Thinking | 23 May 2018
Guide to estate administration and acting as an executor
Dealing with the estate administration process can be a difficult time, especially after the recent loss of a loved one. The process and procedures can often be daunting, especially as most people have never acted as an executor.
Many people have heard of the term ‘executor’, however, do not know what an executor does. For most first time executors, they will find themselves asking ‘what does an executor do’, and ‘what are my responsibilities’?
Who is the executor and do they have to act?
An executor is the person nominated in a Will to administer the estate of the Will maker after they die. Most people nominated as an executor will act in that role. However, in some cases where someone does not want to act, they can renounce their appointment, leaving the remaining executors to act.
Are professional qualifications required?
No professional qualifications are required to act as an executor. If there are complexities with an estate, the executor is able to obtain assistance from professionals.
What do I do as an executor?
The duties of an executor include:
- locating the Will (a copy will normally be found with the deceased’s ‘important papers’ or with their lawyer and financial advisors)
- acting in the best interests of the beneficiaries of the Will
- protecting the assets of the estate (such as maintaining any insurance policies on any estate assets)
- determining the assets and liabilities of the estate applying for a grant of probate and
- collecting estate assets, paying any liabilities and distributing the estate in accordance with the Will.
Why do you need a grant of probate (Grant)?
The Grant provides formal acknowledgement from the Supreme Court that the Will was the last Will, and that you are appointed as executor. The Grant also provides the executor with legal title to deal with the assets of the estate.
Many institutions require a Grant before they will transfer assets over a certain value (often $25,000), or where there is real estate.
What assets are in an estate?
As part of the probate application process, an inventory of assets and liabilities is submitted to the Supreme Court. This document sets out the date of death values of any assets and liabilities solely held by the deceased.
It does not include assets that are:
- jointly held with another person (which pass to the surviving joint owner) and
- held in trusts, such as a family trust (which continue on after death).
It also does not include superannuation death benefits or life insurance benefits unless they were left to the estate or the ‘legal personal representative’.
The first step in the probate application process is to collate information from institutions that hold assets solely owned by the deceased and confirm the date of death values (usually by writing to them and providing certified copies of the Will and death certificate).
What documents are submitted to the Court?
Once the date of death values of assets and liabilities have been determined, the next step is to advertise on the Supreme Court website that you intend to apply for a Grant. This must be done at least 14 days before the application is made to the Supreme Court.
When 14 days have passed from the date of the advertisement, a number of documents are submitted to the Supreme Court to apply for a Grant, including:
- an affidavit of the executors which includes the liabilities of the estate
- an inventory of assets (mentioned at 5 above)
- an originating motion and
- other supporting material.
It generally takes two to three weeks to receive the Grant from the date the application is lodged with the Supreme Court.
Timing of distributions of the estate and collecting estate assets
No distributions can be made from the estate until after the Grant has been obtained.
Some executors will deal with the various institutions directly once they have received the Grant, and others prefer to use the services of their lawyer or other professionals to assist.
Potential issues for executors
Possible claims against the estate
Any person who believes they did not receive adequate provision for their proper maintenance and support under the Will can make a claim for further provision. Any claim must be made no later than 12 months of the date of death of the deceased.
Generally, you may distribute assets of the estate if:
- the assets are distributed at least six months after the date the deceased died and
- you have published the notice of intended distribution of the estate after Probate has been granted and
- the time specified in the notice is not less than 30 days after the date it is published and
- the time specified in the notice has expired and
- at the time of distribution, you did not have notice of any application or intended application by any person(s) for provision to be made to them from the estate.
If an executor distributes all of the estate before complying with the above actions, the executor can potentially be personally liable. If there is a concern about a claim, it is best to comply with the above actions.
The executor is also required to finalise any tax returns for the deceased, as well as for the estate (if required). The best approach is to seek advice once the assets and liabilities of the estate have been determined to ensure any tax liabilities are dealt with before the estate is distributed.
Communication with beneficiaries
All beneficiaries should be identified and advised of their entitlements under the Will from an early stage in the administration of the estate.
Issues can arise where beneficiaries’ expectations regarding the payment of entitlements are not realistic and they expect an immediate payment of their entitlements under the Will.
In most cases, payments of entitlements will not occur until 6 to 12 months from death. Keeping the beneficiaries informed regarding when they can realistically expect a payment can avoid many issues.
Please contact us with any questions and to arrange a meeting.
You might be also interested in...
Private Clients | 23 May 2018
Discretionary trusts are usually established for tax and asset protection reasons. Given your client’s trust may hold a significant proportion of their wealth, it is important that the deed is up to date from a tax, asset protection and succession planning perspective.
Private Clients | 23 May 2018
Under the Social Security Act 1991 (Act), a trust can be established with assets up to $657,250 (as at 1 July 2017, indexed annually), for a severely disabled person (Principal Beneficiary) without affecting their social security benefits.