Have you been named as the executor of an estate? People generally appoint someone who they consider trustworthy to carry out the very important task of distributing their assets in accordance with their Will and so at first, it can seem like an honour.

However, the perceived honour comes with an array of responsibilities, deadlines, family issues (particularly where a blended family or family business is involved) and even the risk of being personally liable.

Here are five common mistakes executors should avoid:

  1. Failing to identify all of the assets of an estate

In NSW, an application for a grant of Probate should be made within 6 months from the date of death. Applications lodged out of time will require an explanation to the Court by way of affidavit. The Court is quite generous in granting leave to apply out of time if legitimate reasons, such as difficulty identifying estate assets, have caused the delay.

Many executors make the mistake of moving too quickly in applying for a Grant and overlook assets which later need to be disclosed to the Court. This can cost the estate time and money and could potentially expose the executor to liability if creditors or beneficiaries are adversely affected by the original oversight.

  1. Distributing the estate too early

Executors should administer an estate in a timely manner, aiming to complete administration of an estate within 12 months from the date of death ('the executor's year'). This may not always be possible, particularly where there are complex taxation issues to address. For example, lifetime tax returns for the deceased or if the estate has received income, returns for the estate may need to be prepared. If property is sold, capital gains tax may be a large liability which the executor will need to account for.

If the executor distributes the estate too soon without holding back sufficient funds to cover any taxation liabilities, recouping funds from beneficiaries, particularly if they are overseas, uncooperative or have already spent their inheritance, may be a problem.

  1. Delaying administration

On the flip side, delaying the administration of an estate can cause an executor to come under fire by impatient creditors and beneficiaries, costing the estate unnecessary expense. Beneficiaries may be entitled to interest once the executor's year passes. An executor who doesn't administer an estate in a timely manner or who generally doesn't act in the interests of the beneficiaries, may be at risk of personal liability or could be removed from office.

A recent Victorian case, Denby v Power & Anor [2016] VSC 535, is a reminder that executors can be removed from office if they have a conflict of interest or don't act in the interests of the estate.

  1. Poor management of beneficiaries' expectations

Executors often make the mistake of keeping beneficiaries in the dark or making unrealistic promises to them. Impatient beneficiaries may become suspicious, or if executors don't deliver on promises because they have underestimated time frames or overestimated the net value of assets, beneficiaries can be disappointed and become difficult.
It's important for executors to keep an open dialogue with beneficiaries and to manage their expectations as well as possible without creating too much expense for the estate (for instance, if there is frequent contact between a beneficiary and the estate's solicitor).

  1. Failing to keep proper records

Beneficiaries are entitled to full and proper accounting so executors should ensure that they keep a proper record of the expenses of the estate. This is particularly important if an executor is claiming reimbursement for expenses which the executor has personally met (such as funeral costs, court filing fees, etc).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.