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
Nothing in this article represents an offer or solicitation by Australian Unity Trustees Ltd in relation to securities or investments in any jurisdiction. Where a particular financial product is mentioned, you should consider the Product Disclosure Statement before making any decisions in relation to the product and Australian Unity Trustees Ltd makes no guarantees regarding future performance or in relation to any particular outcome. Whilst every care has been taken in the preparation of this information, it may not remain current after the date on which it is published and Australian Unity Trustees Ltd and its related bodies corporate make no representation as to its accuracy or completeness.
Dennis Souksamlane and Defined Financial Advice Pty Ltd are Authorised Representatives of Australian Unity Personal Financial Services Limited (ABN 26 098 725 145), AFS Licence no. 234459. The information provided on this website is general in nature. Any advice on this website 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 financial advice relevant to your circumstances before making investment decisions. AUPFS is a registered tax (financial) adviser and any reference to tax advice contained in on this website is incidental to the general financial advice it may contain. You should seek specialist advice from a tax professional to confirm the impact of this advice on your overall tax position. Nothing on this website represents an offer or solicitation in relation to securities or investments in any jurisdiction. Where a particular financial product is mentioned, you should consider the Product Disclosure Statement before making any decisions in relation to the product and we make no guarantees regarding future performance or in relation to any particular outcome. Whilst every care has been taken in the preparation of this information, it may not remain current after the date of publication and AUPFS and its related bodies corporate make no representation as to its accuracy or completeness.