While many people are unlikely to nominate estate planning aka “Thinking about what will happen to my assets when I die” as being on their “most wanted things to do” list in reality, this is something that should be on all our “must do” lists.

Who needs an executor?

If a person is married or has a de facto partner, their will usually leaves everything to their spouse or partner. If so, it makes sense to appoint the spouse or de facto as executor.

However, for an unmarried person not in a de facto relationship, the will requires at least one executor to take charge of the estate, and distribute it according to the directions set out in the will. Also, a will leaving everything to a spouse or partner should provide for the possibility of both dying together, in which case, again, there needs to be at least one executor.

How difficult is it to be an executor?

If you are the executor of a deceased estate, the first thing you do is to engage a solicitor. Your role as executor is then simply to provide any information requested by the solicitor, and sign the necessary documents.

However, executors may be required to make important decisions. For example, if there are minor children, the will may appoint the executor to act as trustee of the estate until the children reach an age where they take over their own affairs. While you are not responsible for making decisions a child’s education, support and welfare, you will be required to make decisions about spending the estate’s money on these issues.

This role is not as difficult as it may sound. In almost all cases, the minor children will be living with a family member, so your role is to make reasonable and fair decisions about spending, usually in consultation with the child’s carer.

As executor, you may also have a duty to lodge returns and pay tax out of the funds of the estate. Again, this is not as difficult as it sounds, as you would engage an accountant to look after the tax issues, and the tax would come from the assets of the estate. However, it is vital that this be done correctly, as there have been cases where the ATO has held an executor personally liable for unpaid tax where an incorrect tax return was filed and the estate assets distributed prior to the ATO issuing an amended notice of assessment.

If you are an accountant or other professional, who services will be required in the course of administering the estate, you should ask for a clause to be included in the will entitling you to be paid for both professional and non-professional work. Otherwise, you will have no entitlement for payment for your services other than to apply for commission as referred to below.

Can an executor of a will receive commission?

An executor of a will is entitled to be paid a reasonable commission for administering the assets of the deceased’s estate. However, executors are not automatically entitled to commission for their work and we need to make an application for commission on behalf of the executor to the Supreme Court.

Alternatively, if all beneficiaries of the will are adults, they can reach a unanimous agreement on the amount of commission to be paid. This agreement should be in writing and signed by all beneficiaries.

How is commission determined?

Generally, the Supreme Court may determine the amount of commission paid to an executor by taking into account factors such as:

• the size of the deceased’s estate;
• the type of care and responsibilities required of the executor;
• the amount of time an executor has invested in performing their duties;
• the care and diligence shown by the executor in performing their duties.

The amount of commission paid to an executor might typically range from 0.25%1 – 2.5% of assets sold or directly transferred, and 1%-5% of income collections. For example, an estate is worth $1.5 million. After the sale of the property, payment of outstanding mortgage, funeral, and other estate administration expenses, $1 million remains as part of the estate and there are no income generating assets. In this scenario, the executor may be entitled to a commission of approximately $2500 to $25,000.

If an executor is a beneficiary under a will, this does not mean they cannot also make a claim for commission. The Court will look at how much has been left to the executor as a beneficiary and will adjust any commission accordingly if granted. Or, the executor may disclaim the gift in the will and simply seek commission.

We can advise you as to receiving the correct and fair amount of commission for acting as executor.

So, should you agree to be an executor?

There is no problem in agreeing to be the executor of an estate, and you face no personal liabilities, provided that you engage competent solicitors, and you act reasonably and honestly. In fact, Tim Somerville and Stephen Lynch of our office have been happy to accept nomination as executors of numerous wills over the years.

If you or someone you know wants more information or needs help or advice, please contact Stephen Lynch (02) 9923 2321 or slynch@somervillelegal.com.au

or email enquiries@somervillelegal.com.au