What are personal representatives? These are the people you nominate to undertake certain responsibilities when you die and if you become incapacitated. We hope that there won’t have to be a guardian for our children or someone to make our financial decisions while we’re living, but that’s the reality of the world in which we live. It is a serious matter to choose the right personal representatives because there are some jobs that are necessary when we die and there are a great many ‘what if’ scenarios which require someone to make decisions in our place.
The temptation when we’re choosing people to act as personal representatives, such as the executor of your will or power of attorney, is to choose family members. Now blood may be thicker than water and we can love our families dearly, but sometimes – let’s be honest – blood is just thick. Choosing people for certain duties should be an analytical rather than an emotionally based task. It may seem like a fair thing to choose your spouse first and foremost for any estate planning tasks, but is your spouse the best choice? Would they be able to make objective decisions during a time of shock and grief? If they had to apply for the task of power of attorney to deal with your financial decisions, would they be the best candidate for the job? Sometimes you will find there is no one suitable in your family for the task and you will need to consider a friend or corporate fiduciaries.
Personal Representatives: The Wrong Choice
A mother in Massachusetts, Shirley Leathers, chose her daughter to be the executor of her estate. Dell Leathers-Buford became executor of Shirley’s estate in 2006, when Shirley died from cancer. Leathers-Buford was not the right choice.
Shirley’s estate received $553,570.84 for a wrongful death settlement two years after her death (which had been filed on behalf of Shirley). Although the money was supposed to be split evenly with her siblings, Leathers-Buford kept more than half of that amount for herself. Her siblings became suspicious of the true value of the settlement and she was removed as executor.
After a criminal investigation into the management of her mother’s estate, Leathers-Buford was eventually charged and found guilty of larceny, perjury and embezzlement. Leathers-Buford was sentenced to 18 months in jail and must also pay restitution to other family members for the money she stole.
The Most Important Quality to Look for in Personal Representatives
Character is a diamond that scratches every other stone. Cyrus A. Bartol
Good Character. For any of the positions required, good character should be first and foremost. This is solid foundation from which you need to start. Are they trustworthy and known for completing tasks? Are they known for putting others first? Some of these roles will potentially be required over long periods of time – will they stick with them well? Choosing a person of integrity to represent you should be a comforting thing. If you’re left wondering about how someone might treat your loved ones and your estate when you’re incapacitated or have died, then choose someone you won’t be wondering about. It is common for parents to make the wrong assumption that after they die, their children will change or do the right thing. In our experience, this is seldom the case. A child with a history of dishonesty and fraud is likely to be a catastrophic executor.
What Personal Representatives Should I Include in Estate Planning?
Executor: These are those persons responsible for administering your estate after your death. You should make a first choice of persons to be your executors, a second choice and, in our view, even a third choice. This is important because any executor or executors appointed by you may not be living when you die, may be incapacitated or may simply refuse to act as your executor/s. Although you cannot force someone to become your executor, you need to choose willing people whom you trust, who are sensible and who would wisely seek legal advice about administering your estate.
If they are going to be dealing with money, do they themselves have a history that shows they know how to handle money well? Someone who has a history with bankruptcy, or borrowing money is not going to be the best choice. It is wise to choose an executor who has a fair understanding of financial matters including accounting, taxation matters and business practices. It is a task that can be difficult and time-consuming, so this would certainly be a factor in considering the right person to nominate for this position. An executor who does not complete their obligations may be held personally liable.
Enduring Power of Attorney: An enduring power of attorney document appoints someone to make financial and/or personal decisions on your behalf. They become your attorney at a time previously nominated by you – usually when you are incapacitated to make financial and personal decisions yourself. It may be that you choose one person to make financial decisions on your behalf and someone else to make personal decisions, or it might be one person who does both.
The Queensland Government outlines what an attorney must do:
Your attorney must:
- act honestly and with care
- recognise your right to confidentiality
- consider your existing supportive relationships, values and culture
- apply the general principles under the Powers of Attorney Act 1998.
In relation to health care decisions, your attorney must:
- ensure any decision made contributes to your health and wellbeing
- choose the least intrusive method of treatment where possible
- consider your views and wishes
- consider the advice of your doctor or other health care providers
- comply with the health care principles under the Powers of Attorney Act 1998.
In relation to financial matters, your attorney must:
- avoid entering transactions that may result, in their interests (or those of attorney’s relations, business associates or close friends) conflicting with your interests
- keep records and accounts of dealings and transactions
- keep your property separate from their own (unless it is jointly owned)
- not give your property away, and make only reasonable gifts for birthday/Christmas presents or donations that you would normally make yourself.
Trustees (for Testamentary Discretionary Trusts): The trustee is the person (or persons up to four) you designate to be in charge of the trust. The trustee can be the person whom you wish to benefit under your will, or even one of the persons for whom the trust is established. The trustee can also be a company.
The trustee of a testamentary discretionary trust has to be given an absolute discretion in distributing some or all of the capital and/or the income of the trust from time to time in various proportions, amounts and categories to the beneficiaries of the trust. In exercising this discretion the trustee decides who gets what and when.
Guardians: If you have children and you’d like to choose who cares for them if you become incapacitated or die, then ensure you nominate them in your will. There are lots of questions to think about when choosing a guardian, such as:
- Does the potential guardian have the skills and capacity needed to raise your children?
- Will they raise your children in a similar way with similar beliefs, ideas about education etc?
- Would raising your children work with their lifestyle?
- Will they love your children?
As you can see, choosing the right personal representatives for your estate planning is not always a straight-forward task.
To help consider all of your estate planning needs, please contact us today. We offer a free, 10-minute phone consultation with one of our estate planning specialists.