Speak now or forever hold your peace!
Due to the general uncertainty arising over the last 12 months, individuals are more cognisant of their succession planning strategies. To this extent, and as widely communicated by many estate practitioners, there has been a significant increase in the drafting of Wills, particularly among individuals between 40 and 60 years of age.
Pivotal to any Will is the appointment and role of the estate Executor. The Executor of the Will is tasked with ensuring the terms of the Will are followed and beneficiaries of the Will are treated in an equitable manner in line with the intentions of the Testator.
In a younger generation of Testators, there may be a significant time lag between the formal execution of the Will and the role of the Executor becoming active. It is therefore essential that professional Executors have proactive channels of communication with the Testator, even in situations where they are appointed as a successor Executor. Although this may seem a premature exercise, the upside to this early communication will prove invaluable to ensuring the spirit and form of the Will is fulfilled.
1. Understanding the Testator’s Intention
Often times an independent professional Executor is court appointed or is engaged when matters become contentious between personal Executors and/or Beneficiaries. In such instances, the professional Executor is guided solely by the text of the Will and Letter of Wishes if one has been put in place. At this stage of the succession process, the professional Executor has not had any prior engagement with the Testator to appreciate their ultimate final intentions.
Having an informed professional Executor in place from the outset will ensure the estate assets are distributed to beneficiaries in an appropriate manner as envisaged by the Testator. This will assist in insulating the professional Executor from any disingenuous claims brought by a disgruntled beneficiary.
Furthermore, the intention of a Testator is not static and can often be fluid and ever evolving over time. Proactive engagement with a Testator will enable the professional Executor to take appropriate action especially in instances where the terms of the Will may be subjective or ambiguous.
2. Requirements of Beneficiaries
Similar to the Testator’s intentions, the needs of the Beneficiaries are subject to change with the passage of time. This can be due to a myriad of reasons such as a change in financial position, earning capacity, health and personal relationships to name but a few.
A professional Executor when called into action should be fully equipped to distribute the assets of the estate in line with the terms of the Will and commensurate with the personal requirements of the beneficiaries of the estate.
Having active communication lines with the Testator and, where possible, the Beneficiaries, will enable the professional Executor to make informed decisions that benefit all parties concerned. Even with the most carefully drafted Will, life is unpredictable and unexpected gaps may give rise to succession planning disparities. A fully apprised professional Executor should be able to navigate these hurdles and make pragmatic decisions that are in the best interests of the parties to the estate.
3. Preventing future conflicts
The aim of any succession plan is to distribute the assets of the estate in line with the intentions of the Testator, act in the best interests of the Beneficiaries and avoid future conflict. Conflict is ultimately a drain on the value of the estate, not just in monetary terms, but also in respect of personal relationships that are often critical to preserving the future value of the estate. This is particularly relevant in situations involving dynastic succession planning of family businesses.
A healthy operating relationship between the players of the estate, ie. the Testator, Executor and Beneficiaries is paramount to ensuring future conflict is avoided. A professional Executor should have transparent and open-dialogue with the Testator and Beneficiaries where situations allow.
Careful steering is often needed in circumstances where there is cross-generational wealth transfer. In such situations, the future ambitions of the Beneficiaries (and also among Beneficiaries) are not always aligned to the Testator’s intentions. This ultimately leads to estate disputes and increased professional costs to resolve the same. Having advanced dialogue enables the professional Executor to educate the parties concerned and negotiate any problem areas in advance of the demise of the Testator.
As evidenced above, preemptive engagement and communication by the professional Executor with the Testator and Beneficiaries is an important aspect of the fiduciary relationship to ensure a successful asset transfer. Although nowadays physical interactions may be curtailed, depending on the jurisdictions concerned, there is still a plethora of platforms available that facilitate progressive, virtual communication.
During the course of time, people’s attitudes, views and requirements evolve. A professional Executor, even in a successor capacity, needs to be fully informed of such developments. Like any fiduciary role, a good relationship starts with good communication.
Brian O’Malley, CA, TEP
Rawlinson & Hunter