Estate Executor’s Guide

There can be many parts that can be confusing in estate administration, which is the last thing, you and your family needs when a loved one dies. We are here to make this process easier for you. If you are require further information regarding estate administration, please call us on 1300 580 413

The executors role

The executor is the person appointed in the will to bring in the will maker’s assets into the estate and be responsible for distributing the will maker’s assets as per his or her wishes specified in the will, after her or she has died.

Pending distribution, the executor must manage the estate.

The executor must also ensure that all liabilities of the estate are satisfied. This will require payment of household accounts such as telephone, utilities and services as well as credit card debit balances and income tax.

An executor may choose to do so everything themselves or instruct a solicitor take the necessary steps at his or her direction, including notifying and communicating with the beneficiaries as to their entitlements and the progress of the administration of the estate.

Key responsibilities

In Queensland, these are specified by the Succession Act 1981 and include obligations to:-

  • Carry out wishes of the will maker according in the Will;
  • Act in the best interests of the estate and beneficiaries;
  • Manage and protect assets of the estate until they are distributed to the beneficiaries;
  • Ensure liabilities of the estate are paid;
  • In the event that more than one executor is appointed, collectively agree on a course of action;
  • Maintain accurate records dictating how the estate has been managed and distributed including a financial summary;
  • If a conflict arises, disclose the circumstances to beneficiaries and seek written consents as to the course of conduct proposed to be taken.
  • In the event that the will maker has not proposed funeral arrangements, to decide those arrangements.
  • Communicate regularly with beneficiaries a to steps taken as regards administration of the estate.

Additional responsibilities

In addition to their statutory duties, an executor also holds a fiduciary duty in relation to the estate and the beneficiaries arising out of to duty to act in the best interests of the estate at all times.

If an executor is also a creditor or a co-beneficiary they must always transparently and not appear to favour their personal interest. In cases of actual conflicts, the express written consent of beneficiaries should be obtained as to the course of conduct the executor proposes.

Executors must not seek to profit from their position.

If more than one executor is appointed, they must consult to decide issues concerning estate assets and beneficiary entitlements.

Accountability

Executors are accountable for the decisions you make and the management of the affairs of the estate. They are legally liable for their acts and omissions in performing the role.

What do you tell the beneficiaries?

An executor does not have a legal obligation to tell beneficiaries that they will receive gifts as stated in the will before they are distributed. A beneficiary is entitled to receive a copy of the will upon request.

Should there be a reading of the will?

A formal reading of the will does not commonly occur. Rather, copies of the will are distributed. If an executor prefers a formal reading, he or she should notify the beneficiaries to attend an appointment with the solicitor appointed by the executor, for that purpose.

Getting started

What you need to know from the start

What is comprised by the estate?

The deceased’s estate covers all of a deceased person’s property and debts but does not include:-

  • Property co-owned with another person as “joint tenants”
  • Joint bank accounts
  • Superannuation and life insurance proceeds (unless specified as being payable to the member’s/policy holder’s estate)
  • Company assets, the estate’s interest being the shares the deceased holds in the company
  • Undistributed assets of a trust

What is the duration of an estate administration?

Receipt of information from banks and companies; advertising requirements as regards Probate or Letters of Administration; the sale of assets; and finalising tax issues are all time consuming requirements.

Claims against estate assets are allowed six months to be notified. Thus executors in many cases should not make distributions before that period has expired.

Some assets may be required to be held on trust until a certain event happens or if a gift is left with for a person’s benefit, such as by way if a Protective Trust, the executor’s role continues for an extended period.

All of the above issues are determinative of the period over which any particular estate requires administration.

What if the estate liabilities exceed the estate assets?

In the circumstance where there are more liabilities than assets, the estate will be deemed insolvent and should be declared bankrupt. The remaining assets should then be used by the trustee to pay out the liabilities. The executor and beneficiaries have no responsibility for the estate’s insolvency so long as they have not taken any assets from the estate.

What is required to administer an estate correctly?

The steps involved in administration of an estate and the time it takes to administer depend largely on the nature of the estate. The following guide will assist you through each step.

Decision making

Most wills afford wide discretion to executors in relation to many things you must decide in the course of estate administration. You must act in the best interests of the estate and you are entitled to consult with beneficiaries. You are not bound to observe beneficiaries’ requests.

You should balance the wishes of the beneficiaries with any immediate and long-term financial needs of the estate.

You must ensure your interests do not conflict with the interests of the beneficiaries.

Before making major financial decisions you must consider potential taxation and stamp duty implications.

Investing

You must ensure that the estate’s investments, if any, are reviewed periodically (at least once a year), to ensure they continue to be appropriate for the circumstances.

Generally, when investing, you must use the care, diligence and skill that a prudent person in your position would use. You must consider the relevant legislative and general law obligations. You may decide it is in the estate’s best interests to retain current investments.

You may wish to consult a financial advisor. An accountant or solicitor can only give advice on investing funds if they hold an AFS licence or are an authorised representative of a licence holder.

You can be liable for financial loss if you conceal or misrepresent or carry out your responsibilities negligently or illegally. To protect yourself, you should always follow any advice given by an accountant, solicitor or financial advisor.

Always ask to see a copy of the financial advisor’s licence and if relevant, letter of authority. A licence is not a guarantee of good advice. Ensure the adviser has professional indemnity insurance. Such insurance does not cover losses due to poor advice as opposed to negligent advice.

Generally, advisers who charge a set fee to research and prepare a financial plan (and monitor investments, if required) and who do not receive any commission from the entity with whom the investment has been placed are considered the most transparent.

Immediate steps to take

If you have been appointed as an executor, the following are the immediate items that should be addressed.

Original will

Obtain a copy of the will and satisfy yourself that the original is held securely and safely, for example, in a solicitor’s safe custody facility. You will also need to see any letter of direction or explanation deposited with the will.

Funeral arrangements

Familiarise yourself with the provisions of the will relating to burial or cremation and any specification in the will about where and what funeral or memorial service should be conducted. Liaise with family members to arrange the event at an agreed time.

Funeral director

In consultation with family, appoint a funeral director to perform the desired arrangements. Most banks will allow the release of sufficient funds from a deceased’s account to cover funeral expenses. If this is not available, most funeral directors will await payment of their costs from the estate if required.

Capacity

Consider whether there are any potential issues of legal capacity and if so, seek evidence from the testator’s medical practitioner that he or she had capacity to make the will on the date it was made.

Execution

Consider the signing of the will to ensure that on the face of it there were two independent persons present who signed as witnesses in the testator’s presence. Examine the will to see if any of the witnesses been granted a benefit under the will.

Probate

Consider whether Probate of the will is likely to be required. Part IV of this guide explains this process and similar court procedures.

Family provision

Consider whether any family members – for example, children or step-children – have been omitted from benefits under the will.

Inventory

Make an inventory of all estate assets to consider what steps need to be taken to collect and preserve them. This will also assist in determining whether a grant of probate will be needed.

Copy of will

Ensure copies of the will are provided to all persons named in the will as a beneficiary. The following are also entitled to a copy on request: a beneficiary under a former will, the deceased’s spouse, children, stepchildren and parents. In some cases a former spouse and some relatives are also entitled to a copy.

Insurance

Satisfy yourself that all assets such as homes, boats and cars have current and adequate insurance.

Security

Ensure that items of monetary or sentimental value such as jewellery, photographs, paintings etc. are adequately stored and secured.

Consider appointment

An executor does not have to accept the role however if they propose to decline, this should be done at the earliest available opportunity and certainly before a grant of probate is issued.

Obtain Death Certificate

Often this is sourced for the deceased’s family by the funeral director. The certified death certificate can in most cases be obtained on line payment of the appropriate fee to the registrar for births, deaths and marriages in the state where the deceased died.

Appoint a Solicitor

In most cases, a solicitor should be appointed. If probate or letters of administration is required, you will definitely need a solicitor. Likewise if the estate consists of multiple assets including real estate or investments. The solicitor can do as much or as little of the administration as you prefer.

Housekeeping

There are a variety of “housekeeping” duties that should be attended to as soon as convenient: redirect mail; cancel drivers licence; cancel Centrelink payments; claim medical expenses from Medicare and private health fund; and cancel health insurance and claim refund.

Administering the estate

Having successfully installed yourself into the role and made contact with beneficiaries, the administration can proceed in earnest.

The following is a step by step guide through each item you will need to turn your mind to during the course of the administration.

This section of the guide should be used in conjunction with the checklists in Part X.

Keep top of mind that claims can be made against the estate during the six month period from the will-maker’s death. You are entitled to delay paying legacies during that period.

Dealing with the deceased’s bank

Powers of Attorney to access bank accounts or conduct any other transactions cease to have any effect immediately on the deceased’s death.

Most banks will release funds from the deceased’s account for this purpose, prior to probate of the will. You will need the original funeral tax invoice or receipt. If there isn’t enough money in the account the bank may make a partial payment. Funeral directors will charge a fee to wait to be paid until after probate has issued.

Any joint accounts can continue to be operated by the surviving account holder or closed so that the survivor receives the entire proceeds.

Term deposits should normally be left to run the course of their investment to maximise interest return. However if the bank will permit it, they may be terminated early to provide cash if the deceased’s surviving family is in urgent need.

Accounts in the deceased’s sole name are strictly only able to be released to an executor on production of a copy of the Supreme Court probate. Banks make exceptions for balances below about $20,000 and will release the funds to a beneficiary upon receipt of a written indemnity from the beneficiary to re-pay the sum if required.

So ask the deceased’s bank what its policy is as regards releasing small balances.

If cash is urgently required prior to probate eg for the essential support of a spouse and children, the bank may require a Probate Bond that can be purchased through an insurance company. The insurer guarantees to re-pay the bank in the event a payment from the account requested by the executor is later proved to have been unauthorised, eg if a later will is subsequently discovered.

To ensure there is no unauthorised access, also ask the bank to confirm there is a hold on all relevant accounts.

Business accounts will continue to operate, if in a company name.

Debit balances of unsecured personal loans are paid from the estate’s cash. If a loan is secured over an asset that is gifted to a particular beneficiary, double check the will to determine whether the gift is made subject to the beneficiary taking responsibility for repayment of the loan attaching to it.

Property loans can usually be extended until a sale of the particular asset is realised. Interest will continue to accrue and if possible payment should be made when due. If not, notify the bank of any anticipated delay or steps being taken to sell the property.

Cancelling direct debits

Most people have numerous monthly debits eg Foxtel, movie streaming (Netflix), music streaming, cloud services, gyms, telephone, internet, insurance etc.  Ask the bank for a list of direct debits attached to a deceased’s account and request a hold be placed on the account to prevent further debits.

Direct debits on a credit card can only be cancelled by contact each creditor directly or cancelling the credit card.

Credit cards

Credit cards should be cancelled. Enquire whether the card issuer provided insurance for debit balances, in which event the estate is relieved of the obligation to pay the balance that would have been due to the issuer.

Insurance

Identify whether the held insurance policies such as vehicle, home and contents etc and notify the provider of your appointment and who is in occupation of any insured properties.

Household items

If their value is agreed, they may be taken by beneficiaries in part satisfaction of their estate entitlement. Otherwise a sale to a second-hand dealer or via gumtree is a common practice. If the beneficiaries agree, they may be given to charity or dumped. Money collected should be recorded and banked as estate funds.

Nursing home deposit

Contact the institution to enquire as the to the procedure required to be followed. If dissatisfied with its response, examine the contractual provisions that apply.

Real estate

If a property is required to be sold, the initial step is to have the property transmitted into the name of the executor “as personal representative”.

Once a buyer is found at a satisfactory price, the executor signs a contract of sale in that capacity to the third party buyer.

Because the sale to the buyer may trigger Capital Gains Tax, distribution of the proceeds should not occur until an estimate of the tax payable is obtained from an accountant.

An executor may elect to obtain a professional valuation to be satisfied of the price at which the property should be marketed for sale. It the property is to be transferred to a beneficiary “in specie”, a valuation may be necessary for CGT purposes or if the transfer is made pursuant to, for example, an equal division of the entire estate among several beneficiaries.

For property held as joint tenants, registration of the interest of the surviving co-owner as sole proprietor is a relatively simple procedure than can be performed by a solicitor.

Shares

The deceased’s shares can be sold through a stockbroker and the proceeds paid to the estate. Publicly listed companies each have their own paperwork for transmission of the shares into the name of the executor, if for example it is desired to maintain the investment.

Debt collection

The estate can sue for debts due to the deceased and can be sued.

Debt due by beneficiary

The death of the testator does not relieve a beneficiary’s liability to repay a loan that was due to the deceased at the time of the debt. This may include sums paid to third parties by the deceased on the beneficiary’s behalf and loans taken out or guaranteed by the deceased for the benefit of the beneficiary.

Such debts may of course be “forgiven” by a provision in the testator’s will to that effect or co-beneficiaries may all agree that forgiveness of the debt is to apply.

Before paying any legacy to a beneficiary, each should be given a statutory declaration to sign that among other things, confirms no such debt exists.

Estate bank account

If probate has been obtained, the executor may open a deposit account or an investment account in the estate’s name with a bank. Alternatively this can be accomplished by way of a solicitor’s trust account.

Gifts to charities

The organisation’s name as well as the particular branch intend to benefit from the gift should be clear from the will. Sometime a particular fund – eg in relation to a hospital or university – may also be specified. The executor should ensure the payment is directed precisely according to the testator’s wishes and a receipt is obtained for payment.

Most wills specify who on behalf of the organisation may issue a receipt for the bequest that will discharge the executor from his obligation to ensure it has been paid correctly. Likewise there is commonly a provision to the effect that the executor need not monitor the use of the funds to ensure they are put to the use the testator specified.

If the particular will does not so specify, legal advice should be obtained.

Cash gifts

When the estate is in a position to make them, cash gifts can be made.

Life interests

If a life estate in any asset (most often a residence) is granted in a will, the beneficiary is free to use the asset but is not able to dispose of them. Terms are usually imposed in the will such as the beneficiary being liable for the insurance, maintenance and outgoings in respect of the home; whether the home can be sold and the funds used to acquire another one; and whether the beneficiary is entitled to rent out the home and receive the income from that arrangement.

The executor is responsible for monitoring the arrangement and eventually transferring the asset to the residuary beneficiary.

Varying the distributions specified in the will

A beneficiary may for one reason or another disclaim a benefit under a will or request it be paid to another person. If it is disclaimed, the will needs to be examined to determine if the benefit is to be received by another beneficiary or other beneficiaries.

Intestacy

If circumstances arise where there is no viable beneficiary to receive a particular legacy or bequest, it will usually form part of the residue of the estate.

Superannuation

Superannuation has a fund membership component and often an insurance component payable in relation to the testator’s death.

If a valid ‘nomination’ has been completed by the testator, the fund will pay the benefits to the person specified in the nomination, not to the estate. If there is no nomination or it is a “non-binding nomination” the deceased’s spouse and children can make application for the benefits to be paid to them.

There is no role for an executor in relation to this process unless the testator has requested the executor to make submissions to the trustee of a fund to pay the benefits in a particular manner; or if there is no valid nomination and no persons who would qualify as recipients from the superannuation fund.

Contact the Trustee and/or Administrator of the superannuation fund for details about their death benefit notification requirements.

Insurance benefits

An executor is responsible for realising the proceeds of life and other insurance policies. Contact the insurer for their requirements for notification of claims. The proceeds of whole of life and other insurance benefits arising under life policies are payable to the estate unless a specific beneficiary has been nominated.

Tax

Income received by the estate including mere bank interest is taxable. Capital gains tax is payable on assets of the deceased (other than the family home) that are sold. Annual tax returns are required to be lodged and the estate is responsible for payment of the tax.

Payment to residuary beneficiaries

When all legacies and bequests have been distributed and all estate debts have ben paid or provisioned for, the remainder of the estate can be distributed.

Financial statements

In preparation for making a final distribution of the estate, each residuary beneficiary should be provided with an itemised detailed financial statement recording the assets, income, payments, intended payments and provisioned sums.

The statement should make it clear how the amount to be paid to the beneficiary has been arrived at.

Receipt and discharge

All beneficiaries should be requested to provide a receipt for amounts received that among other things, acknowledges they owe no debts to the deceased and they indemnify the executor for making the payments (including to the beneficiary) referred to in the discharge.

Closing the estate

When all debts, expenses, taxes and distributions are paid the estate is fully administered. An adequate receipt and discharge signed by the beneficiaries is a sufficient acknowledgment to the executor.

Court proceedings by and against executors and administrators

No will – Application for Letters of Administration

If there is no will, the deceased is said to have died intestate and the “rules of intestacy” apply for division of estate assets.

Property in the sole name of the deceased (or the deceased’s share of assets co-owned other than as “joint tenants”) must be distribute to a spouse and children or in their absence, to other relatives, according to the specific proportions mandated in the rules.

In Queensland, the spouse receives the first $150,000 plus one third of the residue where there is more than one child, or half if only one child. The surviving child or children share in the remaining half or two thirds of the residue.

Children may be able to bring a “Family Provision” application to increase their share of the residue, due to their financial or other need for a greater benefit.

A family member may apply to the Supreme Court for “Letters of Administration” as a consequence of which they become the administrator of the estate.

A spouse has seniority in making such application but if there is no spouse or he or she declines, a child has standing to seek the grant. Likewise a parent and in succession, more distant relatives.

A creditor may also apply if others with priority to the grant decline to do so.

An administrator performs the same role effectively as an executor.

A will but no executor – Application for Letters of Administration

If the persons named as executors have died or are unwilling to act, a family member or creditor can apply for Letters of Administration to administer the will.

The order of family member priority to the grant that applies if there is no will, is also observed in this instance.

Probate of will – Application for Probate

Probate is necessary to give the executor power to deal with real estate and bank accounts require others to deliver up control and possession of the deceased’s assets. Most banks will not allow the executor to deal with an account with a balance exceeding about $20,000 (although this varies from bank to bank).

A solicitor needs to be engaged for this process. The first step is advertising the proposed application at least 14 days before it is filed in the court. An application for probate must be accompanied by an affidavit setting out the assets and liabilities of the estate and if appropriate, valuations. Also required are the death certificate; the original Will; a description of the estate affairs and any relevant background information.

A grant of probate also protects an executor in that he or she has the assurance that the will being administered has the approval of the court. Should facts arise that warrant withdrawal the grant of probate – eg the discovery of a later will – an executor has no personal liability for having taken the steps performed.

Concerns as to will’s authenticity – Application for “solemn form” pronouncement

An executor who has  concerns as to the legitimacy of a will or its execution – for example due to the alleged lack of legal capacity of a testator or the veracity of the will-maker’s signature – may ask the court to decide the issue on the evidence produced.

A third party, for example someone provided for in an earlier will but cut out of a later one, may also make such an application. Third parties will usually preface such action by filing a caveat against a grant in the Supreme Court registry.

Medical records and statements from the persons who witnessed the will-maker’s signature are required to be obtained so their evidence as to the circumstances of the making of the will can be presented to the court. Expert medical opinion as to the mental capacity of the will maker is also often needed.

The pronouncement of a will in solemn form means its provisions cannot be subject to later contest except for fraud or the discovery of a later will.

Inappropriate executor – Application for removal

A beneficiary may attempt to bar an executor from seeking a grant of probate by seeking an order that the person be “passed over”. The order must be obtained before the grant of probate is made. A court will only be persuaded that a named executor be passed over, if genuine reasons for the executor’s disqualification are placed before the court.

The court may also order removal of an executor or a testamentary trustee from their position due for example, to their ill-health or misconduct.

Challenging the Executors Actions – Application for review

If you are a beneficiary under the will and are unhappy with the Executor’s actions ABA Lawyers can represent you to further your interests.

Delay – Application for removal

The executor must administer the estate expeditiously and should report progress to beneficiaries regularly, for example on a quarterly basis. Failure to do so can be a ground for removal of the executor from the position.

Long Term Trustees

Every executor is a trustee of estate assets for at least the period until assets are sold and net proceeds are distributed.

Some wills allow for the executor or another person to be appointed as trustee for the performance of extended responsibilities in respect of estate assets.

An executor or trustee may be appointed to administer a life estate and thereafter distribute assets to residuary beneficiaries. Or a trust may be created with discretionary or protective powers in respect of assets.

The purpose of the trust and powers and duties of the trustee are specified in the testamentary trust created by the testator’s will.

Trustee’s roles are also regulated by the Trusts Act.

Generally a trustee must protect the assets and the beneficiaries’ financial and legal interests. In addition to managing their day-to-day financial needs, they should actively pursue all income opportunities and ensure the estate does not suffer financial detriment.

This includes the performance of all executorial responsibilities referred to in Parts I and II of this Guide.

Because the duration of the trust can extend for generations, management of assets and investments; ensuring assets are adequately maintained and insured adds an extra level of responsibility.

Payments for the maintenance and education of infant beneficiaries must be considered and decisions taken. These measures must be measured against the importance of preserving the capital of the trust so that it can meet the testator’s objective for the trusteeship period.

Trustees cannot delegate their powers but may and should seek professional assistance particularly in relation to investment decisions.

Some procedures that long term trustees should put in place include the following:-

  • Appoint real estate agent to manage maintenance and condition of properties;
  • Appoint real estate agent to manage collection of rents;
  • Establish half-yearly inspection and reporting procedures in respect of properties; and
  • Establish procedure for preparation of annual accounts and tax returns if required.

 

A common term during estate administration is ‘Probate‘. To learn more, about it, click here. It is important you understand Probate and what it means. Our friendly staff is here to guide you through this difficult time and ensure you are well informed during the proceedings.

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