Choosing an executor
Your will appoints the executors and trustees who hold, manage and distribute your assets after your death, in accordance with the directions given in your will. When making a will, choosing the right executor is an important decision.
You can name one or more person(s) to act as executor(s) and trustee(s). Anyone can to be your executor. In Australia the executor must be 18 or older and in New Zealand 20 or older.
Before appointing anyone as an executor you should first ask them if they are prepared to take on that responsibility after your death. The duties expected of an executor can be difficult, demanding and time consuming.
In most cases, an executor will require legal or other professional representation or advice which of course involves costs and liabilities to the estate. Your chosen executor should be aware of the legal responsibilities and have some understanding of accounting, business practices and taxation matters, particularly in Australia where capital gains tax is applicable.
Your partner will normally be appointed by you as the sole executor and trustee if they survive you and you are leaving all of your assets to your partner.
If your partner dies before you your adult children (i.e. those aged 20 or over) will normally be appointed by you as the only executors if you consider that they are then old enough and wise enough to carry out these responsibilities.
You can also appoint one or more adults whom you trust (either in addition to or instead of your partner and/or children) to be the executors and trustees of your will. Examples of when this is desirable are:
- • If your partner or children need help to carry out the terms of the will, or
- • If you believe there should be an outside person to make sure that the terms of your will are followed.
An outside trustee can also assist in sorting out any disagreements that may arise between the trustees. Choices of outside trustees include:
- A close family friend or friends.
- A relative or relatives.
- Lawyers and/or accountants. You can appoint "the partners of" a law firm or accounting firm as trustees e.g. "the partners of Ross Holmes Lawyers". Professionals usually charge on a time basis to administer your estate.
- Statutory trustee companies such as Public Trust, Guardian Trust, and Trustees Executors. You need to obtain details of their estate administration costs, as some trustee companies charge a percentage of the value of your estate, plus other charges. Such fees are often more than lawyers would charge.
Duties of an executor
An executor must carry into effect the provisions of the will: 17 Halsbury's Laws of England (4th ed, 1976) at para 702, Laws of New Zealand, Administration of Estates (Vol 1) para 189 and Re Chamberlain 1958 NZLR 1176. This involves:
- Contact the beneficiaries. The executor locates the will and immediately contacts the beneficiaries and any relevant business associates.
- Look after the estate. The executor must ensure that all assets are safe and arrange Insurance protection when needed. If the deceased has left property or Investment Solutions that need managing it is the executor's responsibility to arrange for them to be managed. The needs of the beneficiaries must be assessed and measures taken to make sure that they do not suffer any unnecessary financial hardship.
- Identify assets and liabilities. The executor must identify all assets and liabilities. Each asset and liability is then checked by obtaining written confirmation from banks, financial institutions, Insurance companies, share registers, titles offices and creditors. In Australia (but not in New Zealand) each asset must then be valued by obtaining sworn valuations from licenced valuers, writing to relevant institutions, looking up stock market prices or by any other appropriate means.
- Obtain authority to administer the estate. Before an estate can be administered, the executor must apply to the Supreme Court of the relevant Australian State or the High Court in New Zealand for the authority to deal with the deceaseds estate. This is referred to as obtaining Probate of the Will if there is a will or obtaining Letters of Administration if there is no will.
- Complete income tax returns. Before an estate can be distributed to beneficiaries Taxation returns need to be completed for the deceased person down to the date of his or her death, and for the estate. This means that the executor will have to obtain details of all income earned during the current financial year and past years, if the deceased failed to lodge a return. Taxation needs to be paid. In Australia (but not New Zealand) it is necessary to obtain a clearance from the Australian Taxation Office. In most cases in Australia, the calculation of Capital Gains Tax is involved.
- Pay all debts.Creditors, funeral expenses, income tax, fees for administering the estate and out-of-pocket expenses must all be paid. This often requires the executor to sell some assets. Beneficiaries may choose to provide funds to cover these expenses so as to keep the assets of the estate intact.
- Divide the estate.When all debts have been paid, the executor is then free to distribute the remaining assets according to the directions laid down in the will.
- Establish trusts required by the will. The final role of the executor is to establish trusts required by the will. Trusts are required if the beneficiary is under 18 years of age or mentally incapable, or if there are specific instructions in the will. Such trusts need ongoing administration.
The executors position ceases and they become known as a trustee when the estate has been fully administered, in the sense that all the debts and liabilities have been discharged and it has been established what the balance of the estate is: Laws of New Zealand, Administration of Estates Vol. 2, para 463.