What is an Executor?
An Executor is the person appointed under a Will to “administer” the Estate. Administration of an Estate is the legal term describing the role the Executor takes on.
Role of an Executor
When making a Will, it is best you discuss with your proposed Executor/s your intention to appoint them, and obtain their consent to the role – this allows them to consider the responsibilities, and whether they feel able to assume the obligations that will imposed on them. Seeking the Executors’ consent decreases the likelihood that they will renounce the role in the future.
The role and its responsibilities of being an Executor are not to be taken lightly, with Executors assuming strict legal liability for acting in accordance with the law regarding how the Estate should be dealt with. Responsibilities include:
- Obtaining probate of the Will, if required. Probate is legal term describing the procedures a Court takes to declare a Will valid, and confirm the appointment of the Executor;
- Determining the Estate’s assets and then protecting those assets until they are sold or distributed, including ensuring the assets are appropriately insured, and having income-producing assets continue to produce efficiently;
- Calculating debts and and other liabilities (including tax liabilities), and paying those out before distributing the Estate’s assets; and
- Locating and notifying beneficiaries of the gifts they are entitled to, and providing those beneficiaries with an accounting of the Estate, including the Estate’s financial statements.
If an Executor does not properly fulfil their responsibility, even if unintended or through lack of knowledge, then the Executor could find they are personally responsible to make up any loss the Estate may suffer. For example, if the Executor doesn’t properly insure some assets, and those assets are stolen or destroyed, then the Executor may be personally responsible for contributing the value of those assets to the Estate.
Obligations to the Tax Man
One of the last things on the mind of the Executor and the beneficiaries of the Estate may be their obligations under tax law, but it should be thought of, and dealt with, early in the administration of the Estate. Taxation issues to consider include:
- Does the Estate need to lodge a (final) tax return (or several years tax returns) for the Estate?;
- Unpaid wages and associated entitlements that were owed to you before you died;
- Capital gains tax liabilities for assets you may have sold before you died, or that the Executor sells;
- Income the Estate may receive after the death;
- Tax credits/refunds and prior tax liabilities; and
- If you were involved in business prior to death, depending on the legal structure you used (sole trader, partnership, companies or trusts), that business may form part of the Estate, including the need for its continuing management.
Renouncing being an Executor
A person can renounce (turn down) the role of Executor. A well drafted Will should include options for this eventuality. Alternatively, the Court will appoint a government officer (for example, the State’s Public Trustee) to administer the Estate. That government-appointed officer will charge the Estate a fee for their administration.
If an Executor does wish to renounce the role, they should do so before taking any actions regarding the management of the Estate – once they become involved in the management of the Estate they will be liable for that, and it may be more difficult to renounce the role.