Tara (00:57):
Thank you for joining us for episode 23 of the Art of Estate Planning Podcast. And today, Carrie, we're talking about what do you do when your client asks you to be their executor?
Carrie (01:10):
Tara, I can end this podcast in 20 seconds flat, say "no".
Tara (01:16):
I wrote that. I was like, "don't do it, end of episode" on my notes. Well, yeah, we didn't even lead anyone on. That's not a good idea.
Carrie (01:26):
Yeah, so thanks for tuning in. We'll see you all next.
Tara (01:29):
We think we're so funny. That's estate planning lawyer jokes for you, isn't it?
Carrie (01:35):
I actually think this is something that comes up so commonly in our Facebook groups and our communities that I think that this is really important to talk about. I'm still going to say no at the end of it, but I'm going to give you reasons about why I say no and I'm going to say this saying that the only couple of people I've ever agreed to do this role in other than my immediate family are my best friend. And then now I agreed over the Christmas holidays for my other best friend because they literally have no one else. They don't have kids, they don't have families they get along with. So that's the only people ever I've agreed to. So that gives you an idea that I'm not saying, I don't ever say no, don't ever say yes, but it's super, super, super limited circumstances because we're going to talk about this episode y, why we need to think about all these issues before we just kind of blindly say yes.
Tara (02:28):
Yeah, Carrie, I was reading a few papers on the topic in preparation for this and someone's quoted the statistic out of New South Wales law cover that executors who are solicitors has a disproportionately high volume of claims compared to all the other areas of practise.
Carrie (02:51):
Why am I not surprised? Why am I not surprised?
Tara (02:55):
So I personally see it as really high risk to you as an individual. I mean you are liable for the tax debts of the deceased testator. You do not want to go into that lightly and it goes against everything that I believe in terms of systemizing and automating as much as possible in your estate planning workflow in order to maximise your profitability and reduce your stress and risk. So I think unless you are set up to do this repeatedly as part of your business and you've got all the infrastructure protocol team in place to do it, I just think you can't charge enough to make this worth it to you.
Carrie (03:49):
Yeah, and I think too, I think that's something we do have a lot of people in our community who do a lot of estate administration litigation and they do take on ia, so independent administrator roles and they're set up. I'm in a practise now that has someone that does these roles. They're set up to do it, no problem. So this is a different conversation. This is if you largely do estate planning and a client asks you in the process, I think for me, I'm going to be really careful to say this word, but I think it's lazy planning and I said lazy doesn't feel like the right word, but I think we need to help our clients look outside the box before they resort to the lawyer. So when we're talking about professional bodies, the fees they charge deplete the size of the estate and any commission that they can charge as well, and often it's just a matter of someone not thinking about anybody else in their network that might be able to take on this role and even other professionals that aren't the lawyers.
(04:40):
So this is like an accountant for example, but I mean take it a step back from that close friends extended family. So I had a young girl yesterday and she forgot she had cousins, like cousins. They're on the same bloodline, they're adults, she gets along with them. That's better than the lawyers. So when we're talking about this role, I think that again, don't like the word lazy, but I think that we need to help our clients pursue other options or look outside or think outside the box when it comes to is there really no one? If there is no one, then we go things like put like an accountant before you put a lawyer. Okay, number one. But number two, there are professional bodies that do this. Professional bodies exist for people that have no one. They have their own negatives as well. They do charge a lot, but they charge a lot. The work is hard and it's complex and there's a lot of risk attached to it. Why does that have to be you? That can be that body that's set up to do that. Think that's my foot of broad position that when we're talking about lawyers doing this role, have we really explored that? There's no one else.
Tara (05:50):
Yeah, Carrie, I really like that you brought that up. I just want to give everyone listening permission to say no when you're asked because it is not your job to solve this problem for the client. They came to you with this problem as a result of things that have happened in their lives and it's not something that you are responsible for fixing. So they can always go and use the professional services if they have to. I think a lot of us are really caring and we have empathy and sympathy for clients who might be in this situation and we think, oh, well maybe we could just do it and sort it out, but you don't. It's not your role and if you're not set up to do it, I actually think it's going to cause more harm than good.
Carrie (06:38):
Yeah, you're not doing yourself a service and you're not doing their estate. So the client long term service as well. So you're right Tara. I think that that's actually a good point about we do always want to help. A lot of people that come to estate planning are here because we like helping people and we really, really want to. We are quite empathetic practitioners. I'm not saying that other practitioners aren't empathetic, but my experience is that a lot of people that practise in estate planning are just these beautiful human beings that just want to do anything they can. It's not necessarily helping them long term to fill a short term gap.
Tara (07:09):
No, whenever this comes up in the TT precedents club hot seats, the lawyer is always saying, oh, the client is so lovely. I just feel bad that there isn't anyone who can take on the role and I really want to help them. Like I said, it's the highest area or there's a disproportionate high volume of claims against the practitioner. There's huge exposure for misconduct complaints by disgruntled beneficiaries. The costs are really iffy in terms of professional charging and I really just want to touch on what the professional services are charging to do this role. Carrie, you mentioned it before when you said they can erode the estate and that's so true. So I did some searching to see what professional executive services like Australian Unity and equity trustees are charging to take on the role of executor. Now this is from around 2023 I think, but Australian Unity are charging 3.3% of the capital to be the executor and administer the estate for estates that are worth 2 million or less. So that's $66,000, which is not insignificant.
Carrie (08:36):
And that's actually like when you look at some of the what courts say is okay, that's still within the breadth of what's okay as well.
Tara (08:43):
Yeah, equity trustees is similarly charging about 3.85% of the capital and they've noted on their fee schedule there is a minimum commission of $19,800 and that's from their 2023 pricing schedule. I feel like when we talk to a lot of the lawyers who are thinking of embarking on the executor role, they are not quoting or charging anywhere near that and there's a reason why the professional services are charging so much, right? Because they're factoring in the risk to themselves, not just the time it takes to complete the role and execute it, but the actual risk.
Carrie (09:24):
Yeah, I want to say too, Tara, tying this in for wanting to help your clients with also other firms being set up for this. We are in a community both. We've got a Facebook group which is free anybody, the art of estate planning on Facebook. We also have a TT Precedents club, which is a closed community or subscription member only access both of those communities. We have people that do practise in those kinds of roles, so using those communities can connect you with other practitioners. So if a client comes to you and it really is the last line of resort, perhaps you can connect them with another practitioner that agrees to take on that role. So when we talk about wanting to help your clients and we are down to the last line of resort that there is no one else, it still doesn't have to be, you can collaborate with other firms that do these roles and have the tools and the precedents and the whatever else to be able to do it. So you're giving your client that comfort and there's ways that you can collaborate with those other firms as well, whether it's involved a meeting with that other lawyer, phone calls, whatever else to actually connect because sometimes clients want to go with someone they trust helping the client as an introduction to this other person, but collaborating with other practitioners is also an option as well through different communities.
Tara (10:41):
Yeah, I love that, Carrie. That's such a good suggestion.
Carrie (10:44):
Tara, what I want to talk about is some of the specific, I know you mentioned a few of these before, but I really want to delve into this. We talked about this in hot seat and I think this is something that people don't really think about when they say yes to these roles. When we talk about what your role is as an executor, you're probably thinking, oh yeah, it's easy, it's just dealing with banks and whatever else. It's also things like cleaning out the damn fridge. So when we talk about what your role is and what you can charge for as well, when we talk about how you capture the time that you put into this, do you want to go and clean out someone's fridge? Do you want to go and go through their house and pick out their items and pack up their undies or be responsible for those sorts of things?
(11:31):
When we talk about what you can charge for, there is some information, but it's still kind of very uncomfortably grey in my eyes around what is a professional versus what is a personal task and then what you can charge for that as well. And if you are agreeing to take on that role, have you disclosed to the client what you would charge? Because they need to know before you take on that, before they agree to you being appointed. Like this is my professional hourly fee and this is what is personal tasks and have you actually spoken to your insurer and your ethics team around what you can charge for those personal tasks and whether you should even be taking it on. When we talk about insurance, I don't know what it's like in every other state, but in Queensland we have to disclose what sort of work we're doing.
(12:18):
Have you told them that you've agreed to act as executive for some roles? I can bet you they'd be taking that into consideration. So I think that when we talk about the actual kind of process of that, there can be a lot of points where it's a problem and do you actually really want to do it? I mean this isn't even thinking Tara about things like cost issues as well, like conflict. If you are a sole trader, and this was brought up by Kelly Gatehouse from Nurture Law in that hot seat, if you are a sole trader and you've agreed to act as executor, you can't engage yourself as the sole trader law firm by you, the executor for example, I think from Kelly's experience, she's the executor individually, but she can engage nurture law to do some of the legal work. If you're a sole trader, that could be a problem for you as well. So you might get all of the responsibility, but none of the fun legal work. So when we talk about this, there are these really small issues that unless you are set up and you're doing this frequently, it's going to come back and potentially bite you.
Tara (13:21):
Carrie, I really like what you said about the actual practical detail of cleaning out the fridge and all of that. There's a really strict rule about what needs to be charged out at a non-professional rate and what executor work you can charge at the professional rate like cancelling services, opening bank accounts, paying out debts and liabilities. That's technically something the executor should do personally and you can't charge professional rates for. So to me, I just don't understand why would you take on all this non-professional work at the opportunity cost of doing legal work that you love and that you can charge professional fees for? It doesn't make a lot of sense to me unless you're fully set up and you have a great non-legal support team who can go and do all that work for you.
Carrie (14:14):
Tara, I don't like cleaning my own house. I don't want to clean someone else's house. I have a cleaner so that I can focus that time on being a lawyer because it's more profitable for me and it's something I like doing. I don't want to be a cleaner.
Tara (14:26):
And the role is so varied too in terms of the scenarios that are going to be thrown at you. It'll depend on the nature of the assets, organising the funeral, tracking down key people. Carrie, you were talking in episode 21 about the funeral and all the steps involved for the executor and next of kin in organising that, and I'm assuming here there is no next of kin who is willing to step up to assist here, which is why you are being appointed as the executor. So the role, it's just so varied and I can imagine that you would have to work out so many things on the fly.
Carrie (15:05):
I think too, Tara, I wanted to spend a little bit of time on this because I think for those that are new to estate planning and haven't really done a huge amount to do with things like structures. So for example, if a client comes to you and says, I've got no one, can you be my executor? And you kind of say yes. What you've got to be really careful of is if that person has other structures. So if they've got a company, if they've got an SMSF, if they've got a trust that you are going to be assuming all these roles, you're going to be assuming the director role of the company, you're going to be assuming the trustee of the SMS staff and any trust potentially, depending on the succession mechanisms. If they've got nobody to be their executive, they've probably got no one to do those roles either.
(15:48):
You've all of a sudden got director liabilities under the Corporations Act and all the ASIC stuff as well generally. So the costs that are associated with that, you've got trustee liability as both the trustee of the existing family trust and also the SMSF and then you've got just normal super liability issues as well. So are you across all of those liabilities? Do you know what you're doing? Do you know what your responsibilities are? Are you set up, do you have the things ready to be able to take on those roles? So I think that we forget that when we think about an estate, it's not always just their personal estate assets. There are other structures. So if this person even has whiff of another entity, be really, really careful that you know exactly what the liabilities are that you're taking on.
Tara (16:37):
And the tax debts as well. I mean it gets a little bit, we don't need to go into the full detail of it, but executors can be personally liable for the tax debts of a deceased and you're possibly going into that pretty blind when it's a client that you are accepting this role for, especially if they pass away quite a long time after you've made the will for them and you haven't kept up with their circumstances and what's happening. So to me, I wouldn't want to touch it with a 10 foot pole that just makes me so nervous.
Carrie (17:13):
Yeah, I think when we talk around these sorts of things, obviously there are these hidden issues that we just dunno about. You don't know what you don't know is probably the biggest point we're making here is that you don't have all of the information. I know we do tend to have quite large egos in law where we like to think that we know a lot and again, combined with our desire to help people, I think that it is a common mistake that we make. What we're trying to say to you is just be really careful because there's all these issues you don't know about and also is this really your love language? Is this really what you want to do?
Tara (17:48):
Or you creating a problem for future you that you do not want to have to deliver on? It's a bit like you make plans to go out and have a crazy weekend or Saturday night and then the day rolls around and you're like, I really just want to stay in bed in my pyjamas and watch a movie and I can't be bothered going out. I just feel like this is the exact same scenario, but professionally and by then you are committed to being the executor. I can just imagine this is going to be one of those files on your desk that just makes you cringe. It hangs around for so much longer than you were anticipating and you are not making enough money on it as you should. And it's just like you'll be saying, why did I do this?
Carrie (18:41):
I think too, just to make sure people know that we're not out here just being these two negative Nellies. We're not the only people that think this way. I mean we have a training in the TT Precedents club that was done, I think it was last year. Tara, correct me if I'm wrong by Michelle Davies and she did an ethics training with us where she talked a lot about this as well and some of those issues. I've always got a bad feeling in my stomach when a lawyer writes themselves into a will and Michelle does talk us through a few of those issues in that training. So if you're interested in looking at that training, please feel free to reach out to us to join the TT Precedents club. I think that that alone is worth joining the TT Precedents club. You get the nice CBD point for ethics on the tick, but also I think that Michelle comes with a wealth of experience. I think she's a self-confessed succession nerd and I think that hearing it from another practitioner, it's not the echo chamber, but it is Tara and I tends to make you feel like confident that if you need to go to say no to the clients, it's not just two people randomly saying it. There are other people that agree.
Tara (19:46):
And obviously we are expressing some strong opinions here. So do what you will. We are really just trying to tell you what decision we would make and the areas of concerns that come up for us and for me personally on the pros and cons lists that I would make. The cons column is really heavy. Last week our episode was all about cost agreement clauses and the cost agreement is really important when it comes to sorting out your professional charging if you were taking on the role as executor in terms of getting the disclosure and giving your client the chance to obtain independent advice. Carrie, do you have any thoughts on that?
Carrie (20:27):
Yeah, so I think when we talk about those costs agreement, you're absolutely right. I think we touched this sort of lightly before that the client should really know what the numbers look like. And I think, forgive me if I'm wrong and I've got my wires crossed. It was a big year last year. There's some sort of expectation that you run the numbers through with the client so they can see what that would look like, sort of sit down and I think they call them back of the envelope numbers. I still don't understand that because I'm not a money person, but show the client, if there're a state's worth $2 million, this is what you might charge and this is what the cost might look like. So making sure that your cost agreement has an absolutely clear, but also your precedent that you set into the will with the client.
(21:07):
Does the precedent allow you to actually charge fees? So if a client has a will and you've drafted it, if you're not using precedents from Tara, make sure that your precedent has a charging clause allowing the executor to even engage your law firm as well and has some really interesting or not, I wouldn't say interesting for the wrong word, probably. I find it interesting, nobody else does. I think make sure that it covers off what those different tasks are that you might do. More importantly too is that you have written consent from the client to use those charging clauses. This is an absolute requirement in Victoria for example. So Victoria have this requirement that the client has to have consented to including those charging clauses knowingly before they signed their will. And we've heard a lot of feedback from our Victorian practitioners that this is being requisitioned in their probate departments down there.
(22:03):
If there's no evidence of that, I think it's a good debate about whether they have the jurisdiction to actually requisition it on that basis, not their business. But in the meantime, it's a very practical issue that they're experiencing. And while that's only kind of seeming to be required in Victoria, I think it is really good best practise if you are going to be acting to actually get the client's written consent to say, yes, I've picked this person. Yes, I'm aware there are charging clauses and yes, they've shown me some numbers, what that might look like. So when we talk about those costs, I don't think we should be hiding things. I think you need to be absolutely blunt with the client as to what that might look like.
Tara (22:42):
Yeah, I couldn't agree more, Carrie, in terms of if there are beneficiaries who are feeling disgruntled, you've got to be squeaky clean on your costs, disclosure, compliance and even just in terms of, okay, so what is it going to cost? Doing those worked examples for the client I think will be very revealing because it will show you, well what are you charging here? And if you are charging similar to what Australian Unity or executive trustees are going to charge, great. And it'd be the client's like, oh, I didn't think it would be that expensive. I'm only choosing you. I thought you would be more affordable than those services. Then that will be enlightening. Or if when you actually look at what you think you can charge at your rate and all the work and looking at the professional and non-professional schedules that you have to go through, if you are going to be coming in a lot lower than those professional trustees, then asking yourself why And is that actually fairly remunerating you for those services and are you actually, are you going to make enough money in the year or the years that you have to be the executor there because it's going to be time intensive?
(24:01):
And how does this work into your business plan?
Carrie (24:04):
This is only when things go well when it's a simple administration. This is not including if there's litigation, do you want to spend your time in court? I mean a lot of the people that do estate planning are doing estate planning. We don't want to sit behind a desk in a courtroom. Are you happy to be dragged up in front? And again, not saying that there are people out there that aren't and they're probably set up for it as well. But I think that, have you thought about that? Have you thought about the potential that you could be having to be pulled around, left, right, and centre to all these third parties including court?
Tara (24:32):
Yeah, I mean we all know how stressful the court process is even if you're not emotionally involved in it. I also had one more thing I wanted to mention Carrie, and that is because I know that a lot of our listeners are sole practitioners or from really small firms and just thinking about the succession issues in terms of your career and where you see yourself in five or 10 years and what that means for agreeing to take on this responsibility for clients because you feel bad or you want to help them solve a problem if the client outlives the life of your career. If you want to take time off for maternity leave or perhaps take a sabbatical or a career change, if you've agreed to take on this role, usually it's in a personal capacity because if you are not at the firm, there's no one else who can do it, especially with a solve practitioner or small firm.
(25:25):
Is there a chance you could find yourself in a position down the track where actually being a former client's executor is the last thing you are set up and equipped to do. So look, again, if you have a business plan where this makes perfect sense and you are setting up your systems and processes and getting your risk management covered, then by all means go ahead and take what we're saying in this episode with a grain of salt. Absolutely. I think there is such a great need for personalised executive services beyond the professional trustees. Go for it. But if you are a small operator and you are just doing this out of a sense of duty and obligation for a client and you haven't really thought a lot about it, we just want to encourage you to think really deeply about the points that we've raised before you commit to the role.
Carrie (26:16):
So I think that rounds us out, Tara, to We don't recommend it. Not recommended. No, don't do it. Don't do it. Yeah. So I think unless you said, unless it's something that gets you excited and you've got the systems and processes or it's very much close to being done and it's where you want to take your firm, do everything you can to help the client look elsewhere.
Tara (26:39):
You are so right Carrie, and there's definitely further inquiries can be made, or maybe they just appoint the professional services organisation initially and work strategically on getting their lives in a position where they can update their will down the track and then they can eventually appoint people closer to them because they have worked strategically on building closer relationships or repairing relationships or whatever they need to do. It's not our problem to solve. We can only do so much.
Carrie (27:13):
10 out of 10
Tara (27:14):
If anyone is listening and you are a passionate executor and you don't agree, we'd love to hear or we even get you on as a follow up.
Carrie (27:23):
What do you like at parties if you're a passionate executor?
Tara (27:26):
If this episode has got your blood boiling and you want to do some fact checking with us, then we would absolutely love to hear it. This is just our personal opinion that we would not do it and we wanted to give you permission to say no and get you off the hook. So if you're listening to this episode because you have been asked to be a client's executor, we release you from the pressure of saying yes and you can just say that it's not something that you're insured for or not something you offer. Hopefully this episode was helpful. We'll wrap it up there and we look forward to seeing you next week.
