Common Executor Mistakes
An executor acts as a testator’s personal representative when administering a deceased estate. While the role of executor is often straightforward, there are potential pitfalls for unwary executors. When executors make these mistakes, it can expose the deceased estate, or even the executor themselves, to litigation, tax liability or other repercussions. This article explains some common mistakes that executors make when administering an estate.
Executor Mistake 1: Failing To Review The Will
Every executor needs to undertake some due diligence activities at the outset of the executorship. These activities are necessary to avoid encountering more significant problems in the future. As the executor’s authority to act comes from the deceased’s will, the executor’s first task is to confirm that the will is valid. The executor should confirm that they are working from a will that is:
- the original document, not a copy;
- the most recent testamentary document;
- signed and witnessed appropriately;
- dated consistently; and
- not damaged, torn or in another way altered.
If the document that gives the executor authority does have some irregularities, the executor may need to apply to the court for clarification and validation of the will.
Executor Mistake 2: Failing To Identify The Assets And Liabilities Of The Estate
One of the executor’s major tasks is to collect the estate’s assets together until they transfer them to the beneficiaries. The executor is unlikely to have a convenient inventory of the deceased’s assets, so this can require some detective work. An executor may need to enquire with the deceased’s family and friends, accountant, financial advisor and solicitors to establish the extent of the deceased’s possessions. Otherwise, an executor can run into trouble if they fail to uncover and protect all the deceased’s assets. For instance, an executor may be held responsible if they fail to find and secure a vehicle belonging to the deceased estate, and the car is subsequently damaged or stolen.
The executor is also responsible for identifying and discharging any debts and liabilities before finalising the deceased estate. This may require the executor to look through the deceased’s paperwork and bank records to identify direct debits and other payments. The executor will also need to advertise before seeking probate to allow creditors to make a claim against the estate. If an executor distributes the estate prematurely without first identifying all of the estate debts, they may be held responsible for the unpaid liabilities.
Executor Mistake 3: Failing To Keep Records
Even a well-intentioned executor can forget to keep detailed records of every transaction, especially if they are also grieving the testator’s death. However, the executor needs to keep accurate records of everything they do on behalf of the deceased estate. An executor must be prepared to present these accounts to the beneficiaries (including final distributions) when they conclude their administration. These records protect an executor from accusations of misconduct. They are also proof if there are questions over administration expenses or the executor’s commission.
Executor Mistake 4: Intermingling Estate Funds And Personal Funds
One of the problems with failing to keep accurate accounts is that the executor might accidentally use estate funds for personal uses. Using estate funds for a personal purpose is a form of fraud. An executor guilty of fraud may face civil liability and even criminal charges. For this reason, every executor should open a separate estate or trust account and use that account only for estate expenses.
Common Mistake 5: Distributing Estate Assets Too Early
An executor is obliged to hold the estate assets and only pass them on to the beneficiaries after the specified statutory period. Sometimes beneficiaries put pressure on the executor to distribute estate funds and assets earlier. On occasion, it can be appropriate for an executor to make interim distributions. Still, the executor should only release funds early if there is more than enough left in the estate to cover debts, possible claims and final distributions.
Common Mistake 6: Delaying Administration
On the other end of the spectrum is when the executor inappropriately delays the estate administration. Typically, an executor should aim to wrap up the estate administration in the year after the testator’s death (known as “the executor’s year”). An executor who fails to administer the estate promptly can be removed from their role as personal representative.
Common Mistake 7: Not Seeking Legal Advice
An executor can usually finalise a small, straightforward deceased estate without legal assistance. However, it is a mistake for an executor to avoid seeking legal advice if there are any complexities. In some instances, obtaining legal advice early means saving time and money in the long run.
Being an executor can be an onerous role, and it can be difficult to avoid making mistakes administering a deceased estate. Please do not hesitate to contact our specialist solicitors on 1300 038 223 if you want to better understand your responsibilities as executor or would like assistance with any aspect of estate administration.