How much thought have your clients put into whom they should appoint as executor of their Wills? An executor is responsible for the administration of an estate upon the death of a person. The executor/s are bound to gather in the estate, which means that the assets owned by the deceased person must be placed in the legal name of the estate.
As part of the administration of the estate, it may be necessary to sell assets so that all debts and estate expenses may be paid. In some cases, it is very unhelpful for assets to be sold as part of the administration of the estate and it may be more helpful for them to be kept intact and appropriated to beneficiaries as part of their inheritance.
Many people don’t know that failure to administer the estate appropriately may result in the executor being personally liable for their oversights. An entire estate plan can be unravelled because an executor doesn’t like the beneficiary and doesn’t behave in a professional way. The following case illustrates such a situation.
Taking care of Tara
Thomas and Anna were married and had one child, Tara, who was diagnosed with Asperger’s syndrome. They divorced while Tara was still a child,
and Anna assumed the day-to-day care of Tara.
Thomas and Anna became estranged and did not maintain any kind of relationship over time. Thomas died when Tara was 18, and he had appointed
his only living relative as his executor: his brother Garry.
In his estate plan, Thomas had wanted to ensure that Tara would be taken care of and had set up a testamentary discretionary trust under which Tara was a beneficiary. Garry was the sole trustee of the trust and executor of the estate.
The estate took a long time to wind up and more than nine months passed.
Garry and Tara had a volatile relationship, and during one particular argument, Garry told his niece: “I’m going to make sure you don’t receive anything from the trust!”
Because Garry was the sole trustee of the trust, he could have acted on his threat to ensure that Tara didn’t receive anything from the trust. Tara had no control over the trust or its activity and could have ended up with nothing from her father’s estate. Neither was she the sole beneficiary of the trust, which meant that others could potentially receive benefit from the trust.
Tara’s financial adviser, Jenny, knew that Tara was expecting to receive some money from her father’s estate. Tara had asked for help in investing and managing her money. When Jenny enquired how the settlement of the estate was going, Tara recounted the conversation she’d had with her uncle.
Jenny was alarmed. She knew that Garry could very well carry out his threat and leave Tara with nothing, despite the wishes of the deceased. She explained to Tara that she needed to seek legal advice as soon as possible from a lawyer who specialised in succession law.
Launching a claim
On the advice of the lawyer, Tara launched a family provision claim, arguing that the trust was set up with the intention of providing for her care but, despite this, her uncle could ensure she received nothing.
The court viewed the claim as a zero-percentage provision from Thomas’s Will and her claim was successful, even though her claim had been brought outside of the required time frame of nine months.
It’s important to note that Tara wouldn’t have sought advice if a financial adviser hadn’t been in communication with her. The nature of their relationship meant that Jenny could see when her client was being exploited and recommend further advice to remedy the situation. Garry could have reduced or removed Tara out of the trust at any time during the following years.
The moral of this story is to educate your clients on how to appoint executors. They should pick executors who are able to put aside personal differences in order to administer the estate properly. Thomas thought he had done everything he could to take care of Tara, setting up a testamentary discretionary trust for her benefit. But his plan fell down in the choice of executor.
To avoid this, Thomas could have chosen a trustee company or a professional person to administer his estate.
