What is Estate Administration?
When someone dies, their next of kin or the person appointed within their Will is responsible for finalising their affairs. This includes things like closing bank accounts, selling their home, paying taxes, debts and other expenses, as well as applying to the Court for 'Probate'. Finally, they have to pay the inheritance to the beneficiaries named in the Will or entitled by Law. This process is often referred to as Estate Administration or Probate.
What is a Personal Representative?
When someone makes a Will, they appoint an executor. The executor is responsible for the Estate Administration. When someone dies without a valid Will, then there is no executor since an executor can only be appointed by a Will and as such the law appoints an administrator (usually the next of kin) to administer the estate instead. Executors and Administrators are collectively referred to as "Personal Representatives".
Personal Representatives are:
Responsible: for ensuring that the wishes of the person who has died are carried out to the letter and the applicable law is followed and adhered to.
Duty bound: and answerable, not only to the beneficiaries but also to the court and any creditors.
Accountable: for the finances and tax liabilities that arise in the estate.
Liable: and obligated to achieve the maximum possible value from the estate for the beneficiaries and to act in their best interest at all times.
Therefore, when it comes to estate planning, one of the most important decisions you'll make is choosing your executors. The role of an executor carries significant responsibilities and potential challenges, making it crucial to select the right people for the job.
Choosing a particular person as an executor is a real vote in confidence in their character. They are being chosen because they are trusted to do what is right. If that person steps in to administer the estate, then the onus is on them to get it right. It is important someone is not simply chosen as an executor out of fairness or equality, it is more important that they are up to the job.
Estate Administration can be a complicated process, especially when the estate involves numerous assets and properties. The estate could be sizeable in terms of value and there may well be numerous beneficiaries or Trusts, all of which add to the complexities. If the Personal Representative, whether an Executor or Administrator; gets something wrong, even unintentionally then they could be held personally liable and they may have to put things right financially out of their own pocket.
Just because someone is named as executor in a Will, it does not mean they have to take on the job. If they have got too much on their plate, or perhaps are of ill-health or just do not feel able then they can refuse to act. It is better that they that they do not act then to try to take on the role only to struggle through.
Given these responsibilities, it’s clear that the role of an executor is not just a formality. The person or people you choose must be capable, trustworthy, and willing to take on the task.
What skills should an Executor have?
Integrity:
Can you be sure that they will act in the interests of the beneficiaries at all times?
Do you consider them to be honest?
Do they have strong moral principles?
Can you trust them with money and assets and to look after the needs of the beneficiaries?
Experience:
Do you think they are competent?
Have they had any relevant experience that can help them in their role as executor?
Have they been an executor before?
Do they have financial acumen and astuteness?
Are you confident that they can manage and look after your assets competently, prudently and diligently as they would if they were their own assets?
Impartiality:
Can they remain objective and not be influenced by personal feelings or opinions when making decisions?
Will they treat the beneficiaries fairly?
Will they be unduly influenced by someone else, such as their partner or spouse?
If they are also a beneficiary, how can they remain objective?
Willingness:
Would they want to act?
Would you want to burden them with such a heavy responsibility?
Key Considerations When Choosing an Executor
Trustworthiness and Integrity: The most critical factor in selecting an executor is trust. Your executor will have access to your assets and personal information, so it’s essential to choose someone you trust implicitly to act in the best interests of your estate and beneficiaries.
Organisational Skills: Administering an estate involves a lot of paperwork, deadlines, and coordination with various institutions and professionals, such as solicitors, banks, and HM Revenue & Customs (HMRC). A good executor should be organised, detail-oriented, and capable of managing these tasks efficiently.
Willingness to Act: Serving as an executor can be time-consuming and, at times, stressful. Before naming someone as your executor, make sure they are willing and able to take on the role. It’s wise to have an open conversation with potential executors about what the role entails and whether they are prepared to accept the responsibility.
Impartiality: If your estate includes complex or potentially contentious matters, such as multiple beneficiaries with differing interests, it may be prudent to choose an executor who can remain impartial. This could be a trusted friend or a professional executor.
Potential Pitfalls:
Laws and Legislation:
Personal Representatives may misunderstand the meaning of the Will and how the law applies. Wills can be written in complex legalese and there are many powers and laws that apply to Wills and estates which people will simply not be aware of. As well as this, here is a general lack of understanding around Probate, what it is, when its needed and how to apply for it not to mention the complex tax regime .
Time:
Ideally, a beneficiary should be paid their inheritance within a year of the death, known as the "Executor's Year". Many people start the estate administration process thinking it will only take a couple of weeks, but not realising that it is a lengthy process which could take many months and sometimes even years to complete. Once the Personal Representative has started acting, they cannot simply quit. As well as this, is it the right time for them to shoulder such heavy responsibilities. Many people will not consider the impact of grief. It is possible that the Personal Representative will have lost a loved one and so dealing with the process on top of their loss may well be too overwhelming.
Record Keeping:
Personal Representatives who are disorganised may fail to keep clear and accurate records relating to the estate. However, they are obligated by law to keep track of everything they are doing, and they will need to prepare detailed Estate Accounts not only for the beneficiaries but by order of the Court and the HMRC. These Accounts will need to show every financial transaction and account for every penny belonging to the estate, clearly broken down into capital and income.
Communication:
It is a sad fact, that many families fallout following the death of a loved one which can make things even more difficult for the executor. Beneficiaries who are due to inherit from the estate can become inpatient and demanding. They will want to know how much inheritance is due to them and when to expect it. Charitable beneficiaries may insist on being consulted with throughout the process, which can make things more complex and lengthy. Many Executors fail to communicate with the beneficiaries to provide anticipated timescales and so will often bow under pressure from the beneficiaries and start to distribute the assets early.
It is important to understand what is expected of loved ones when dealing with the affairs of someone who has died. There are many legal, financial and practical obligations they have to face and Instructing a professional is often the preferred option, not only will that professional ensure the estate is dealt with correctly and in adherence of the law but they can also ease the emotional burden from loved ones and give them that peace of mind that everything will betaken care of properly and efficiently.
In conclusion, estate administration is a complex and often challenging process that requires careful planning and the selection of capable, trustworthy individuals to act as executors. The executors bear significant responsibility, from managing assets and paying debts to ensuring that the wishes of the deceased are honoured and the law is meticulously followed. Given the potential legal, financial, and emotional challenges involved, it is crucial to choose an executor with the necessary integrity, experience, and willingness to undertake this demanding role. For many, engaging a professional can provide the peace of mind that the estate will be managed effectively and in compliance with all legal requirements, allowing loved ones to focus on healing during a difficult time.
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