When accountants cross the line to wills and estates

Acting as an executor carries risks for accountants

Accountants need to be extremely cautious when “crossing the line” to work in the minefield of wills and estates.

For many accountants, being asked to be the executor of a client’s will is an honour. It demonstrates the deep trust the client has in their accountant and is a service a practitioner can provide to their client’s family at a time of great need. But acting as an executor carries many risks for accountants, and if they do decide to take up one of these appointments they should be aware of these risks, say accountants and lawyers with experience in the field.

Jenny McMillan, the practice leader (Wills and Estates) at The College of Law in Sydney, says accountants need to take time to do an assessment before they accept a role as an executor. As she explains, accountants are held to a different standard from, say, a family member or friend acting as an executor.

“In terms of being a prudent investor, a higher standard of care, diligence and skill would be expected of somebody who practises a profession which involves holding trust assets or investing money compared to a layperson,” she says.

Executors can get caught in the middle of family disputes and if it comes to litigation, then it is the executor who is the defendant in such proceedings. This can cost a practitioner time, money and emotional turmoil.

Executors can also be held personally liable in several areas. While they’re not liable for the debts of the deceased, they can be held liable for those incurred in administration of the estate. They are also liable if they don’t properly administer the estate. For example, if the executor fails to collect assets that they should have collected, or fails to distribute the estate correctly, then the beneficiaries have a cause of action against them. The beneficiaries could sue and recover costs against the executor personally. And if the executor distributes assets to beneficiaries and there remains an outstanding tax bill, he or she is personally liable and may have difficulty recovering the money distributed.

Executors also have day-to-day duties such as protecting the assets of the estate and making sure those assets are insured. If a client had a business with a lot of perishable goods, for instance, that would have to be dealt with immediately.

"Once anyone accepts an appointment as an executor and starts to administer the estate, they cannot renouce the position."

“I wouldn’t discourage people from taking on the role, but if you do, you need to realise there are certain duties and obligations attached and an exposure to personal liability,” says McMillan. “You do need to be aware of that and not just let things run and not deal properly with the estate.”

For accountants who do take on the role of executor, it is important to make sure they are going to get paid at their standard hourly rate. “As a general principle, executors are expected to act gratuitously or for free, so it’s not an automatic entitlement to charge for being an executor,” says Ivana Bosio, special counsel at Australian Executor Trustees in Adelaide, one of Australia’s few licensed trustee companies.

There are three ways accountants can be authorised to receive payment – with the consent of the beneficiaries; with a clause on the will; or by applying to the Supreme Court to receive a commission, although this is less certain and can be a time-consuming, expensive exercise. 

Accountants also need to be aware that different states have different Trustee Acts, with different obligations for trustees and executors. This “sets the bar a bit higher”, says Bosio. “Accountants need to be careful. Are they taking on this role in their professional capacity as an accountant, or is it a favour to a longstanding client? They need to weigh up what is their actual role here.” 

Bryan Mitchell of Mitchell Solicitors in Brisbane – an accredited wills and estates practitioner – says accountants and financial planners are starting to do estate planning work. 

“It’s a really dangerous trend that’s not going to end well for a number of people, because it’s one of the most complicated areas of law I’ve ever dealt with,” he says. “[This trend is] based on the presupposition that estate planning is largely about tax and advice on tax, but that’s just a subset of estate planning work.”

Professional Development: Estate planning and SMSF: learn to identify the key estate planning issues requiring consideration by SMSF trustees and members.

Mitchell says straying into the territory of lawyers is arguably uninsured conduct on the part of accountants, so their professional indemnity insurance would become invalid. Even if they don’t cross this line, accountants need to be aware of what their professional indemnity insurance will and won’t cover in terms of acting as an executor.

Ian Raspin heads the Estates and Trusts division of accountancy firm BNR Partners, and refuses to accept executor appointments. “After all these years working in this space, I don’t accept executorial appointments because I appreciate many of the risks involved,” he says. “I’m happy to advise from a tax perspective and deal with that, but the executorial side is outside of my professional skill set.”

He points out that accountants don’t have any training in or understanding of estate law. Even lawyers, who study the subject at university and in some cases do specialist training through their state law society, still find it a highly complex area. He adds that accountants are not obliged to take up an appointment as an executor, even if they are named in the will. One alternative is to be appointed as an adviser to the executor and provide tax advice only. Practitioners should be aware that once anyone accepts an appointment as an executor and starts to administer the estate, they cannot renounce the position.

Another reason Raspin declines executor appointments is the huge amount of time they take up and the personal liabilities involved. There are also potential conflicts of interest, for instance, when an accountant is carrying out an executorial role and working as a tax adviser to the beneficiaries, or providing services to the broader family or the family business.

With nearly 25 per cent of Australia’s population forecast to be aged over 65 by 2050 (The 2010 Intergenerational Report), dealing with estates is a substantial growth area. As a result, the Australian Taxation Office will put more focus on what will be a growing source of revenue, so accountants need to be fully versed in the tax of estates. 

“It has its own language, it’s a different area of tax,” says Raspin.

Patricia Wass, a consultant at UK law firm Foot Anstey who specialises in powers of attorney and legal issues relating to the elderly and vulnerable, says that in the UK, lawyers usually handle estate work, although where it involves a wealthy individual or a family business it can be a good idea to bring in their accountant for tax advice.

Read next: It's your funeral: the (frequently thankless) role of the executor


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