Making Life Easier for the Executor of Your Estate

Introduction

As property prices have soared in recent decades and the population has aged, significant wealth is shifting from the baby boomer generation to the next. As a result, executors have had to administer far more complex estates than was previously. Trusts and company interests, once the preserve of the wealthy, are now more common across middle Australia. From an executor's perspective, this can give rise to many headaches. Therefore, we encourage you as a Willmaker to consider the executor of your estate and turn your mind to the following information that can assist them:

 1. Your Will – the starting point

• Have you told your executor that they are appointed? There is no legal requirement to, but it gives your executor the opportunity to raise any concerns with you. Also, they need to be able to take certain steps a executor after your passing. Remember that your executor must carry out yourwishes and is legally obliged to do so, whilst acting in the best interests of your estate.
• Does your executor know where your original, current Will is kept? Most people do not register their Will, so please keep all originals in one place.
• Is your Will current? We recommend that every five years or following a major life change (ie. separation, death, divorce etc) that you will review your Will to ensure that it reflects your present relationships and circumstances including who you’ve appointed as your executor.

2. Funeral arrangements and immediate costs

• Upon your death, an executor is responsible for arranging and paying for your funeral. Funerals are not cheap – a basic cremation can start around $4,000,and an elaborate burial can exceed $15,000. Therefore, you may wish to consider a prepaid funeral and advise your executor of where the paperwork is kept.
• Alternatively, a funeral account can usually be paid directly from your bank if your executor requests such payment.

3. An inventory of your assets and liabilities

• Your executor must compile a list of everything you owned and owed at the date of your death – and the hardest part is often simply knowing what is out there.
• Keep your records in one place and, ideally, compile a schedule of your accounts, investments, insurances, periodic payments and your accountants’ and other advisers’ contacts. In particular, your executor will need to know:
  • Bank accounts you hold.
  • Superannuation – whether you have a fund, whether you have made a death benefit nomination, and whether benefits will be paid to your legal personal representative (your estate).
  • Real estate you own in your personal name – the location of any original paper Certificate of Title (although these are being phased out).
  • Shares you own – including the SRNs (security reference numbers). Registries make it surprisingly difficult to obtain these numbers.
  • Digital assets you own – online, betting or trading accounts, loyalty points and cryptocurrency. Crypto can be lost forever without the wallet keys or device, so leave secure access instructions.
  • Are your assets subject to capital gains tax? – When investment properties and shareholdings are later sold, the market value at the date of death and the original cost are needed to calculate any gain or loss, so receipts, contracts and registry records save your executor a painstaking reconstruction.

4. Your executor does not have to do it all

Many people assume that, once appointed, the executor must personally master tax law, property transfers, superannuation and trust administration. In reality, the role is one of oversight and decision-making. Your executor is entitled – and often expected – to engage lawyers, accountants and other advisers, with those reasonable costs paid out of the estate. It is worth reassuring your executors of this and that tasks can be delegated.

5. Simplifying complex assets whilst you are alive

Company directorships and shareholdings (operational companies)

• Has a Shareholders' Agreement been executed that may compel the other shareholders to buy your shares on death?
• Have you executed a company resolution (where possible) directing who is to act as director in your place, upon your death?
• Have you expressly gifted your company shares in your Will to beneficiaries? What are the implications to all other shareholders and who will actively operate the company?

Real estate

• A beneficiary may normally "appropriate" a property or an interest in a property in lieu of a cash inheritance. However, this requires all beneficiaries to agree and can lead to disputes, especially over a sentimental or legacy property. This issue is often exacerbated if you own more than one property.
• Therefore, we encourage you to discuss such succession issues with your beneficiaries.

A family discretionary trust

• Such trusts do not form part of your estate and cannot be dealt with by your Will – you cannot gift trust assets to a beneficiary.
• Often clients want their beneficiaries to equally benefit across both their estate and the family trust (on certain conditions), but this "equalisation" can be difficult and a real burden for an executor.
• To avoid such issues and after obtaining financial advice, some clients are selling real estate and are winding up trusts to reduce the burden on their families. We would encourage you to discuss such issues with your family and beneficiaries and obtain legal and tax advice.

6. Reducing the risk of a claim on your estate (Part IV)

A "Part IV claim" under the Administration and Probate Act is a claim for provision or further provision from your estate.

• Who can claim: only certain people - including a spouse or partner, children and stepchildren, and grandchildren (if financially dependent on you).
• When: if you exclude such a person or leave them only a limited benefit, they may make such a claim. The claimants must demonstrate financial need, and the Court will consider the nature of your relationship and whether you had a moral duty to provide for them.
• Because of the significant wealth now held in estates, such claims are occurring more frequently, and often the claimant receives a greater amount than otherwise entitled to under your Will.
• Your executor must defend your Will and your wishes, however, this can be a difficult and lengthy process. Often it may be commercially viable to reach a settlement with the claimant.
• What helps: think carefully about who you exclude or limit from benefitting under your Will. A letter setting out your reasons can be produced as evidence if required – it is persuasive before the Supreme Court of Victoria but is not binding and offers no guarantee. Alternatively, you might consider gifting some of your assets to beneficiaries whilst you are alive after obtaining financial advice, to minimise the incentive for a disappointed beneficiary to make such a claim.

A final word

To estate executors - you are not alone. An experienced wills and estates lawyer, together with your accountant, can do most of the work for you. Hopefully the will-maker has considered most of the matters above and have left their affairs in order. And if your Willmaker, needs a little prodding to think about these issues, feel free to encourage them to contact our Wills and Estates team on 1300 205 506 or email sp@sharrockpitman.com.au.

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The information in this article is general in nature only and should not be relied upon as legal advice. Any legal matter should be discussed specifically with one of our lawyers.