Lynch Solicitors for Information Purposes Only
What is the difference between acting as an Executor, Trustee, Guardian or Attorney?
The role or function of the Executor is to take all the necessary steps to carry out the wishes of the deceased as outlined in their Will.
This would be important when the Executor collects the deceased assets and calls out their wishes under the Will.
The role of the Trustee takes over where there are minors. The Trustee manages or looks after the assets until the children reach the age when they become entitled to the assets, in their own right.
The role of the Guardian is to take over the day to day care of minor children.
While the Trustee can also act as Guardian it might be worthwhile assigning the roles to different people so that you don’t have a Guardian with a potential conflict of interest if they have to make financial decisions.
The role of an Attorney is to look after a person if they are no longer capable of doing so. They can look after both their financial and personal affairs.
Put simply – The Executor is there to carry out the instructions under the Will, the Guardian is there to take care of the children, the Trustee is the financial manager for all Trust beneficiaries under the Will and the Attorney looks after you if you can no longer look after yourself.
What is an Executor?
When you die your assets are frozen and a legal mechanism is required to allow your Executor to unfreeze these assets and manage the estate left behind.
The main duty of the Executor is to collect and then give the assets to those entitled – the beneficiaries as outlined by you in your Will.
The Executor has a duty to protect property for the beneficiaries – e.g. insuring house and contents.
The Executor is also obliged to pay your funeral expenses and debts.
Your Executor carries out your wishes as set out in your Will.
WHO SHOULD I APPOINT AS EXECUTORS?
Your Executor carries out (or executes) the wishes set out in your will. Choosing the right person or persons is an important decision.
Persons who are willing, capable, trusted and resident in Ireland
Ideally, it should be a job given to two people to act as co-Executors.
It is also a good idea to make provision for them to be compensated for doing the job. This can be done by a bequest or by a charging clause in the Will.
The Executor needs to be able to identify assets, take control of them and pass them on to the people entitled under your Will.
So tell them where they can find all the details – whether it’s in a shoe box or safe at home or our office.
Give them your funeral arrangments or choices.
Many people appoint family members or their solicitor as Executors.
There is nothing to prevent a family member, who may also be due to benefit under the Will, from being appointed as an Executor.
An Executor (other than a professional Executor) is not entitled to get paid or profit from the role
but they are entitled to recover any reasonable expenses during the administration of the estate.
and they can also get something under the Will.
It is advisable to inform someone if you chose them as your Executor and to get their agreement to be your Executor.
If an Executor is to receive a benefit under a Will, they cannot witness the Will.
SO, what does an executor actually do?
Their primary task is to extract what is called a Grant of Probate.
When you die your assets are frozen and a legal mechanism is required to allow another person to unfreeze these assets and manage the estate you leave behind.
Probate or Administration is the legal term for a procedure that gives a person, chosen by you, authority to manage this estate.
Some assets, if jointly owned or nominated, can automatically pass to the joint owner or nominated party on death and the Executor needs to be able to identify such assets.
For assets that will not pass automatically, an Executor needs to go through a number of legal steps to get the Grant of Probate from the High Court.
To do this, they will need to be able to locate the Will.
In most cases the Will is held by the Solicitor who acted for the deceased person and the Executor will have knowledge of it.
It is advisable for anyone who makes a Will to let either the Executor or a family member know where the original Will is kept.
It is usually the Executor who makes contact with the Solicitor when the Testator (person who makes a Will) passes away.
The Solicitor will then make arrangements for the Executors to call for the reading of the Will.
After the meeting, the Executors and the Solicitors will be on a fact finding mission to find out the assets and the liabilities of the deceased.
It is very helpful if the deceased has left a summary of assets, bank accounts and insurance policies with the Will as it can be a good starting point in the enquiries.
The details of the assets and liabilities of the Testator must be disclosed to Revenue. Once all enquiries have been completed the Inland Revenue Affidavit is prepared for the Revenue Commissioners. At the same time, the Executor will complete the application forms required to issue the Grant of Probate.
Once the application is submitted the papers will be considered by the Probate Office and, if everything is in order, the Grant of Probate will issue.
Once the grant has been obtained, the Executor now has a legal duty to adminster the estate in accordance with the law of succession and the wishes of the deceased as set out in their Will.
They have the power to gather all your property and distribute it in line with the directions in the Will.
So, for example, money in your bank account can be withdrawn, shares can be sold and title to property (e.g. houses) can be transferred to the beneficiaries or sold, depending on the instructions in the Will.
What are Guardians?
The next major decision that has to be made is the appointment of Guardians for your children who are under 18.
This is probably one of the most difficult decisions that any parent will have to make. The consequences of not doing so make it ever more important for parents to actually take the step.
If you have young children you need to appoint someone to look after them.
This person is a Guardian who is in loco parentis to your children.
It is important that the person appointed as Guardian is someone who you would trust to look after the best interests of your children.
Ideally, it should be a job given to two people to act as Co-Guardians.
You should make them aware that they have been appointed as Guardians in your Will and get their agreement to be your Guardian.
It is advisable to discuss your hopes, plans and ambitions for your children with them.
It is worthwhile to put your hopes, plans and ambitions in writing.
It is also a good idea to make provision for them to be compensated for doing the job.
What are Trusts & Trustees?
The recommended Will for parents of young children is a Will Trust. The usual form of Will Trust has some basic features which can be developed, or changed, depending on the circumstances of the family.
Firstly, the Will Trust will appoint Executors. They will also act as Trustees.
Trusts are a good way to provide for minor children, children with special needs or children with disability (or even ‘wayward’ children or children with addictions) or, simply, a way to manage how or when your family get a benefit.
Where children are under age you need have a way to look after the finances for those children before they come of age.
This is usually done by a mechanism called a Trust.
You need to choose someone you believe can manage money in the best interests of your children – called a Trustee.
In such a Trust the children will normally take control of the finances when they reach an nominated age. This can be an age of your choosing.
Ideally, it should be a job given to two people to act as co-trustee.
It is advisable to get a person’s agreement to be your Trustee and to discuss your plans for your children with them.
It is worthwhile to put your plans in writing.
It is also a good idea to make provision for them to be compensated for doing the job.
How do people choose Trustees?
Choose someone capable who you know, like and trust.
Remember, you will be handing over responsibility and authority to them to look after your assets until your children are of a certain age.
It is important to make sure that you are happy that the person has the ability to make the right financial decisions for your children.
So how do you set up a trust?
The creation of the Trust, at its simplest, happens when the parent directs in the Will that their assets are given to the Trustees and are to be held by them for the benefit of the children, and once the children reach a certain age then the Trustees must handover the trust property to the children.
In another form of Trust, called a Discretionary Trust, Trustees will have an absolute discretion as to how much, when and who is paid.
A Discretionary Trust may be a good way of providing for vulnerable children or children with disabilities.
Can the money or property be accessed by the Trustee for the children before they come of age?
The Trustee can pay out a portion of the capital or income if it is required for the children. E.g. for school or college expenses.
If the Guardian needs money to get the children back to school items or money for college then the Trustee has the power to make a payment out to fund those expenses.
While the Trustee can also act as Guardian it might be worthwhile assigning the roles to different people so that you don’t have a Guardian with a potential conflict of interest if they have to make financial decisions.
Discretionary Trust for a child that has a disability or special needs?
It can be useful in providing for children with special needs, disabilities, mental health issues or persons suffering from addiction as it allows for the safe management of their inheritance.
In that situation a parent would be advised set up a Discretionary Tust will. The Will directs the Trustees to use the money or assets for the maintenance of the child.
The beneficiary of the Trust Will is not automatically entitled to the money or assets in this case.
The Trust can operate to protect their state benefits while creating a fund for their benefit.
The Trustees are obliged to use the trust funds for the benefit of the children.
In a Discretionary Trust, Trustees will have an absolute discretion as to how much, when and who is paid.
The Discretionary Trust structure offers flexibility consistent with a “wait and see” approach by the Trustee.
We would advise that a Trust Will be accompanied by a Letter of Wishes. This sets out what parents would like to happen with the trust fund. This is a very individual letter from the parent to the Trustees. It may include, for example, how the trust fund should be divided or at what age the children should benefit.
TAXES & TRUSTS
There are two taxes that come into play –
CAT (Capital Acquisitions tax) & DTT (Discretionary Trust Tax)
CAT is payable if a child receives a payment over a certain threshold.
DTT is payable by Trustees as a once off and annual levy on the funds in the Trust.
A payment out by a Trustee for a minor child with a disability to pay for normal support, maintenance or education may be exempt from CAT tax.
Payments for medical care of a child with a disability are exempt from CAT
There is also an exemption from DTT for a Discretionary Trust for a person who is incapable of managing their affairs. It is not an automatic exemption. An application to Revenue would be required when the Trust is established together with a medical certificate to confirm that the child is unable to manage their own affairs.
DTT arises when the youngest child turns 21. It may be possible to mitigate it by paying out to older children in advance of this event.
If we had a crystal ball and could see into to the future wouldn’t it be wonderful – we could plan and manage our businesses and personal affairs accordingly.
Unfortunately none of us can predict what is around the corner, so the importance of having the right person in the wings with the legal authority to act on your behalf cannot not be understated.
This person may have full or limited control of your assets and may make care decisions for you – he or she is called your ‘Attorney’.
What is an Enduring Power of Attorney?
If you become incapacitated through disability, illness or a progressive degenerative disease your assets become frozen.
To avoid this situation, while in good health, you should create an Enduring Power of Attorney (EPA).
This a legal document that only takes effect if you become incapable of managing your affairs.
The person creating the EPA (you) is called ‘the Donor’.
The document sets out the extent of the decision-making you are pepared to give to a chosen person – your Attorney.
In the event of your incapacity, you can give full or limited power to manage all or some of your property and affairs (including personal welfare).
You are not prevented, in the meantime, from continuing to manage your money and assets.
The EPA only comes into effect if you lack the capacity to make decisions.
Powers
An EPA can be very specific, e.g. give the Attorney a particular task to carry out, e.g., the sale of property or management of bank accounts.
An EPA can also be very general and give the Attorney power to do everything that you can do yourself, with your money and property.
The EPA can also enable your Attorney to make “personal care” decisions e.g. where you live, who you should see and not see, diet and dress and so on.
Who can be appointed as Attorney?
You can appoint anyone you wish to act as your Attorney e.g. spouse, family member or a friend.
You can also appoint more than one person.
The choice of Attorney is a personal matter – but a good deal of thought needs to be given to the nomination.
You need to ask yourself is this person suitable for the job? Are they trustworthy and do they have the skills to manage my affairs and make decisions for me?
There is a statutory mechanism to oblige your Attorney to be answerable to both the Courts and the Decision Support Service when carrying out their duties under the EPA.
What is the procedure for creating an EPA?
The procedure for the creation of an EPA can be complex.
You will have to consult us and satisfy your Doctor and a Healthcare Professional that you have capacity to create the EPA.
The process also requires us to notify two people that you have made the EPA.
What happens if I change my mind?
You can revoke, cancel or amend the EPA at any time before it is registered.
If you change your mind about having an EPA or about your choice of Attorney you should consult us immediately.
We will advise on the process of revocation of the EPA.
Registration of the EPA
The Attorney must apply to the Wards of Court (in time , the Director of the Decision Support Service) for registration of the EPA if you become mentally incapacitated.
The Attorney will be required to produce evidence of your incapacity.
Notice of the application to register the EPA must also be served on you and the same two persons that were notified on the creation of the EPA.
Once the EPA is registered the Attorney can lawfully act on your behalf.
An Enduring Power of Attorney is as important as your Will.
SO WHERE DO YOU GO FROM HERE – ESTATE AND SUCCESSION PLANNING?
Estate planning is planning the transfer of assets to the next generation.
While making a Will is certainly the first step in planning ahead, there are other issues to consider.
In certain circumstances it might be appropriate to make gifts to the next generation during your lifetime.
For instance, you may wish to transfer your business or farm to one of your children who is working in the business or on the farm. You may want to give your children a benefit now as they start out in their adult lives to help get them set up.
This material is provided for general information purposes only and does not amount to legal or other professional advice. While every care has been taken in the preparation of the information, we advise you to seek specific advice on any legal decision or course of action.
For further advice or if you wish to discuss any other legal area please contact [email protected] or telephone 052-6124344.
