If you’ve been appointed as an Executor of someone’s estate, do you know what your duties are? The task of being the Executor is not always straightforward, and coupled with the emotions of having lost a family member or friend; the task can seem even more overwhelming.
The Role of an Executor
An Executor is the person appointed under the Will to administer the Estate after the Will maker (i.e. the ‘Testator’) has died. Depending on the size and complexity of the Estate, the assistance of a legal practitioner may or may not be required. Whatever the case, below is a step by step guide on what an Executor’s duties will include:
1. Locating the Will
The first thing is to locate the original Will. A good place to start might be at the deceased’s home or at the deceased’s lawyer’s office, because it is common practice for a Testator to store their Will at the firm which prepared it. Once the original Will has been located the Executor can then confirm who the beneficiaries are.
2. Funeral Arrangements
The Executor needs to be engaged in the process of arranging the funeral. Refer to the Will to see whether the Will stipulates particular funeral arrangements and directions with respect to the disposal of the body and if so, those instructions will need to be followed. In addition, it would be prudent to notify the deceased’s family of the funeral arrangements so that there is no misunderstanding between the wishes of the deceased and that of the family.
Check whether the deceased had pre-paid for their funeral, as that may then be linked to a particular funeral service provider. If there has been no pre-payment, the cost is listed as a liability to the Estate. There are a number of ways in which the Estate can pay for the funeral. Some funeral homes are willing to wait until there are available funds in the Estate before getting paid. Another option is to take funds from the deceased’s bank account to pay for the funeral. Even if Probate hasn’t been granted, depending on the bank, most banks are prepared to allow access to the deceased’s account to pay for the cost of the funeral and any other expenses that must be met prior to Probate being granted. After that, the bank account is usually frozen until a grant of Probate has been obtained. Another common option is for the Executor to pay for the cost out of their own funds and then wait to be reimbursed from the Estate.
3. List of Assets
Look to see whether the deceased has left a list of assets. Part of an application for a grant of Probate involves the preparation of a list of assets and liabilities. People who could assist you compile the list include the deceased’s family, accountant and/or lawyer. It is important to note that any assets that the deceased held jointly with another entity or person do not form part of the Estate.
The list of assets could include, but is not limited to the following:
• Real estate;
• Motor vehicle;
• Bank accounts;
• Furniture and other household effects;
• Shares and other investments;
• Insurance policies; and
• Employee entitlements.
Other relevant questions for the purposes of creating a list of assets and liabilities are whether there are any debts that are owing to the deceased and whether the deceased owes debts to anyone.
The relevant documents which would assist with the list of assets and liabilities include any birth and/or marriage certificates, any Certificates of Title to real estate (which may be held with the bank if the property is mortgaged), bank statements (including home loan statements), leases of real estate or plant & equipment, tax records, insurance policies, superannuation policies and share certificates. The deceased’s financial/tax adviser or a lawyer may be able to assist you with your enquiries.
In relation to superannuation, there are generally two approaches. If the deceased had a self-managed superannuation fund check whether they had a binding nomination and review the directions under the binding nomination to see whether the Estate is named as a beneficiary. If so, the assets from that super fund will form part of the Estate and be dealt with according to the terms of the Will. If on the other hand, the deceased did not have a self-managed superannuation fund, then the funds held in their superannuation fund will go directly to any nominated beneficiary. These funds do not form part of the Estate.
4. Notification to Organisations
Part of the process would include notifying certain organisations of the death of the deceased and a simple letter including a certified copy of the death certificate is usually sufficient. The organisations requiring notification includes the deceased’s lawyers and financial advisers, the bank, utilities service providers, phone company, insurance companies, share investor companies, the ATO, Medicare Australia, Superannuation company and Transport SA (with respect to their motor vehicle).
Probate is a court order which confirms that the Will is valid and that the persons nominated as the Executor is the person who is entitled to administer the Estate of the deceased.
Not all Estates require a grant of Probate, but as a general rule, some banking institutions require a grant of Probate before you are entitled to access the deceased’s account. If the deceased owned real estate in his or her name only then Probate will be required before you can deal with land. The process of obtaining Probate includes an application to the Supreme Court and the payment of a filing fee.
Once Probate is granted, you have the authority to deal with the assets and liabilities of the Estate in accordance with the terms of the Will.
6. Pay Debts and Lodge Tax Return
Before a distribution can be made, the Executor must pay the Estate’s debts, which are set out in the list of assets and liabilities that was prepared and lodged as part of obtaining the grant of Probate. The Executor may also need to lodge a tax return on behalf of the deceased or the Estate (if the Estate continues to earn income, such as rental income), up to the date of death and then to the end of the financial year(s). Depending on the complexity of the tax returns, the Executor may need the assistance of an accountant. Distribution of the assets can only occur once the tax liabilities have been paid.
7. Claims against the Estate
In South Australia, claims against the Estate can be made by various persons pursuant to the Inheritance (Family Provision) Act 1972. The general list of claimants include, but is not limited to, the spouse of the deceased; a person who has been divorced from the deceased person; the domestic partner of the deceased person and children of the deceased. The window of time to make a claim is 6 months from the date of the grant of Probate. When a claim is made, the Court will determine whether the applicant has been left without adequate provision and if that is the case, the Court will then determine what would be an adequate provision.
The Executor will be notified of any claims against the Estate and when faced with one, will need to seek the assistance of a lawyer to advise accordingly.
8. Distribute the Estate
The final step in the process is to distribute the assets of the Estate. This might involve the transfer of real estate and shares. If there are infant beneficiaries or beneficiaries who have not yet reached their preservation age (as per the Will), then their share is held in trust and the Executor is required to continue to administer the Estate until such time as a full distribution can be made.
9. Costs of Administering the Estate
The costs of administering the Estate which are all paid for by, or recoverable from the Estate typically include:
- The commission paid to the Executor/Trustee of the Estate if the Will includes a ‘charging clause’ which stipulates the remuneration paid to an Executor/Trustee who is acting in his or her professional capacity;
- The cost of engaging a lawyer and/or accountant to assist with the process;
- The costs of the funeral;
- The filing fees for Probate; and
- Registration fees to register transactions involving land.
The role of Executor can be time consuming and challenging. If the Executor cannot for whatever reason confidently administer the Estate the Executor should engage the services of an Estate Lawyer who can assist the Executor through every stage of the process.
For further information, please contact the author.
This article is posted in Adelaide, South Australia by Tri-meridian Corporate & Commercial Law and is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. We do not accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your professional adviser.