Understanding the role of an executor in estate planning

If you’re in the process of arranging your affairs, it’s important to ensure your assets are protected after you pass away. That includes nominating who will administer your estate.

Many people choose to appoint a close family member as executor of their estate without realising the extent of the burden they are placing on that person.

It can be a time-consuming and complicated role, so agreeing who will take on this responsibility when drafting an estate plan is vital.

“Choosing an executor is one of the most important decisions in the estate planning process, but sometimes the choice is made without fully considering the consequences,” says Anna Hacker, National Manager, Estate Planning at Australian Unity Trustees Legal Services

“It’s tempting to pick a family member or close friend, but due thought must be given to whether they have the time, the interest, or even the ability to take on the role.”

Ms Hacker said that she is surprised at how casual people can be about choosing an executor.

“I’ve seen situations where people haven’t bothered to tell the person they have nominated to be their executor,” Ms Hacker says.

“It comes as a huge – and sometimes unpleasant – surprise when they realise they have been given this duty.

“Some people simply may not want to take it on. It’s far better to find this out before finalising an estate plan, so that a more appropriate executor can be selected.”

What happens if someone doesn’t want to be executor?

If someone is named as executor in a will, but doesn’t want the role, they can renounce and have, for example, a trustee company take over. But the decision needs to be made early, before any action is taken by the nominated executor.

“If the chosen executor starts to act in the role – for instance, contacts banks or credit card companies in the role of executor – they are considered to have ‘intermeddled’,” Ms Hacker says.

“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.

“They may then be financially responsible for any losses or expenses that have occurred as a result of any steps they have already taken and their decision to renounce.”

Why choose a professional executor?

Ms Hacker says that while people often think that a professional executor – such as a trustee company or lawyer – will be expensive, it can be a false economy to choose family or friends.

“Increasingly, family members are likely to ask for a payment for acting as executor, particularly if there is conflict and the estate administration is complex,” she says.

“If it’s likely the estate will end up paying someone to act as executor, it’s worth considering whether it’s better to go with a professional executor from the beginning.

“A key advantage is that an independent executor brings impartiality to the table and will act in the best interests of the will-maker and carry out their wishes.

“If the conflict ends up in court, the costs can quickly sky-rocket, and will usually come out of the estate. Managing this with a professional executor can be a much more cost-effective option.”

Five tips to appointing an executor

• Choose someone who will be impartial – if they need to “break up” fights, you need someone who will not take sides.
• There is no need to appoint all children just to “keep the peace” – usually only four executors can be appointed, but it is preferable to have fewer.
• Think of someone who will take advice – many people think they need to choose someone who can do it all, but usually an executor has or will need legal and financial support to fulfil their role, so make sure you choose someone who will be happy to use it.
• Younger is usually better – for practical reasons, you want to at least have back up executors who are likely to live longer than you.
• Talk to your proposed executors – some people really do not want to take on the role and it is important to know that before you finalise your will. They can renounce later but choosing executors who are comfortable taking on the role in the first place is important.

Important information

This information is provided by Australian Unity Trustees Ltd ABN 55 162 061 556, AFSL 483220. Australian Unity Trustees Ltd is a wholly owned subsidiary of Australian Unity Limited. Any advice in this article is general advice only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, tax, or personal advice and should not be relied on as such. You should obtain independent legal, financial or tax advice relevant to your circumstances before making any decisions. Information on this site is intended for Australian residents only and any access to this material via the internet is subject to the Terms and Conditions of Use of our website and our Privacy Policy. Please refer to our Financial Services Guide and Fee Schedule.

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