An Executor is a person named in a Will to carry out the final wishes of a deceased person. Executors organise to collect the assets of the deceased, pay their debts and distribute the property as set out in their Will.
If you are named as an Executor of a Will, you should understand your duties and the risks involved with your role in administering the deceased’s estate. It is also crucial to be aware that this role involves a risk of personal liability for the expenses of administering the estate.
What are my responsibilities as an Executor of a Will?
Executors are generally required to organise funeral arrangements, collect the deceased’s assets, pay any outstanding debts, and distribute the deceased’s estate to beneficiaries. Executors may also be required to obtain a Grant of Probate (and even if not required to administer the Estate, it is usually wise to obtain a Grant). This is an application to the Court to officially approve a Will and the formal appointment of the Executor.
Responsibilities of an Executor include:
- securing the assets of the estate and confirming all property is insured
- valuing the estate, and determining any debts owing
- seeking advice from an accountant in relation to the income tax returns of the deceased person and the estate
- notifying Centrelink (if the person was receiving a pension), government authorities, shire/city councils, utilities, telecommunications, insurance and superannuation companies of the deceased’s death
- advising transport authorities regarding vehicle registration and cancelling the deceased’s driver’s licence
- as noted above, applying for a Grant of Probate
- paying the deceased’s outstanding debts and establishing any trusts that were created in the Will
- preparing and providing statements for beneficiaries
- arranging for distribution of assets to beneficiaries
Personal liability
Executors of a Will must ensure that they comply with the terms of the Will and relevant legislation when administering the estate. As Executor (or Administrator) of a Will, you are legally accountable to the beneficiaries and the Supreme Court of Western Australia (SCWA). It is crucial you carry out your duties as an Executor correctly to avoid any personal liability
An Executor’s duty to finalise the deceased’s tax affairs is often underestimated. If an Executor does not properly carry out their duties in this regard, they run the risk of becoming personally liable for the payment of the deceased’s tax liabilities. We strongly recommend Executors obtain legal and accounting advice before finally administering the estate.
How can I minimise my personal liability as an executor?
There are a few things you should do before finalising the estate.
You should ‘advertise for creditors’. In Western Australia, legislation requires you advertise for creditors in the local newspaper and the WA government gazette. Your advertisement must be in the correct form specified under legislation and allow creditors at least a month to give notice of any outstanding debts owed. Doing this may allow you to escape liability for any debts you are unaware of.
You should also consider whether it is wise to ‘pass the accounts’. Western Australian legislation requires Executors file the estate’s accounts and plan of distribution with the SCWA within twelve months of the date of the Grant of Probate. Doing this will ensure you are released from further responsibility in relation to the accounts after three years.
If you are notified of a challenge to the Will or suspect a potential challenge, it may be best to hold off on distributing the assets of the estate and seek legal advice as soon as possible. There are legal avenues to explore which can reduce the issues you face.
You should confirm whether you need to complete and lodge income tax returns for the deceased up to the date of their death and any financial years prior where tax returns have not been completed. If the estate earns income or is likely to earn income above the tax-free threshold, you should apply for a tax file number for the estate and complete and lodge the required tax returns or appoint an accountant to do so. If you finalise the estate without attending to payment of any outstanding income tax, you may be held personally liable.
You should not use any life insurance received to pay the estate’s creditors. If an Executor does pay debts from life insurance proceeds, beneficiaries may sue to make up any shortfall.
Conclusion
Administering an estate can be an overwhelming task. Executors who do not properly carry out their duties may risk becoming personally liable for the payment of the deceased’s tax liabilities, amongst other things. If you are an Executor, there are certain steps you can take to minimise your risk of being held personally and financially liable for the debts of the deceased or the estate.
This information is of a general nature only. If you are an executor or administrator, we recommend you seek legal and accounting advice when dealing with and administering an estate. If you or someone you know wants more information or needs help or advice, please contact us on (08) 9758 8073 or email [email protected].