A wise man once said there is no such thing as a selfless act, and in no instance is that truer than for a person acting as executor of an estate. When drafting Wills, we advise our clients that often the most important choice they will make in their Will is not who is a beneficiary but who will act as executor.
Executors are tasked with administering a person’s estate following their death. Broadly, this consists of ascertaining the assets and liabilities that form part of an estate, valuing them, submitting the necessary inheritance tax forms, obtaining a Grant of Probate, collecting in/liquidating assets, paying debts, distributing the estate and then dealing with any ancillary matters, such as filing an estate income tax return. The role of an executor is an enormous responsibility, and one that is complex and time-consuming.
Given the commitment required for the role, some testators leave directions that their executors should be paid, but this payment takes on different forms depending on the way it was instructed and whether a person is a professional or a lay executor.
An obvious and easy way to reward an executor is to leave a legacy to them in your Will, such as if this person acts as my executor, they will receive the sum of £10,000. This a clear and simple way of rewarding executors. If the named person does not act as executor, they will not receive the legacy.
Alternatively, a person may appoint a professional executor, such as a probate solicitor. The clear advantage being that they have the expertise to administer the estate and know what they are doing. In this instance, the Will should specify that person is being appointed in their professional capacity and if they are part of a firm or a business, also specify the name of that business. The Will should also contain a clause stating that the professional executor is entitled to charge for their services rendered to the estate in line with their normal charging regime.
However, there can sometimes be some confusion over whether a person is truly a professional executor, or whether they are in fact a lay executor. A lay executor is an ordinary person who agrees to act as executor and who does not have any professional experience nor training in administering estates. For example, if a testator appoints their daughter as their executor and the daughter is a shop-keeper by profession, the daughter would be a lay executor. A professional executor is one who has had training and experience in administering estates. A professional executor is not generally defined by reference to profession alone, but also an individual’s particular experience and sub-specialism. For example, if a testator appoints their son as an executor and the son just so happens to be a corporate solicitor, the fact the executor is a solicitor does not automatically make them a professional executor. The distinction between professional and lay executor is nuanced.
Another way an executor may be paid is by the agreement of the residuary beneficiaries. For example, if following the testator’s death, it becomes clear the executor’s role is becoming quite involved and they are having to dedicate many hours to dealing with the estate, it may be felt that the executor should be remunerated for their services, even if they are not a professional executor. Executors can be remunerated for services rendered provided the residuary beneficiaries all agree. It is not enough for the executors to simply agree amongst themselves; the residuary beneficiaries must also agree and be given all the information to ensure the decision is a fully informed one.
Generally, the residuary beneficiaries should be consulted on all important decisions and should agree to the course of action being taken. The executor’s principal role is to realise as much value for the estate as possible, with the estate then ultimately being distributed to the residuary beneficiaries. If therefore follows that residuary beneficiaries should consent to important decisions, including whether lay executors are to be remunerated.
The role of an executor is far more arduous than it may seem at first glance, and as such, it is important when preparing your Will that care is taken over who you appoint as executor and how they are appointed. Furthermore, if you are currently acting as executor, it is important you are aware of your duties and obligations and how best to discharge them.
If you are looking to prepare your Will, or you are currently administering an estate, and have a query, please contact a member of the Private Wealth Team at Druces. Druces’ Private Wealth Team can advise on all aspects of estate planning, Will drafting, probate and estate administration matters.
