There are several factors a person needs to consider when deciding whom to appoint as the executor of their will. The decision should not be made hastily. An ill-fitting appointment can have devastating consequences to the administration of an estate.
An executor is the person appointed by the testator (the person making the Will) to manage, administer, direct, and dispose of property under a will (Encyclopaedic Australian Legal Dictionary, LexisNexis Australia).
Set out below is a non-exhaustive list of criteria to follow when deciding whom to appoint as an executor.
- Trust
The testator must trust that the executor will carry out their duties competently.
Their duties include attending to the funeral, burial, or cremation arrangements, obtaining a Grant of Probate (if necessary), administering the estate according to law, paying estate debts, preparing an estate account and distributing the balance of the estate to the beneficiaries.
Trust is critical not only for the peace of mind of the testator, but because it is also the foundation of the fiduciary duty of an executor. The law recognises the executor is in a special position of power of the property of the estate, and the beneficiaries are considered vulnerable in transactions between the executor and beneficiary concerning estate assets. The executor must act for and on behalf of the beneficiaries.
As a fiduciary, the executor must not put themselves in a position of conflict between their personal interests and their duties to the beneficiaries.
As a tool to assist with the decision-making process, the testator should consider appointing a person who they trust to carry out their wishes.
- Financially Literate
The Executor has a duty to maximise the value of the estate.
In this context, it is important that the executor understands the nature and value of the testator’s assets, preferably prior to him or her passing away. For example, where a testator owns commercial property which is tenanted, then the executor has a duty to maintain those tendencies and continue to collect rent.
Financial literacy can be an important skill for the Executor to have at the outset of the administration of the estate. It will assist when the Executor is dealing with financial matters such as tax and mortgages. It is also recommended that the Executor be able to work with the testator’s accountants and other professional advisors.
- Health
In most cases, we will advise the testator to consider appointing an executor who is younger than them. it is important that when the executor is required to act, they are able to do so, both mentally and physically.
If the person is experiencing health issues, then it is advisable to appoint someone else to act as an executor in the first instance.
If an executor has to retire or renounce during the administration, for health or other reasons, then this can delay the administration.
- Location
It is recommended that the executor is within close proximity to the estate assets.
This is for several reasons:
- although the need to physically sign documents in this electronic age is becoming less likely, there are still documents which require physical signatures; and
- there are a number of issues that can arise during the estate administration and may require the executor to physically attend the property.
Particularly recently, with the increased incidences of flooding and other natural disasters, the executor may be required to inspect the estate property and arrange for repairs. This is part of their duty to maintain and maximise the value of the estate.
As a tax consideration, it is important to appoint an executor that lives in Australia and is a resident for tax purposes. In the alternative, there is the potential for the estate to be deemed a foreign trust. This can result in a higher tax liability, meaning less estate assets to distribute to the beneficiaries.
In any case, the testator should appoint a substitute executor to act in the event that the first named Executor is incapable or unable to act. This will allow the estate to continue to be administered in circumstances where the first mentioned executor renounces.
From an accountability perspective, it is also worth considering appointing two executors to act in the first instance. Executors must act jointly.
As you can see, there are a multitude of factors to consider when appointing an executor under your Will. If you’d like to discuss any of these matters further, please do not hesitate to contact Elizabeth Ulrick (elizabeth.ulrick@perspectivelaw.com, 07 3317 4311) or Tony Crilly (tony.crilly@perspectivelaw.com, 07 3317 4313)