Podcast: Choosing an Executor

Welcome to episode three of Executor Insights. I’m Teresa Catalano and joining me today is Ariana Kim.

Hi, Ariana. Hello, how are you, Teresa? I’m well, thank you.

This podcast series is designed to provide insight into the responsibilities of executors, highlight common traps and pitfalls, and share practical tips.

In this episode today, we’ll be looking at key considerations when choosing an executor. Very important

So, Arianna, what are the key considerations when choosing an executor?

Thanks, Teresa. When appointing an executor, it’s really important for our client to discuss their matter with their solicitors, because the choice of executor can have significance.

The Implications for the administration of the estate, especially where the estate is really large, complex and involves multiple beneficiaries. So as you can imagine, every estate is very unique in form and substance and it is therefore very important for the client to take into account so many different factors and what are the potential issues that may arise from appointing an unsuitable person as the executor of the will.

You should consider a number of different factors including the age and health of the executor, the history of the relationship between the executor and the beneficiaries, and also the complexity of the estate.

Yeah, all very important considerations, aren’t they? And we see so many things go wrong often, don’t Absolutely, Teresa. So let’s deal with each item in turn, Teresa.

One of the things that we often see play out is where there’s conflict between who the executor is and who the beneficiaries of the estate are and if that executor perhaps has an unrealised debt that the deceased may or they allege or assert that the deceased owed them. So there could be conflict of interest for that executor then being appointed in that role to represent the beneficiaries’ interests, but then they also want to represent their own interest in trying to reclaim a debt.

For example, we had a matter once where the executor was trying to assert that the deceased person owed him $80,000 and was not willing to get a grant of probate or to call in the estate or do anything in the needs and the interests of the other beneficiaries. without getting this money back. So that caused a real issue didn’t it for the estate.

So again, think carefully about who the beneficiaries are and what potential loans or debts there are with that nominated executor as to who you then appoint in that role.

Another key consideration is how complex will the estate be to administer? Is there just a property and just a bank account? So not too complex. Or are there many corporate entities?

Is there a business? Things of that nature that often require a certain level of financial or legal acumen and then you may then choose to appoint someone that’s got those skill sets, whether it’s in your personal life, a friend or a professional executive may then be more discerning.

The other factor that I can share with you guys is that it’s really important for a client to consider the nature of the relationship between the executors and beneficiaries as well.

If your family members do not historically get along, then it’s probably not appropriate for you to appoint that executor to administer the estate. For example, in blended families, clients may wish to appoint their children from their previous marriage as joint executors rather than their current partner. So potential issues may arise if the children act as trustees of a life interest, for example, in one or more of the person’s properties.

Because this arrangement may create friction between the children from the previous marriage and the partner, who is given the life interest because the trustees, the kids, are responsible for monitoring the partner’s use and maintenance of the property until his or her passing. So this arrangement will generally create some issue because that life interest runs for as long as the partner lives, pretty much.

Well, that’s right. Yeah. And the other factor we should consider is if the executor, him or herself, intending to make a powerful claim against the estate,

That executor may not be appropriate to act as the executor. Isn’t that right?

That’s right. Arianna, just for our listeners today, what is a part four claim?

A part four claim can be made by an eligible claimant under the law who is seeking pretty much further provision from the estate.

Yes, we see more and more of those particularly in blended families, don’t we? Absolutely. So if the executor who’s appointed under the will is seeking further provision from the estate, that person may not be suitable to represent the estate in the Par 4

And another factor is the executors or nominated executors’ age and health. So if you’ve got someone who’s quite elderly, it’s probably going to be quite taxing on them to carry out this role. So think about that and at least look at perhaps nominating a tier of alternate executors who can act as well. Also, if someone was nominated at the time of your death, they have then lost capacity. They can’t apply. They’re not allowed to legally apply for the grant and they’ll be passed over.

So again, that’s important to look at nominating alternate executors who can act in case the first nominated person can’t

Another factor is integrity. You have to trust the person that you’ve nominated in that role. They don’t have to, again, even though we said before, it is helpful if they have some sort of financial or legal or business acumen. They certainly don’t need to obviously because they can employ advisors to assist them in that regard. But what you do absolutely need them to be is trustworthy and honest and you want them to act in the best interests of the estate and the beneficiaries. know, people of bad character will often tie things up in the…

Yeah. the other fact that we should consider is executors, they must understand that they act for the estate, for the beneficiaries. So executors, they’re the legal person representatives of the state and they must remain very neutral and fair and especially when there are multiple beneficiaries involved with competing interests. So if the executive favors one of the beneficiaries over the other, then that executive may be in trouble.

And also, Theresa has briefly discussed earlier on that when the estate is very complex, the executors are expected to understand the financial complexity involved. this, you know, this involves managing investments, paying debts, dealing with different properties in the estate. So a basic understanding of finance, accounting or access professional advice is very essential.

Absolutely. That’s another factor, proximity to the estate. So, I mean, you can have an executor who’s resident interstate to where you were living or overseas, no issue, but that can cause some practical impediments, can’t it? To getting things done in a timely manner. The other thing to consider is a court, but only on application, obviously.

Can, once a grant has been obtained by someone who’s outside of Victoria, for example, for more than two years, remove that person as an executor. So these are all important factors to consider as well. And you may recall in episode two of our podcast series, we talked a little bit about the tax implications that might result from having an executor who is a non-resident of Australia, because that then causes the estate to have non-resident tax status. So it will cause the estate to be taxed in that way, not ideal and has implications for the beneficiaries in that regard. So again, think carefully about whether your executor is or at least one of them is a resident for tax purposes.

So that takes us to our next question, Ariana, and looking at alternate executors. So I know we’ve briefly touched on this, but is it prudent to appoint at least one alternate executor if not more when you’re nominating executors?

Yeah, so in the context of estate planning, I think it’s always prudent to appoint more than one executor because you don’t know what will happen to that executor. You know, that executor might have moved overseas or he could have some health issues which prevents him from acting as the executor. So it’s always sensible to have a backup executor. So.

he number of backup executors you might want to have, it really depends on your circumstances. But if there is no alternate executor appointed in your will, then the executor of the deceased executor will act in that place. Yeah. Yeah. And I guess we have to be careful about the incidents or the higher incidents now of executor disputes.

Yes. So often we can’t even get past or can’t even get to the probate process and that let alone deal with the estate assets or anything because let’s say there are two appointed executors that don’t get along. That’s right. So again, important considerations and we’ve certainly touched on this in our last two episodes as well, but important things to consider. Yes, and that really results in increased costs and delays in the administration of the state. So Theresa, if the executors are not acting.

In a professional way, can you then have that executor removed?

Yes, look, Arianna, it is quite tricky, as you know, obviously, to get an executor appointed under a will removed. And the court doesn’t lightly interfere with what we call the deceased person’s freedom of testation. Their freedom, their ability to appoint who they want as their beneficiaries and who they want to control their estate.

So there would need to be certain grounds for their removal. You know, one might be that conflict of interest issue we were talking about before, or if they’re a non-resident, or if they’re bankrupt, you know, potentially, or if they’re doing the wrong thing. Or if they misappropriated the estate funds. the person was alive. Yeah. you’re power of attorney and you’re doing a lot of that at the moment for clients.

So absolutely all of those reasons will certainly justify a removal application. And we’ll probably see more of these, won’t we, Ariana?

Yes. The higher incidence of elder abuse now. Absolutely. Unfortunately. So again, those things aren’t great though, because any removal application that might be brought will cause significant costs potentially to the estate if the claim is successful. And again, it means just all your hard earned assets and who you wanted to benefit from your estate, they may end up getting less, which is not deal.

That’s it!  Thanks to our listeners today for listening and thanks Arianna for joining me today on the couch for this podcast episode and we wish everyone a happy and festive season and holiday season and a great start to the new year and we hope you’ve enjoyed our current last three episodes so far and we’ll bring out our fourth episode in the new year.

So thank you everyone.

We’ll see you next time. Bye.