believes that if Helen isn’t executor, as chosen by their mother, then a professional trustee company should be appointed. He himself does not want to take on the burden of the role.
When he approaches Helen with the idea of appointing an independent executor, she is relieved. She was concerned that he would force her to continue acting as executor, even though she no longer wanted to undertake this role. They both consent to a trustee company applying and the estate was able to be professionally and efficiently administered. The siblings’ relationship was mended over time and the management of the on-going trusts for the grandchildren did not cause continued angst between them or the cousins.
Anna Hacker is national manager - estate planning at Australian Unity Trustees.