An executor is a person who has been appointed in a Will to administer the will-maker’s estate and carry out the Will-maker’s wishes. They are often described as the deceased person’s ‘legal representative’.
While the role of an executor sounds simple enough, the procedure of estate administration is full of potential pitfalls.
We often see executors, in the process of carrying out their responsibilities, make mistakes that expose the estate to litigation, increased tax liability and other potentially serious consequences.
Obtaining proper legal, accounting, and financial advice from the outset is essential if an executor wants to minimise their potential liability.
Below are 7 some common mistakes we see executors make when administering a deceased’s estate:
1. Failing to identify issues with the Will
Executors may fail to identify some issues in relation to the Will, that if not dealt with at the outset, can lead to problems down the track.
- the original Will is missing or lost, and the executor only has a copy;
- assuming the deceased died without a Will without making reasonable enquiries into whether a Will actually existed;
- reasonable searches for any later Wills and/or Codicils have not been made;
- the Will is not dated, or the date is inconsistent;
- the Will is damaged, is not bound, or has been taken apart;
- the Will is not signed correctly by the Will-maker and two witness.
An executor dealing with an estate without professional advice on the Will itself, can lead to complications, disputes, and delays.
2. Failing to investigate all assets and liabilities of the estate
An executor is responsible for identifying, locating, managing and protecting all the assets of the estate until they are distributed to the beneficiaries.
The executor is also responsible for ensuring all liabilities of the estate are paid from estate funds before distribution is made to beneficiaries of the Will.
The value of the assets held by the deceased, may also answer the question on whether a grant of probate will be required.
A grant of probate is a legal document that confirms the authority of an executor (or executors) to manage the estate of a deceased person in accordance with the deceased’s Will.
If the holder of the assets will not release them without a grant of probate, then an executor will need to apply to the Supreme Court for a grant.
3. Failing to keep records
An executor has a multitude of tasks to complete and it is important they stay organised.
It is an executor’s duty to keep detailed records of everything that they do on behalf of the estate. Unfortunately, we sometimes see executors failing to keep detailed records of what comes in and what goes out of an estate.
At the conclusion of an estate, the executor must provide an accurate account of all money received by, and paid out of, the estate to the beneficiaries
Having an account of all expenses will also assist if a beneficiary objects to an executor being reimbursed for expenses they have incurred personally in their capacity as executor.
4. Mixing estate funds with personal funds
Some executors make the mistake of mixing estate funds with their own funds. This should not occur under any circumstances.
An executor is responsible for holding the estate’s funds in trust. Accordingly, an executor should be opening a trust or estate account for the funds.
If any loss is caused to the estate by the executor mixing the funds with their personal funds, this is likely to result in a personal liability for the executor.
5. Distributing money to the beneficiaries too early
While an executor is responsible for administering an estate, they should keep in mind that they are holding the assets on trust for all beneficiaries of the Will.
An executor at times can come under pressure from the beneficiaries to distribute available funds from the estate before all the assets have been collected and debts are paid to keep beneficiaries happy.
However, distributing assets early can cause significant problems as it can be very easy to lose track of who has received what and how this will affect the remaining amounts.
It can also cause complications if future costs were to arise including a tax liability, any unexpected creditors or claimants for provision come forward. In these situations, if the estate has been distributed too early, there is the risk that the executor may be personally liable.
6. Delaying administration of the estate
On the other hand, delaying the administration of an estate is equally as risky.
An executor who does not administer an estate in a timely manner or who generally does not act in the interests of the beneficiaries, may be at risk of being removed from their position.
The risk of removal will depend on the extent to which the executor has delayed the administration of the estate.
An executor should administer an estate in a timely manner, aiming to complete administration of an estate usually within 12 months from the date of death (subject to any administration issues such a tax return etc.).
7. Acting as an executor without legal assistance
In some cases, seeking advice in relation to an estate will cost less in the long run. For example, if there are issues in an application for probate, the Court may return your application, or ask for further information, which could then lead to further issues.
This in turn, may result in a dispute between the beneficiaries and the executor as to the time to complete tasks leading up to the final distribution of the estate.
What should I do if I need help avoiding the seven common mistakes?
Being an executor can be an onerous task and a role that can carry personal risk.
Don’t get caught out by these seven common mistakes outlined above. If you wish to get a better understanding of your role and responsibilities as an executor or would like some guidance throughout the estate administration process, please do not hesitate to contact us.