Who can resist an offer? It is tempting to hear the offering of professional executors to have a will prepared for you entirely free of charge.
At first sight this seems a better deal than having to pay a solicitor to draw up a will for you. But it’s worth asking about the conditions applying to the “free service”. When all is revealed the true cost may be higher than you think.
How can I draw up a will?
Whilst a will can be drawn up by anyone and can be any length you desire, from a few lines to many pages, it is best to use a solicitor to draw up a will. This involved payment of a fee, which solicitors will quote in advance. The amount charged is always significant compared to the value of the Will to you and your family.
Trustee companies (including the Public Trustee) will draw up wills free of charge but only if they are appointed executor. This appointment gives them the right to charge fees when administering the estate.
How much does an executor charge?
If you appoint a spouse, a family member or a close trusted friend, you can usually expect your estate will be wound up without any more expense than the cost of employing a solicitor to look after the legal aspects.
Professional executors, however, charge a commission for their services, set by statute at a maximum of 4.25% of capital and 5.25% of income.
Nowadays, it does not take many assets to build an estate worth $200,000. Using simple arithmetic, applying the percentage rates quoted above, will prove that it can be quite costly to name a trustee company as your executor (especially where legal costs are charged in addition to the executor’s fees). The very modest saving in will drafting fees can be well and truly seen as false economy.
A role for the trustee company
All this is not to say that trustee companies do not have an important and worthwhile role to play.
In complex estates or where there is discord within the family or where the estate has to be administered over a length of time (perhaps because minors are beneficiaries, or a life estate is involved) the employment of an independent, immortal executor may be the sensible choice.
What matters is that the choice of executor should be an informed one as should be the case with every purchasing decision. All trustee companies publish a scale of charges and each testator should weigh the respective advantages and disadvantages of nominating a professional executor.
What does as executor do?
The main duties of an executor are:
• To be responsible for the burial or cremation of the deceased’s body;
• To prove the will (that is, to obtain a grant of probate of the will demonstrating to all the world that the executor named in the will, only that person, may be deal with the deceased’s assets);
• To collect the debts owing to the estate;
• To claim the life insurance proceeds and money in financial institutions.
• To convert non-cash assets into cash for distribution (subject to the exact terms of the will);
• To collect investment income;
• To lodge income tax returns and pay tax (if applicable);
• To pay in the proper order, all the other debts owing by the estate;
• To protect and insure the assets of the estate;
• To administer any trust set up under the will;
• To pay any specific legacies and
• To distribute the remainder of the estate.
It is a good idea to discuss your wishes for the administration of your estate with your executor and to plan for the future care and well-being of minor children in the event of an untimely death.
The importance of making a will
The worth of a properly drawn up will cannot be over emphasised. It will ensure that your wishes for the disposal of your assets are carried out when you are gone.
People often take great pains to arrange their affairs to minimise tax or to maximise social security benefits.
They are happy to pay premiums to insure earthly possessions against loss.
How absurd then it would be to overlook making a proper will with professional help when such a relatively simple and inexpensive act can help to protect the financial security of loved ones.
Along with death and taxes, there is another certainty of life – you get what you pay for.