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Acting as an executor - a cautionary tale

Jennifer Jackson, Avant Law - Partner, Head of Estate Planning & Probate

Michael Mobberley, Avant Law - Senior Associate, Estate Planning & Probate

Monday, 27 March 2023

image with assets

Key takeaways

  • It is the responsibility of an executor to make sure a person’s will is administered properly.
  • An executor can become personally liable for unpaid bills and even legal damages if they distribute a deceased estate incorrectly.
  • Engaging a professional early can save you from unnecessary headaches.

When someone dies, it is common for the executor of their will to seek out professional advice and support, such as lawyers and accountants.  

But what about when the deceased’s affairs are simple and straightforward, do you still need a lawyer then?

As the scenario* below illustrates, even a ‘simple’ probate can take a turn for the worse if you don’t know what to look out for.

John’s story

John is the executor of his late mother Susan’s will. Her will gifts her assets as follows:‍

  • I leave my property at 123 Pitt Street, Sydney to my second husband Greg.
  • I give $40,000 to my daughter Nicole.
  • I give all my shares in the Popular Company Limited to my friend June.
  • I give the balance of my estate to my son John.

A few things have changed since Susan made her will.

Firstly, Susan sold her shares in the Popular Company after they reached $100 a share (she had bought them back when they were still only $5 each) and used the windfall to go on a lavish cruise.

Susan and Greg also separated shortly after the will was made. John remembers his mother telling him she was applying for a divorce and after searching online, John has found that after a divorce, a gift to an ex-husband is no longer effective.

John figures this does not matter much anyway, as he sold the Pitt Street property whilst acting as his mother’s attorney to help her move into aged care. All the sale proceeds were put into a single bank account from which fees were paid.  This account still had $500,000 in it when Susan died and is the only asset in Susan’s estate.

As his mother’s affairs seem simple enough, John decides to administer the estate himself, rather than engage professionals to help him. John applies for a grant of probate with the Supreme Court and soon has access to his late mother’s bank account.

He pays off some small bills he found in his mother’s mail and hand delivers a cheque for $40,000 to his sister at a family birthday party.  John uses the rest of the money to go on a Hawaiian getaway and pay off his mortgage.‍

The problem

John soon returns home from Hawaii to a full letterbox.

The first letter he opens is from Greg’s lawyers. They have seen a copy of Susan’s will. It turns out Greg and Susan started the divorce process but never actually went through with it. Greg is still Susan’s legal husband.

Greg’s lawyers also say that because John sold his mother’s house in his capacity as attorney, the gift to Greg is still valid and he is entitled to the $500,000 sale proceeds. They give John 21 days to pay Greg.

John opens the next letter. It is from the Official Trustee in Bankruptcy advising Nicole was made bankrupt last year. Any money given to her in the will must be re-directed to the trustee or John will be personally liable instead. John calls Nicole to give him back the cheque, but she tells John she has already spent it.

John looks at the final letter. Surely, he thinks, it cannot get any worse.

He opens the envelope. It’s from the Australian Tax Office (ATO).

Susan made significant capital gains on her shares in the Popular Company but failed to file a tax return before she died. The ATO has calculated the amount owing and has asked John when they can expect payment given that they are a creditor and should be paid before any distributions under the will are made.

John wonders how fast he could get back to Hawaii.

We can help you

If you have any questions, or would like more information about how we can assist you or your practice, please call 1800 867 113, or to organise a confidential discussion at a time that suits you, please click here 

About the authors

Jennifer Jackson

Jennifer Jackson leads the estate planning team at Avant Law. Jennifer has over 15 years’ experience providing estate planning and structuring advice to clients and their financial advisers and accountants. Jennifer takes the time to work through the issues with her clients, to identify what matters most to them in that often-difficult conversation about planning for their death or loss of capacity.  She brings a wealth of life experience and a calm, practical and considered approach to handling legal matters, which her client’s value. In addition to working directly with clients, Jennifer presents to both professional and community groups on topics relating to her area of practice.

Michael Mobberley

Michael Mobberley

Michael Mobberley is a Senior Associate in the estate planning and commercial law practices at Avant Law, based in Sydney. Michael is an accredited specialist in Wills & Estates and holds a Masters degree in Corporate, Commercial and Taxation Law. Michael provides advice to both individuals and businesses on a range of matters, as well as acting for clients in contested estate and family provision claims.

Disclaimers

 Scenarios* in this publication are fictitious and any resemblance to real persons is purely coincidental. The information in this scenario does not constitute legal advice or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest, and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of its content. The information in this article is current to 28 March 2023. Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.



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