3 Things You Should Know Before Becoming an Executor

Photograph 057 by Ashley Schweitzer found on minimography.com

John lived in Moree NSW, a divorced ex shearer and farm hand he had 2 sons he hadn’t seen in several years. He spent most of his days in the local pub where he worked part time cleaning up. John’s only sister Myra lived in Western Australia and while they spoke once or twice a year they were not particularly close. John died of lung cancer relatively quickly 2 weeks after his 67th birthday but Myra was not able to be at his bedside for his passing and John’s sons arranged the funeral.

Myra received a letter from a Moree solicitor 4 weeks later informing her (to her surprise) that she was the executor of John’s estate. The letter informed her that he should contact the children who were the named beneficiaries and begin the process of identifying and realising the assets of John’s estate.

Myra had no idea where to start and was not able to get away from work for a couple of weeks but eventually rang John’s sons, flew to Moree and began the process of collecting paperwork, superannuation information and bills. Ultimately this process took around 4½ months most of which happened from WA.

What Do you Mean the House Burned Down?

In that time a local grass fire spread to the house and burned it to the ground. Dismayed Myra sorted through John’s paperwork to find that the house insurance had lapsed 3 months after his death.

Myra contacted the insurance company to be told that:

  • Due to non payment of premiums the house had been uninsured for more than 90 days, the policy had therefore lapsed and they would not pay the claim;
  • The house had been uninhabited for more than 90 days and under the terms of the policy they would not have paid the claim even if the premium was paid.

Myra spoke to the solicitor to discover that as executor she was legally obliged to properly protect the assets of the estate (it is widely accepted that this means properly insuring estate property such as houses and cars). Failing to have in place the appropriate insurance meant that she could be held legally liable for the value of the house.

They Are Suing Me – What Have I Done?

Upon hearing of the fire John’s two children sought legal advice and took action against Myra for her “…failure to properly execute her duties as executor of the estate of the late John XXXX.” Myra was unable to use the other assets of the estate to settle this lawsuit as they “belonged” to the beneficiaries not her.

As is often the case Myra settled the matter out of court and had to borrow more than $75,000 against her house (and contribute $25,000 from her savings ) to pay her nephews and her legal bills.

3 Things You Must Know Before Becoming An Executor

Myra quickly learned that:

  1. Being the executor of her brother’s estate was not simply a compliment it was a burden,
  2. She could have declined to act and transferred the legal responsibility to the sons (via the Supreme Court of NSW)
  3. It is imperative to act quickly to protect the assets of estate if you are executor

What Do You Need To Know?

Assuming you have accepted the role you need a framework to capture the Information That Matters then a Crisis Management Plan to guide you in your responsibilities.  They key information is summarised below:

ITM 10 steps in a circle

The Crisis Management Plan is more detailed but a start would include:

  1. What Information do I need to know?
  2. What assets and responsibilities do I need to assume control of?
  3. What actions do I need to take to protect assets of the estate?
  4. Who do I need to call?
  5. What documents do I need to act?

The Estate Planning For Life process captures the relevant information in the Information That Matters record and makes it easy for family or supporting advisers to understand the financial circumstances that pertain to the deceased or ill person.

Simply having the legal authority to act and the right information is not enough.  The EPFL Crisis Management Plan will steer the family through a prioritised list of issues addressing the most important issues first.

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