5 Common Mistakes Made by Executors and Administrators
Executors or administrators of estate often have a lot to do. They sometimes feel overwhelmed, are not sure where to start and can find themselves under pressure from beneficiaries who want a quick winding up of the estate.
It is not surprising then that executors and administrators make mistakes. 5 common mistakes of executors and administrators to be avoided are as follows:
1. Delaying the administration of the estate
Executors and administrators have a legal duty to obtain probate or letters of administration and then administer the estate in a timely fashion (12 months is a rule of thumb, although often there are legitimate reasons for delay). However, apart from the legal obligations not to delay, delays can cause other problems. Creditors and beneficiaries can get anxious and difficult. Properties may need maintenance. Insurance policies may need to be renewed. In
other words, delays can cause more work, stress and add to estate costs.
2. Failure to locate all the major assets
Sometimes in the process of trying to get things moving, executors and administrators overlook assets that should have been included in the application for probate or letters of administration. If it is an important asset, like real estate, this may require an additional, later application to be made to the Court, costing time and money.
3. Not considering all the taxation consequences to the estate
The realisation or transfer of the assets of an estate will often have significant capital gains tax consequences, either for the estate or for beneficiaries. The estate may also receive income that will need to be assessed for tax. Executors and administrators need to make sure that they identify all the taxation ramifications for the estate before they distribute all its assets. Failure to do so can expose executors and administrators to personal liability.
4. Making unrealistic promises to beneficiaries
Beneficiaries are often keen to know how much they will receive from the estate and when they will receive it. Executors and administrators can underestimate the time it takes to administer an estate and can also overestimate the value of its net assets. This can disappoint beneficiaries’ expectations when estates take longer to administer than anticipated or when estate assets are sold for less than was anticipated, or when estate expenses are greater than first thought. Failure to manage beneficiaries’ expectations, although not usually a legal problem, can put executors and administrators under great personal pressure.
5. Failure to keep proper records
Some executors and administrators fail to keep a proper record of the expenses of the estate. If the expenses are minor or predictable, or the beneficiaries are relaxed, this may not be a problem. However, if a beneficiary wishes to query an expense, as they are entitled to do, this can become a very big problem. If there is not sufficient evidence for expenses, the executor or administrator might become personally responsible for them.