Being an executor of an estate, can be a tough job. If you’ve been entrusted with this by a loved one, use this guide to help you get started.
* 5 min read *
Losing a loved one is truly a devastating experience. It can become more overwhelming when you have been asked to put all the legal, financial, and personal affairs of the deceased in order during a very difficult time. But knowing exactly what to do, whom to talk to, and what needs to be paid from the estate account will make things as uncomplicated as possible. A well-executed Will is a fitting tribute to the relative, friend, or colleague who has placed their trust in you.
What does an Executor of an estate do?
This question is the first thing that comes to mind when a family member, a close friend, or an associate assigns you to be the Executor of their estate. Being an Executor is an honour that comes with great responsibility.
An Executor takes care of a deceased person’s estate after they pass on. Aside from carrying out the wishes of the person after they die, they are also tasked to collect all assets, distribute properties, and pay debts as reflected on the deceased’s Will. The executor also makes funeral or organ donation arrangements if these are mentioned in the Will.
What Comprises an Estate?
The word “estate” may conjure visions of vast lands, mansions, and luxury lodges in the countryside. However, legally speaking, an estate includes all the assets and liabilities that a person had when they passed away.
Assets may include:
- Real estate, including retirement village lease or nursing home bond
- Bank accounts
- Superannuation or life insurance policies
- Personal belongings such as furniture, artwork, or jewellery
Liabilities, on the other hand, are debts that include personal loans and mortgages.
What Is an Executor of a Will Responsible for?
Generally, the executor of the Will is responsible for administering the deceased’s estate. They are on top of crucial processes such as the distribution of assets to the beneficiaries and paying off the debt of the deceased.
Their responsibilities also include the following:
- Applying for a grant of probate
- Applying for a death certificate
- Arranging for the funeral, if stated in the Will
- Finding and contacting all beneficiaries ( both interstate and overseas, if any)
- Providing death notifications to Centrelink, Australian Tax Office (ATO), and concerned banks.
- Arranging for a valuation of assets
- Paying outstanding debts and bills
- Protecting the deceased’s assets
- Taking out insurance
- Making an inventory of all properties and belongings
- Lodging tax returns
- Claiming superannuation and life insurance
- If part of the Will, setting up trusts and managing them.
- Dealing with the deceased’s real estate
- Distributing assets based on the Will
- Defending the estate against legal action
- Providing the beneficiaries with a complete accounting of the administration of the estate
These responsibilities can be a handful, even to the most organised and dedicated person. You might be tempted to do it all by yourself but doing executor duties while grieving can be challenging. Hiring a lawyer to help you go through the motions as an Executor lifts a heavy burden off you.
What You Need to Do and How to Pay for It?
First things First: Preparing the Proper Send-Off
As the Executor, you have to make the funeral arrangements (burial, cremation, or any other legal disposition service) depending on the deceased’s wishes. You have to pay for all funeral costs including food, flowers, or any other expenses incurred during the service.
You may pay for these costs with the estate. Funds from the deceased’s bank account can be released even if it is still frozen, granted that you have provided all the requirements such as the invoice or receipt of the funeral expenses.
If for example someone, like a relative, has already paid for all these expenses, they are entitled to reimbursement from the estate.
Don’t Forget the Probate, Mate
A probate is a legal process that you need to undergo as an executor. You are required to register and prove to the Supreme Court the validity of a Will. If the Will is proven to be valid, the Court will award you a grant of probate. Probate costs can be paid from the deceased’s estate.
This essential document gives you the authority to administer the estate. It should be pointed out that each state has its probate procedures, fees, and requirements.
To avoid further confusion on how to apply for probate, it would be best to hire a lawyer to do it for you. A helpful tip would be to choose an expert who practices in the state where the deceased resided. Not only would the process be quicker, but it would also be less stressful.
Money in the Bank: Accessing the Deceased’s Bank Account
Most of the expenses for the execution of the Will comes from the deceased’s bank account. It is crucial that you can access it as soon as possible to fund all expenses connected to the execution of the Will.
After the passing of your loved one, you as an Executor must notify the bank through a deceased customer information form. The bank will freeze the account until you have satisfied all requirements.
Every bank has its own set of requirements for them to release the money. But generally, you need to provide a certified copy of the Will, the deceased’s death certificate, and the grant of probate. If you are not a depositor of the bank, you also have to meet their identification and verification requirements.
Death and Taxes: What to Do With Life’s Only Certainties
Australia, unlike other countries, does not have a death tax. It means that you do not need to pay taxes on deceased estates or inheritances. However, you still need to settle taxes for ordinary earnings and investments of the person who passed away.
If the deceased has tax withheld on their income on the year of their death or if their taxable income was greater than $ 18, 200 (the tax-free threshold) you need to file a tax return.
If the deceased operated a business or is a sole trader, there might be other tax obligations. This includes Business Activity Statements (BAS) and Pay as You Go Withholding (PAYG) Amounts.
As a general rule, any outstanding debt to the Australian Taxation Office can be paid from the proceeds of the deceased estate.
Till Debt Do Us Part: What to Do With Debts and Other Expenses
You have to pay for the deceased’s expenses and debts before you can distribute all their assets and money. It is advisable to set up an “estate of” account where money from the bank accounts and income from the sale of properties will be deposited.
You may open an “estate of” account at any bank of your choice. The bank will require you to apply a Tax File Number (TFN) at the Australian Business Register (ABR) for the estate.
It is also crucial to follow the order of paying debts:
- Funeral expenses (can be paid even while waiting for probate)
- Administration expenses (fees for solicitors, accountants, and real estate agents)
- Other Personal Debts
Business as Usual: Settling Business Expenses
Partnership, company, trust assets, and liabilities can be considered as part of the estate. It will all depend on the business's legal structure. For example, sole traders are liable for all business obligations. The deceased estate can be used to cover all debts and liabilities of the business.
A lawyer can do the following to help you correctly and legally perform your duties as an Executor:
✔ Apply for probate and assist you with the completion of probate forms
✔ Inform you of your rights and responsibilities
✔ Advise you on potential tax issues that may arise
✔ Identify and consolidate the deceased’s assets
✔ Advise and assist you in case of claims against the estate
✔ Advise you on the right order of settling debts
✔ Recommend the right order of distributing assets
✔ Assist you with drawing up a statement of assets and distribution report
You’re Not Alone: How Lawyers Can Help You
As you can see, being an Executor of an estate entails a whole lot of hard work. It can be emotionally draining and time-consuming at the same time. But don’t worry, you do not have to do it alone. One of the best things you can do as an Executor is to hire an expert lawyer. That’s where Essia Law can help!