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What it means to be the executor of an estate
When it came time to make her own Will and appoint an executor, Anita knew exactly what to do. She had learned the hard way.
Some years earlier, her father, Frank, had named her the executor of his estate, and Anita, the eldest of his three children, was honoured that her father had trusted her with the role. Anita was born to Frank and his first wife, and Frank had another child in each of his two subsequent marriages. Anita and her siblings, raised in different households, were never close, and at the time of Frank’s death, Anita was the only one living in New Zealand.
Anita never anticipated that the role would consume 18 months of her life – while she was holding down a full-time job and raising children – and lead to a legal claim against her. After probate was granted it took her more than a year to gather a full picture of all her father’s assets, including land, shares and bank accounts held overseas, and to discharge all responsibilities to the IRD, such as date-of-death accounts and her father’s final tax return.
Then there was the family infighting: the fractious relationship between Frank’s three children and their mothers meant Anita wasn’t trusted to act objectively in the interests of the beneficiaries (Frank’s three children and his third wife). There were two major complications: a challenge to the Will by a fourth woman – not his legal wife – with whom Frank was living at the time of his death; and the distance of Frank’s youngest child, who was working in Africa and frequently out of communication range.
All the wrangling ultimately led to a legal challenge against Anita by her half-siblings, and she had to appear in court. Anita sought costly legal advice at her own initial expense, and her role as executor was unpaid. Only some of her legal costs were found to be justified and were therefore reimbursed by the estate, and other costs ended up being argued in court. It came as an unpleasant surprise to Anita that her role as executor carried significant financial risks.
In the midst of it all, Anita promised herself she’d never put her own children through this, and approached a professional trustee to make her Will, serve as executor, and create a comprehensive estate management plan with rules for the ultimate execution of the estate. To ensure that her children (as beneficiaries) would always be fully informed but protected from risk, Anita appointed them advisory beneficiaries.
She also learned that had she understood the full weight of responsibility she was taking on with Frank’s estate, she could have legally renounced the executorship before probate was granted, and – with the consent of her half-siblings – handed it over to a professional trustee.
Deciding on an Executor
When you write your Will, one of the most important questions to answer is who will be your executor, the person you appoint to be your personal representative upon your death to ‘execute’ or carry out your wishes, according to the terms of your Will. This role can be fulfilled by any adult you trust and think is up to the job – a family member, a friend or a professional adviser. Perpetual Guardian Head of Legal Personal Client Services, Richard Broad, says it’s not uncommon for people to underestimate the commitment of taking on the role of executor, whether they are appointing someone or being appointed.
“The work of an executor is time-consuming and difficult, and it does carry a number of risks. It also requires some specialist knowledge. Quite understandably, people often want to give the job to someone they trust implicitly to tie up all the loose ends of their life exactly as they specified. People usually choose their spouse or another family member, a close friend, their lawyer or accountant, or a professional trustee.”
The nature of the executor role means many people choose to appoint a professional trustee rather than a friend, family member or other adviser. According to New Zealand law, one or more people can be named as the executor of a Will, and they must be over 20. In most cases, the executor (if not a professional trustee) will require legal or other professional representation or advice, and the associated costs and liabilities will need to be met by the estate.
In a 2016 nationwide survey of more than 1,200 New Zealanders conducted by Perceptive Research, a majority of respondents – 62% – who were considering making a Will said they would appoint a professional trustee company as executor; 11% said they would use their lawyer or another professional; 9% said their spouse or partner; 5% said their child or children; 4% would appoint a sibling; and 9% were unsure who they would choose.
Mr Broad says, “Something to remember when making this decision is how much the executor is likely to be personally and emotionally affected by your death. A person close to you may find the heavy responsibility of executorship too much to bear while they are grieving, they may struggle to remain objective, and they will almost certainly need to call on the help of a lawyer and accountant.
“A lawyer or accountant who is experienced in estate management may well have the requisite knowledge to serve as your executor, but they will charge on a time basis, which can become costly. Also, they will age as you do and ultimately retire, and a replacement executor will have to be appointed. This entails signing a new will.”
The duties and obligations of an executor may include:
- Organising the funeral
- Filing for probate with the High Court
- Ascertaining and differentiating between the beneficiaries and perceived beneficiaries of the estate
- Ensuring that the beneficiaries’ needs are protected against any avoidable hardship
- Handling Inland Revenue formalities for the deceased and the estate
- Dealing with claims against the estate, both legal and financial
- Distributing assets and/or transferring ownership to beneficiaries according to the terms of the Will, and ensuring all assets are secured and protected by insurance as necessary
- Holding assets in trust for a time (for example, if a beneficiary is underage)
- Selling assets (to cover debts, or to distribute the estate)
Mr Broad says, “It’s especially important to note that the executor is personally liable for any mistakes made in the course of execution, such as distributing assets of the estate before probate is granted, failing to pay outstanding debts, or not insuring assets.”
Why appoint a professional trustee company such as Perpetual Guardian as executor?
- Your estate will be promptly administered because of special legal privileges given to trustee companies, so the process is over as quickly as possible.
- A professional trustee will act impartially between interested parties, therefore avoiding conflicts which may arise between grieving family members. They can also work in partnership with an advisory trustee of your choosing (a family member or friend).
- All work is done in-house, from administering the estate to dealing with all legal, financial and tax requirements and regular reporting to all the beneficiaries. This ensures everyone is kept informed and there is a coordinated approach between all professionals.
- A trustee company exists in perpetuity, which means it will be there when the time comes to administer your estate – which may not be true of a lawyer, family member or friend.
- A professional trustee has access to various international agencies, allowing for faster administration of overseas assets.