‘Money’ and ‘assets’ are very emotive words. Families may get along really well but heated arguments often occur when a deceased family member’s estate is being carved up.
Executors/Trustees
An executor has:
- A duty to the court to honestly and fairly manage the estate of the deceased
- A duty to act within a reasonable time frame and not unnecessarily delay the distribution of the estate to beneficiaries – if you are a beneficiary and think the executor is misusing estate assets or causing unnecessary delay then we can obtain orders from the court
Case history 1
‘A man died and in his will he appointed the oldest of his three sons as executor. As executor he distributed a portion of the estate to his two brothers and retained a balance for possible estate debts. Many years later the money that was retained could not be accounted for and the two brothers were sure it had been squandered away. We contacted the brother who was executor demanding and explanation of where the money had gone, but never got an answer. We made a court application requiring the executor to present to us a detailed account of where the money was spent. He will need to compensate for any loss and also required to pay legal costs.’
Executors are required to pay the debts of the estate from estate assets and this includes tax debt. The executor does not become personally liable for estate debts unless he/she has fraudulently misused the money, or been really negligent investing estate money in the type of investments not recognised under the Trustee Act.
Case history 2
‘An executor invested a sum of money on behalf of a number of child beneficiaries until they became old enough to receive the money in accordance with the terms of the will. During the GFC the finance company went into administration and the funds were frozen until the company paid its debts. There is still no certainty the beneficiaries will receive their money and are claiming on the estate or from the executor. The executor denies liability and is seeking indemnity from the estate which means the other beneficiaries have to pay back a portion of the money they received.’
Choosing your executor(s)
Many people choose their spouse or partner as the first option plus one or two family members as alternatives. You need to think carefully who you choose, and ensure they have practical skills and the ability to make decisions after liaising with family accountants, lawyers or financial planners.
There are several things to think about before making your final decision.
- Spouse or partner. Do they have the skills and experience to deal with things effectively? Your spouse may be too emotional and grief stricken, so this may not be the best choice. If your spouse or partner are elderly, will they have the mental capacity to make good decisions? In a situation like this a more able family member could be named as joint executor and hold the reins whilst the spouse or partner steps aside – they could have an option to get reappointed further down the track.
- Children. Again, these are what appear to be obvious choices, but how do yours really get along? Do they have time to make the necessary commitments? If they live interstate or overseas decision making could be delayed.
- Professional. A lawyer or accountant could act alone or converse with a friend or family member. The estate will probably have to pay them professional fees for these and this could work out expensive. However, this may be preferable to avoid potential family disputes.
- Public Trustee. It is important to highlight here that if you appoint a Public Trustee this cannot be changed, and they act alone, not with a family member or friend. The Public Trustee also claims a percentage of the value of the estate, which is more expensive than having family members assisted by a lawyer making decisions on the estate.
Beneficiaries
The law recognises the right of an individual to distribute his/her assets as he/she chooses but the law also recognises that the same person must make provision for certain classes of people.