Australian Unity Trustees' Anna Hacker

Executors are often accepting the role without considering the enormity of the task and the difficulties in renouncing the responsibility, according to Anna Hacker, national manager of estate planning at Australian Unity Trustees (AUT).

Often the nominated individual feels obliged, Hacker says, but soon after tries to renounce due to either the amount of work involved or the emotional toll it takes on them. However, once an individual has begun acting as executor renouncing the role is no easy task.

“You almost can’t,” Hacker tells Professional Planner. “If you do what’s called ‘intermeddling’ in the estate – and that can be pretty basic things like organising a funeral or contacting a bank – you’re stuck. You have to be removed by the court.

“We have people who come in and say they’ve done nothing, then you find out they’ve done a tax return. So, they’ve signed a document as an executor of the estate, which is a really significant thing.”

Advisers have an important role to play in warning their clients not to commence executor tasks unless they are committed to seeing the responsibility through, she adds. If clients do renounce, they could then be financially responsible for any losses or expenses that have occurred because of their decision to renounce.

Additionally, if they fail to carry out their duty responsibly the executor can also be found liable for financial losses. Hacker says she has seen “case after case” of executors having personal liability, “even in good faith”.

“One situation I’ve seen is where the executor kept the money – about a million dollars – for 18 months in a trust account which was not earning interest,” she revealed.

Executors have options, Hacker says, that they aren’t always aware of. Australian Unity Trustees provide a service called ‘Executor Assist’, whereby the executor can retain the role but have AUT do the work, which allows people to retain the title of executor but absolves them of the administrative burden and lessens the financial risk.

“Often they don’t want to renounce, they feel like the person really wanted them to do this,” Hacker explains. “This way they still get to do the role and say they were the executor, but they don’t have the stress of actually doing the work and possibly doing something wrong.”

AUT charges a minimum fee of $3300 and a percentage on estate assets, with a sliding scale that reduces the percentage for larger estates. The cost is the same if the client wants to abandon the role altogether and make AUT the trustee of the estate, because the workload is the same.

Hacker says that if a person died and the courts were involved in bringing in a trustee service, they would generally deem the charge at “between one and two per cent” of the estate.

“The legislation says it can be up to five and a half percent on capital and six per cent on income, but that’s not what anyone gets,” she adds.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at [email protected]
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