A Will often stipulates the naming of an executor, be it sole executor, substitute executor, or even joint executor. Executors have a legal duty to administer the deceased’s estate, managing and being responsible for the entire process until the final distribution to the beneficiaries has been carried out. Apart from the distribution of assets to beneficiaries, it also involves identifying all assets (locally or globally), calling in of the assets, settling outstanding debts/ liabilities, declaring and paying taxes where they are due.
The process takes minimally six months and can last up to years for complicated cases. Throughout this time, executors are expected to carry out their duties with utmost diligence, good faith and loyalty, acting in the best interest of the estate and being answerable to each beneficiary.
Executorship can be an onerous undertaking for the uninitiated, and it is thus crucial to understand the process of estate administration, from a best practice standpoint.
Estate Administration Process
- Prepare documents and start a logbook for accountability. Besides a death certificate, schedule of assets and probate checklist are to be drawn up for visibility of assets and liabilities.
- A Will reading session should then be conducted to ensure all family members and beneficiaries are aware of the schedule of assets and the timelines. This could open up serious discussions on how issues should be handled.
- Hire a probate lawyer to obtain a Grant of Representation (eg. Letters of Administration or Grant of Probate) from either the Family Justice Court or Family division of the High Court.
- Ensure income tax clearance and put up creditors’ notice. A creditors’ notice by advertising on the Government Gazette will help to prevent external claims that would cause delays and inconvenience to beneficiaries and the estate.
- Processing of insurance proceeds and calling in of assets from various bank accounts.
- Contact Financial Institutions to enquire about existing accounts. There are close to 50 Financial Institutions such as banks, insurance companies, asset management/ investment companies that PreceptsGroup checks with in this regard. This investigative exercise in calling in assets is important in preparing for the Schedule of Assets to be filed in Court to obtain the Grant of Representation.
- At the settlement of liabilities stage, proper documentation would go a long way as records keeping would help with accountability of the executor especially at the stage of assets distribution to beneficiaries.
- It is highly recommended for the executor to open a bank account to manage the deceased’s estate. It could be particularly advantageous for the person who has been named executor to keep funds separate from his/ her personal account. The management of funds could be potentially sensitive when it comes to multiple beneficiaries or properties in other countries, even dealing with different exchange rates.
- After clearing outstanding liabilities, an executor will see to the appropriate distribution of various assets to all beneficiaries identified by the deceased. In many instances, this could include overseas beneficiaries, and even charitable organisations.
Handling of residential or commercial properties requires some coordination with Real Estate Consultants and various authorities for transactions such as rental or sale. Should the property be held under a Trust for rental, the appointed Trustee will rent out and prepare statements of rental income.
For accountability, it is important for the executor to maintain proper accounting-related documents such as statements of distribution and quarterly balance sheets. In instances where properties generate rental income, monthly records and contracts should also be safely kept.
The above outlines the scope for a typical Singaporean family but there are additional common scenarios to take note of too. If the deceased is a business owner or has shares in companies, “many make the mistake of failing to leave instructions on how the personal representative is to deal with the other partners/ stakeholders/ shareholders of the business. At its mildest, miscommunication happens. The personal representative and the estate’s beneficiaries do not trust the other partners, the partners think that the personal representative does not know what he/ she is doing and thinks that he/ she is intruding into their space. Typically, we see a shareholder’s dispute arising from there, in the form of an oppression case or a winding up application,” cautioned Mr Daniel Loh, Associate Director of BR Law Corporation.
Many families also have estates that include overseas assets and properties. For such cases, Precepts would work with overseas lawyers and advisors to facilitate smooth transactions. “Many people do not realise that when they have overseas assets and when they pass on, their personal representatives will need to be vested with authority in the county(ies)/ jurisdiction(s) where the assets are situated before they can access and deal with those assets on behalf of the estate. Getting such authority often involves obtaining grant of probate/ letters of administration, or the equivalent. Legal representation and advice from the deceased’s country of domicile and the country where the asset is situated, ie. 2 sets of lawyers, may be needed,” added Mr Daniel Loh.
In the event where there are minor beneficiaries who are not of age to receive the inheritance, guardianship plans should also factor in financial sensibility. Separate considerations such as availing funds for continuous education must also be given.
Given the scope of estate administration, an executor is often subjected to pressure from different parties. A strain in relationships could also be a consequence of common fallouts such as pressure from family members or differing opinions on proper management. All these complications result in additional costs and prolong the distribution process.
“While the business owner is alive, he must get his house and his estate planning in order. It may be too late if he thinks the personal representative can handle it later. The personal representative may not have the business acumen or the relationship existing with his business partners to continue to play any meaningful part in the business. If he wants his estate to continue his business, he may look into a family office structure (if he is an UHNWI) or he ensures he already seeds the right person to succeed him. If otherwise, the usual tools would be key- man insurance, complemented together with properly drafted company constitutions and shareholders’ agreement.
Mr Daniel Loh, Associate Director of BR Law Corporation
What if an Executor is not properly administering the Estate?
“If a beneficiary has concerns about the executor’s handling of the administration and they haven’t been able to resolve them informally or through mediation then they may look to have the executor removed. Removing an executor is not an easy thing to do. Each case will turn on its own facts, but what must always be demonstrated to the court is that there are compelling reasons for the removal,” highlighted by Society of Will Writers in issue 16 (Summer 2020) of Focus newsletter.
Hence, it often makes sense to appoint a substitute executor from the onset to cater for undesirable circumstances. “The main problems a beneficiary may face are the executor’s unwillingness to act at all, or an executor failing to carry out their duties correctly.” Often, there are also requests to renounce the right to be an executor and for Precepts to take on the role.