Executing your responsibilities By William Buck on 01/09/13 - Mins to read: 3 minutes Many people think it’s a compliment to nominate a family member or loved one as the executor of their estate. The reality, however, is that the duties placed on the executor can be challenging, demanding and time consuming. This additional responsibility may be more of a burden than a privilege at a time when someone is grieving a loss. Careful consideration should be given when appointing an executor or agreeing to act as an executor to an estate. What is an executor? An executor is appointed by the maker of a Will to carry out the directions specified in the Will, and administer the estate. An executor can be an individual or a trustee company. An executor must comply with a number of legal requirements as specified in each jurisdiction. Failure to do so could lead to personal liability. What are the duties and responsibilities involved? Locate the Will and notify beneficiaries The executor must locate the deceased’s original Will and notify any beneficiaries. Preserve the estate The executor must identify all assets in the estate and ensure that they are safe and adequately protected. Should an asset be damaged through action or inaction, the executor will be personally liable. There have been circumstances where the executor has been personally liable for assets that have been stolen or damaged. The preservation of the estate can become particularly complex where the deceased was running a business. Obtain Probate Probate is a legal process by which the Will is validated and authority to administer the estate is given. It is often necessary to apply to the Supreme Court in your state to obtain Probate. Identify and value all assets The executor must identify all assets in the estate and verify their values. This is done by making the necessary checks with institutions such as banks, building societies, insurance companies and share registries. In some circumstances (particularly where there is the division of an asset such as a business or property) an independent valuation may be required. Lodges a final income tax return Before a deceased estate can be distributed the executor may need to lodge a tax return to the Australian Tax Office on behalf of the deceased. Pays creditors Any outstanding debts must be paid prior to the estate being distributed to beneficiaries. As part of the process of obtaining Probate the executor must prove that he or she is aware of all outstanding debts. The order in which debts are paid will be dependent on whether the estate is solvent or insolvent. In the case of an insolvent estate, funeral arrangements, Probate and administration fees will be paid first. Again, this is an area that can become particularly complex when the deceased was running a business. Distributes the estate Following the payment of any creditors, the executor will distribute the assets to the estate’s beneficiaries. The executor may also be required to establish a trust for a beneficiary under the age of 18 or a beneficiary who is mentally incapacitated. Dealing with contests The executor may also need to defend the estate in circumstances where the Will is contested. Anyone wishing to make a claim against the estate must do so within twelve months of the deceased person’s death. Considerations when appointing an executor The role of an executor can be very demanding. It is important that the individual appointed has the necessary legal, accounting and taxation knowledge to comply with both the legal requirements and your wishes. Some points to consider when appointing an executor include: Does the individual have the necessary legal and accounting knowledge to undertake the task? Could there be a conflict of interest between the executor and any of the beneficiaries? Could the appointment place an unnecessary burden on the chosen executor? Have you made your wishes clear in your Will?