17 Nov Executing an estate is a team matter
Have you considered whom you should appoint in the role of executor of your estate? Does you spouse really want to take on the role of executor of your will? Probably not…
When our time on earth comes to an end it is seldom planned or timed to suit us. Leaving a current will and appointing someone to the role of executor of that will is one of the best things we can do to help our loved ones recover from the inevitable trauma of loss.
The winding up of an estate can be a lengthy and unnecessarily traumatic experience for those left behind. We have all heard the whispers about the way Jackie or Jim was treated by the executor. So, before you appoint someone to the role of executor in your will, you should at least be aware of what is involved.
It may not be fair to burden a surviving spouse with the decisions and responsibilities that accompany the role of executor during a very difficult time period. Bad financial decisions and family conflict might be the end result.
What is an estate?
A deceased’s estate consists of assets and liabilities (including borrowings and sureties signed) at the date of death. The administration of an estate is the process whereby liabilities are settled and expenses paid, with the remainder of the assets being transferred to the nominated beneficiaries. The executor is the person responsible for the administration of the deceased estate. His or her appointment is approved by the Master of the High Court, who is also ultimately responsible for ensuring that the executor performs the required functions appropriately.
Duties of the executor of a will
Let’s consider what fulfilling the role of executor requires.
- The death notice and original will needs to be handed in to the Master’s Office. A main file is then opened, together with sub-files for correspondence and documentation.
- A liquidation and distribution account is opened – this is effectively an accounting function. Letters to creditors and debtors must be prepared in order to determine claims for and against the estate. The notice to creditors must be placed in appropriate publications, such as the Government Gazette and newspapers. A separate bank account should also be opened.
- Valuations of assets must be obtained. This can be complicated if there are, for example, significant antiques or shareholdings in unlisted companies. Fixed property can also be difficult to value in many cases.
- An income tax return must be completed.
- Sufficient cash must be collated in order to pay debts. Short-term claims from financial dependants may need to be considered – a surviving spouse may not have personal funds available, and may not be able to wait until the estate is finalised.
- Communication with beneficiaries is important at all times and it would help if the executor had some understanding of the family history and background.
- Specific legacies or bequests, and inheritances to beneficiaries will need to be processed.
- Estate duty may also need to be calculated and paid over, depending on the value of the estate and the relationship of the beneficiaries to the deceased.
- Capital gains tax calculations may also need to be performed.
As you can see, the role of an executor in winding up an estate is not a simple task. In addition, a surviving spouse may find even routine decisions difficult to make in the weeks and months following the death of a lifelong partner.
A competent, professional executor will be able to finalise the estate more speedily than a novice. Professional executors often have good working relationships with staff at the various Masters’ offices around the country. These offices are generally overloaded with work and under-staffed, and they are unlikely to have much patience with a once-off novice executor.
It is quite common for an estate to take up to a year to be finalised, even with an efficient executor on board.
What can you do now to prevent future complications?
Firstly, ensure that your will is up to date and as simple as possible. Communicate your intentions to your immediate family and ensure that they know where your original will is and where your other important documents are located. Ensure that your spouse has some accessible funds of their own in their own bank account. Spend some time discussing your financial affairs with your immediate family, especially if they are complicated.
Then apply careful thought as to whom to appoint to the role of executor of your will. A professional executor may save much time and hassle, and can be well worth the fee. It would also be an option to appoint your surviving spouse to the role of executor together with a professional. The professional will no doubt do the bulk of the work, but at least your spouse will feel included and can bring important family issues into consideration.
Try and avoid appointing a bank or a large trust company to the role of executor, unless you have a good relationship with a specific individual at the selected institution.
There is usually no certainty as to which employee will be responsible for the winding up of your estate. A disinterested or inefficient executor could prove disastrous. Also be aware that it is possible to negotiate fees with a professional executor in advance. It is fairly standard to specify a different fee rate on liquid assets (e.g. cash and life insurance policies) and non-liquid assets (such as property).
If you are unsure of how to proceed, my advice is to ask yourself the following questions:
- My original will is …?
- My children are cared for by … guardian until the age of … ?
- I last met my executor …?
Then engage an independent, fee-based certified financial advisor who is focused on your best interests and can provide impartial advice. If you do not have one, visit the Financial Planning Institute website to select one.
Debbie Netto-Jonker CFP®, the founder of Netto Invest, was Financial Planner of the Year in 2001.