What does being an executor mean?
- Financial Planning
Being the executor of a Will may involve a lot more that you first think. Here’s what you need to know if you are nominated.
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When someone makes a Will their normal instinct will be to choose a family member or close friend to act as executor. The choice is usually motivated by trust and a belief that the person is intelligent, fair minded and responsible. However, are these qualities sufficient to carry out the duties and responsibilities an executor must perform?
The reality is it will generally be a foreign experience for most of us and is a lot more onerous than you may first think. So, let’s take a closer look at what is involved and how to best manage it.
Feelings can run high
At first glance you may think the responsibilities of an executor relate simply to the facts and figures of passing on an estate. In practice, however, it can be the emotional and personal side of things that can become the most difficult to manage.
Even in the most congenial of families a perceived feeling of bias or unfairness can quickly escalate into resentment and resistance that can make the executors job an unpleasant and challenging one.
No matter how fair and balanced the executor tries to be, their role will naturally be coloured by their own beliefs and perspectives. Similarly, potential beneficiaries will be looking at the executor’s actions and decisions from their own individual standpoints and their feelings will be swayed by their own perceptions (whether rational or not). It can be a volatile mix that the executor has to deal with.
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Are they equipped to do the job?
Let’s look at some of the specifics that you would have responsibility for if you were an executor:
1. You would need to locate a host of important documents relating to the person’s financial affairs, including bank accounts, assets, loans, superannuation and investments.
2. You need to initiate and coordinate communication with beneficiaries, so that they are informed and updated of progress. This may develop into answering sensitive questions and managing disputes.
3. You are responsible for administering assets, including the selling or transferring of assets, which need to be liquidated or apportioned to beneficiaries.
4. You must arrange for the release of superannuation benefits and deal with the super funds regarding any beneficiary nominations the person may have made.
5. You need to deal with taxation issues, such as finalising income tax and determining any capital gains tax liabilities that may apply.
6. You are responsible for ultimate distribution of funds and assets once the above issues have been dealt with.
Obviously there are very few people who would have the understanding and experience to competently manage all of these areas directly. The legal, accounting, taxation and estate administration knowledge required is simply too complex. This means that specialist assistance is normally required from professionals in each of these disciplines. Nonetheless, the ultimate legal responsibility lies with the executor.
Is the executor at risk?
Legally, the executor is the responsible party and as such is exposed to legal action by beneficiaries if they feel they have a grievance. This can obviously put pressure on the executor to do their job diligently, so it is natural that they would feel a certain amount of stress when carrying out their role – especially if there are family members who feel hard done by.
This underscores the need for the executor to enlist professional help to ensure they have discharged their responsibilities correctly and fairly. Employing such help may also promote a perception of impartiality among beneficiaries.
What to do if you are concerned
The good news is that it is possible for the executor to remain in control of the process without having to deal with all the detail. It is simply a matter of knowing where to go for the right help. If you have been nominated as an executor and have concerns about what to do, a financial planner can be a useful first port of call to assess potential issues and point you in the right direction on which legal, accounting and taxation specialists to engage on specific issues.
Are you aware of any executor ‘nightmare stories’? Join the discussion below.