Estate Planning Myths Series: “Is an Executor paid for dealing with an Estate?”

Estate Planning Myths Series: “Is an Executor paid for dealing with an Estate?”


The duties and responsibilities of acting as the Executor of a deceased Estate can be onerous and time consuming; therefore, if appointing a person to act on your behalf, you should consider whether any provision should be made for such person to compensate them for taking on the role.

Under the Succession Act 1981 (Qld) (the Act), a person acting as the Executor of the Estate is entitled to receive a just and reasonable commission for their attendances in acting as the Executor of your Estate, provided such commission is authorised by the Will, authorised by the Court (in accordance with section 68 of the Act ) or agreed by all beneficiaries of the Estate. In the event such payment is authorised, it would be paid from the assets of the Estate prior to distribution.

However, depending on the value of the Estate, this is something that you may wish to specifically address in your Will; whether to authorise or prohibit such payment, or to make alternative provision.

For example, as a commission payment is generally paid as a percentage of the net value of the Estate, if the value of your Estate is significant, the payment of an Executor’s commission can be a large sum and may significantly reduce the value of your Estate (and, in the event your Executor is also a beneficiary of your Estate, could result in a disproportionate distribution to beneficiaries). This may be considered particularly unreasonable if the attendances by the Executor in administering the Estate have been minimal in comparison to the amount of compensation received by way of commission.

In order to avoid the payment of a percentage of your Estate as commission, or payment of a disproportionate sum, it is also possible to include a clause in your Will directing that your Executor is authorised to be paid for their attendances in administering your Estate at an hourly rate (set by you – such at a specified hourly rate, or a rate equivalent payable to bookkeepers in your local area at the date of your death).

If you wish to review your Will to ensure your Executor is appropriately remunerated for acting in the administration of your Estate, please contact our team on 07 5574 3560 or via email to info@nautiluslaw.com.au.

 

Estate Planning Myths Series: “I don’t need to make a Will because my spouse will automatically receive everything”

Estate Planning Myths Series: “I don’t need to make a Will because my spouse will automatically receive everything”

In the circumstance of a person dying without a Will, they are said to die intestate; therefore, the Estate is administered in accordance with the rules of intestacy as directed by the Succession Act 1981 (Qld) (the Act) (applicable to Queensland Estates only – different provisions apply in other states and territories).

The assets your spouse automatically receives

The intestate Estate is dealt with in accordance with the rules of intestacy; however, such administration is limited to the assets forming part of the Estate. Assets falling outside of the Estate may be dealt with differently.

For example, assets held as by you as joint tenants with your spouse (or another person) will automatically transfer to the survivor upon your death, in accordance with the principles of survivorship. In this instance, the asset falls outside of the Estate and is not subject to the rules of intestacy. However, if the asset is held by you you’re your spouse (or another person) as tenants in common, your interest forms part of the Estate and is dealt with as part of the Estate administration.

Further, non-Estate assets (such as superannuation and trust interests) are subject to distribution by the Trustee of the relevant Fund or Trust and, therefore, may also be distributed outside of the Estate.

Distribution on intestacy

In relation to the assets forming part of the Estate, section 35 of the Act provides that an intestate Estate is to be distributed to the persons entitled to take an interest in accordance with Schedule 2 of the Act.

In the event that you are survived by a spouse (and only one spouse), and you do not have any children, the spouse will be entitled to receive the whole Estate.

In the event that you are survived by a spouse (and only one spouse) and you have children, then your spouse is entitled to receive the sum of $150,000 and the household chattels. The balance of the Estate is then distributed as follows:

  1. If there is only one child, ½ of the residuary Estate is distributed to the child and the balance is distributed to the spouse; and
  2. If there is more than one child, 1/3 of the residuary Estate is distributed to the spouse and the balance is distributed equally between the children.

In order to ensure that your Estate is distributed as you intend (rather than in accordance with legislation, as currently set out above but is subject to change), the best practice is to ensure that you have a Will in place directing the distribution of your Estate.

If you would like to discuss implementing an Estate Plan, please contact our team on 07 5574 3560 or info@nautiluslaw.com.au.

Estate Planning Myths Series: “My Executor has to pay the costs of administration of my Estate”

Following your death, your Executor is responsible for the administration of your Estate; this includes calling in the assets of your Estate, attending to payment of debts and liabilities, and distributing the net proceeds to the beneficiaries in accordance with your Will (subject to any direction of the Court).

There are various debts that must be considered in Estate administration:

Funeral expenses

Funeral expenses may be paid directly from the deceased’s bank accounts upon presentation of a certified copy of the Will and the funeral account to the deceased’s financial institution (however, this will result in freezing the accounts).

Costs of administration of the Estate

The Executor is authorised to engage professionals to complete the necessary works to administer the Estate. In doing so, the Executor personally engages accountants, lawyers, agents and other professionals, and in doing so the Executor is generally entitled to a full right of indemnity from the Estate in relation to the reimbursement of such properly incurred costs as an administration expense.

Estate debts

Aside from funeral, testamentary and administration expenses of the Estate (which take priority to other Estate debts in accordance with the Succession Act 1981 (Qld)), the remaining debts of the deceased and Estate must be paid prior to distribution of the Estate to the beneficiaries.

The Executor is not personally liable for the payment of such expenses, but rather they are borne by the Estate. In the event that the Estate does not have sufficient assets to attend to payment of all such debts, the Estate may become insolvent and be declared bankrupt.

The Executor becomes personally responsible for payment of Estate debts only in the circumstance where administration of the Estate has been completed without the Executor having given proper statutory notice to potential claimants.

If you would like to discuss the administration of an Estate, please contact our team on 07 5574 3560 or via email to info@nautiluslaw.com.au.

Estate Planning Myths Series: “I don’t need to make a Power of Attorney because my spouse can automatically act”

An Enduring Power of Attorney appoints an “Attorney” to act on your behalf in relation to the administration of your affairs at a time of your choosing, including following your incapacity.

Such appointment can be made in relation to both financial and personal/health matters. Should no such document exists upon your incapacity, there are various courses of action that can be taken in relation to the appointment of persons to act for you.

Personal and Health Matters

Pursuant to section 63 of the Powers of Attorney Act 1998 (Qld) (the Act), your spouse (if the relationship is close and continuing) is considered as the statutory health attorney, and can make any decision about the health matter that the Principal could lawfully make if they had capacity (in accordance with section 62 of the Act).

In the event your spouse is unable or unwilling to act, the Act provides alternate appointments and an application can be made to the Queensland Civil and Administrative Tribunal (QCAT) for recognition of same.

Financial Matters

QCAT can appoint a person to act as a Guardian for a person only if they are satisfied that the adult for whom the Guardian is appointed (the Principal) has impaired decision making capacity and that a decision maker is needed to ensure the Principal’s needs are met and protected.

Anyone who has a genuine and continuing interest in the welfare of the Principal can apply for appointment as the Guardian for such person. This power is not necessarily automatically given to your spouse.

Although there are provisions by which a health and finance attorney can be appointed to act on your behalf, this can be a lengthy and costly process and, in the event of your incapacity, can add additional stress to those persons already concerns for your welfare.

Further, a document specifically prepared by you which appoints your preferred Attorneys can provide additional instructions to such Attorneys (which instructions, if the Court were to make, would require additional processes and orders – some of which simply may not be possible). For example, in the event that you required your Attorney to deal with jointly held property or to make a nomination (binding or non-binding) to your superannuation trustee in relation to the payment of your member interests. As such terms can be important to the smooth and effective administration of your Estate, it is important to consider the drafting of a detailed Power of Attorney.

If you would like to discuss the drafting of your Enduring Power of Attorney, please contact Caitlin Bampton on 07 5574 3560 or via email to Caitlin@nautiluslaw.com.au.

Estate Planning Myths Series: Anyone can challenge a Will – it’s not worth the paper it’s written on

A Will is one of the most important legal documents you will make and must be tailored in accordance with your individual needs. It sets out your wishes for the distribution of your estate and provides directions as to who is appointed as your executor and how they should manage your estate.

The failure to execute a Will before your death will mean that you die ‘intestate’, leaving your assets to be distributed in accordance with legislative provisions (in Queensland, this is pursuant to the Succession Act 1981 (QLD) (the Act) – other States have similar legislation), which may not be in accordance with your wishes.

Further, a failure to seek professional legal advice to prepare a Will, attempting to draft your own Will, or neglecting to make sufficient provision for your spouse, descendants and dependants may result in a Family Provision Claim against your estate.

What is a Family Provision Claim?

Family Provision Claims are made under Part IV of the Act and are the most common type of challenge to a Will.  The Act provides that whether a person dies testate (having a Will) or intestate (without a Will), the court may, in its discretion, apply such provision as the court thinks fit having regard to the status of the individual making the claim and whether they qualify as a dependant on the deceased.

Who can make a Family Provision Application?

A deceased person’s spouse, child or dependant is entitled to bring a Family Provision Application seeking proper support and maintenance from the estate of the deceased.  Each potential claimant will be considered in detail below.

Spouse:

At law, a person’s spouse is entitled to a distribution from the estate if they are the husband, wife, de-facto partner or a registered partner of the deceased.

Children:

The definition of child under the Act is broad.  Children who may bring a Family Provision Claim include not only the deceased’s natural or legitimate children, but also step-children and adopted children.  Foster children may bring a claim if they can establish that they were wholly or partially dependent on the deceased and were a member of the deceased’s household.

Dependant:

A claimant may also fall within the category of a Dependant, which is defined as “any person who was wholly or substantially maintained or supported … by that deceased person at the time of the person’s death being:

  • a parent of that deceased person; or
  • the parent of a surviving child under the age of 18 years of that deceased person; or
  • a person under the age of 18 years.”

Accordingly, a dependant may be a parent of the deceasd person.

 So – if a Family Provision Claim can be made in any instance, what’s the point in writing a Will?

In the event of a Family Provision Claim, the Will is one of the primary documents upon which a court will rely, as this document sets out the testamentary intentions of the deceased.

While there is no concrete method of preventing a Family Provision Claim being lodged – there are various methods by which the chances of a claim being lodged, or of such a claim being successful, can be decreased.

When a court considers a Family Provision Claim, the deceased’s views will be considered.  However, there is no guarantee that the court will uphold the wishes contained within the Will if the claimant can demonstrate the need for proper support or maintenance.  It is, therefore, paramount to consider every possibility which may arise, and to draft a Will that considers all potential claimants and provides security and protection to ensure your estate is distributed as you intend.

If you are excluding any of the potential claimants from receiving a distribution under the Will, or effecting a distribution that is less than what may be considered by a court to be “proper entitlement”, it is important that you record the reasons for such exclusion or reduction with either a clause included in the Will or alternatively executing a signed statement to be kept with the Will.  There are various supplementary documents which can be prepared by your solicitor setting out the reasons a lesser provision was made for potential claimaints.

If you would like to speak to our estate planning team about drawing a Will or potential Family Provision Claims, please contact our office on 07 5574 3560 or via email at info@nautiluslaw.com.au.