Tham was convinced by his son Alex, to appoint him as the executor and not trust a company so to save on the estate administration fees and his is one of the beneficiaries.
Upon Tham’s death, Alex went about to obtain the grant of probate. Little by little, he found out that he had a load of administrative matters to handle- identifying, locating and collecting all of Tham’s assets, obtaining data on all liabilities, dealing with creditors and banks, dealing with the income tax department on the past tax assessments of the deceased, filing of the estate’s own tax returns and applying for a letter of clearance before he can make any distribution of assets to Tham’s beneficiaries.
Alex had to make numerous calls, correspondences and even follow up with various parties, all very arduous and time-consuming tasks. He had to comply with different procedures of each financial institution and was not able to obtain the relevant information through the phone or by mail alone.
Alex then realized there’s too much to do and it distracted him from focusing on his business. Alex thought the work of an executor is to sign documents after he has given instructions to his lawyers what need to be done. Alex did not know that if he failed to conduct the affairs of the estate in a proper manner, he becomes personally liable, among other things, for the debts and taxes of his father. If he knew it was so tedious, time consuming and with so many unknown liabilities that he exposed himself to, he would have told his father to appoint a trust company as the executor.
Conclusion, Alex did not save time and money but incurred more money because he had to engage a tax agent, lawyer and accountant to handle different matters for the estate.
Alex turned out to be the not-so-smart alec. He did not have a good understanding of the tasks and challenges faced by an executor. Ignorance often resulted in people taking the route of appointing a person whom they trust to be the executor.
The issues to consider in selection of an executor are:
- Complexity of task. Estate administration work is not simple but requires detailed knowledge of legal, tax, banking, accounting and administrative matters
- There is no free lunch. Avoiding costs of professional handling may mean higher costs eventually. Trying to get cheap or free service can lead to overlooked and costly mistakes.
- Priority is forsaken. An individual executor has his own priorities perhaps in his job or own business and may not be able to handle or pay full attention to his role as an executor.
- Impermanence of individuals. Often, the choice of executor is someone in a similar age band. An individual, no matter youth or middle-aged, is subject to old age, sickness and death and may not be an effective executor or be in the position to complete the task at hand.
- Risk of estate being frozen. When an individual executor passes away, his assets are frozen until the necessary legal estate administration processes are completed which means the assets that he is holding as a trustee are frozen too. When this situation occurs, it would cause further delay in distribution and cost a lot more due to the complications in separating the assets belonging to the deceased executor and the assets he is holding as a trustee.
A licensed trust company, on the other hand, exists in perpetuity and is not subject to old age, sickness and death and will have a team of professionals well trained to execute estate administration matters.
For total peace of mind knowing that one’s loved ones need not face unwarranted problems, the trustee company’s estate administration fee is a small price to pay.
Article extracted from rockwills.com.