When drafting a Will, important consideration needs to be given to who to appoint as Executor or Executors. An Executor’s role is to stand in place of the deceased and they are responsible for the administration of their Estate. Put simply, this means making sure that debts are paid and the assets and possessions are distributed as the deceased had intended. In reality however, the role of an Executor comes with significant responsibility, which can sometimes be a burden, particularly when the estate is complex or where there are disputing beneficiaries.
The following is a guide of some of the responsibilities that come with being appointed an Executor of an Estate.
Make funeral and final arrangements
It is an Executor’s responsibility to organise any funeral or related service in consultation with the family of the deceased. If the deceased has left clear instructions for final arrangements, then this can be a simple task, however this is not always the case. The Executor has the final say on the arrangements that are to be made and their decision can sometimes overrule a family’s wishes.
Apply for Probate
An application with the Supreme Court must be made for Grant Of Probate, which effectively grants the Executor with the power to administer the Estate and will enable them to discuss the affairs of the estate with financial intuitions and other intermediaries, make necessary arrangements to release assets, pay debts and arrange the distribution of assets. There is usually a fee payable to make an application for Probate, however there are some exceptions for small-value estates.
Manage Estate Assets
An Executor is responsible for collecting, maintaining, and protecting the assets of the estate pending the payment of all debts and prior to the distribution of all assets to the nominated beneficiaries. An Executor will need to make a list of everything that the deceased owned as well as any amounts or payments that they were entitled to at the time of death. This list is known as the Inventory of Property and will typically include items such as home and other real estate, cars, boats, caravans and motor bikes, bank accounts, furniture, household appliances and jewellery, shares, managed investments, insurance policies, superannuation and any other entitlements such as unpaid leave entitlements from working arrangements. It should be noted that not all assets are necessarily included in a Will, some examples may be superannuation funds and insurance policies.
Repay all Outstanding Debts
Similarly to the Inventory of Property, an Executor will need to make a list of all expenses and debts of the deceased. The sale of any assets will need to be deposited into a bank account in the name of the deceased estate, from which the funeral expenses, administration expenses and outstanding tax (including income tax and capital gains tax) will need to be paid. Any other debts such as loans, mortgages and other liabilities are also paid from this account.
If the deceased earned an income prior to his or her death, then the Executor is responsible for lodging any outstanding tax returns, up to the date of death, and will be required to pay any assessable amount from the Estate. If assets of the deceased are to be sold, then the Estate will also be liable for payment of capital gains tax.
In some instances, the Executor will be required to set up a separate tax file number (TFN) for the Estate, and lodge a separate tax return.
If provisions were made under the Will for trusts for minors or testamentary trusts, the Executor will be appointed the trustee of the trusts (unless a separate trustee is nominated) and will be responsible for transferring the relevant assets to the trust and required to administer this trust as well as the Estate.
Keep accurate records and documentation
An Executor is obliged to keep “proper” accounts, keeping the assets of the Estate separate from other assets and ensuring that adequate receipts and payments are evidenced.
Distribute the Estate Assets
A distribution report will need to be drafted which sets out the specific assets owned, the assets sold, the debts paid and the expenses incurred. It is a requirement to give a copy of this report to the beneficiaries of the Estate when the final assets are gifted to them.
Estate planning law is complex and will differ depending on the State that the deceased resided. If you are named as Sole Executor of an Estate, it can pay to seek advice from your professional adviser to help you administer the estate as you can be held liable if you get it wrong.
If you are considering nominating a loved one as the Executor of your Estate, you may wish to consider naming a professional adviser (such as a financial adviser, accountant or solicitor) as a Co-Executor to assist them with the role and responsibilities of this task.
For Estates that have investments, it would be advisable to speak to your financial adviser and/or accountant. This will help with how to arrange the sale of investments and also any fees or taxes that might be applicable.