Nobody wants to leave behind a mess after they die. You, therefore, need to choose the right executor to ensure that your estate is wound up properly in due course. But who is the right person to do the job – a professional (who will charge), a family member, or both?
Your choice of executor in your will is a very important one. Your executor will be responsible for winding up your estate and ensuring that your debts are paid and that your assets are delivered to your beneficiaries in accordance with the provisions of your will.
An executor is entitled to charge a fee for winding up an estate. The statutory fee is currently 3,5% (excluding VAT) of the gross value of the estate as at date of death, plus 6% (excluding VAT) of any income earned by the estate after death. This fee can be significant for larger estates, although some executors do negotiate the fee.
To try to soften the pain of the executor’s fee, some testators do one of the following:
- try to “keep it in the family” and appoint a family member to wind up the estate. The problem with this option is that the family member will (in most cases) have no idea how to wind up an estate and the Master usually insists in these cases that the family member get help from a professional (who will charge for the service), which defeats the purpose of appointing the family member in the first place. Of course, the family member may be able to negotiate a lower fee at the time, but in most cases, the family member is grieving and won’t want to haggle over money before the winding-up process even starts.
- appoint a professional and a family member as co-executors. This option also has problems:
- The process of obtaining letters of executorship can be delayed because more documents need to be signed and the non-professional executor will not be familiar with these documents. The non-professional executor may also live far away.
- The allocation of the work will need to be negotiated. In most cases, the professional will do most, if not all of the work.
- The signing of documents (for example for the opening of the estate bank account and the liquidation and distribution account) will be delayed because both executors will need to sign.
- The splitting of the executor’s fee – if the professional is doing most of the work, the professional will want most of the fee.
The reality is that winding up an estate costs money and it needs to be dealt with properly. The best way for a testator to deal with the nomination of an executor is, therefore, to nominate one professional (not co-executors) and to make sure that the executor’s fee is provided for either by allocating an investment for winding-up costs or through an insurance policy. The testator can also attempt to negotiate a fee with the executor in advance
To the extent that a testator is concerned about the beneficiaries not being kept informed about the progress made in winding up the estate, the Administration of Estates Act obliges the executor to perform his/her duties within a specific timeframe and to advertise the liquidation and distribution account. An executor can be removed from office for failing to perform his/her duties properly. Choosing a professional executor who knows the family will also help to keep beneficiaries informed of developments.
For assistance or advice on drawing a proper will, please contact us.