Legal Tip 297: Nominating Overseas Executors under the will

It is best to avoid having a non-resident executor of your will. There are 2 main reasons which are

a) Taxation, and

b) Practicality

A deceased estate is basically a trust and where a trust is controlled by a non-resident trustee the trust will be a foreign controlled trust. This will have adverse tax consequences such as loss of the 50% CGT discount on the sale of the estate assets, potential loss of the main residence exemption, withholding tax on any capital gains etc. To avoid being a non-resident the estate would need at least one resident executor.


Also it is impractical for a non-resident to be executor because they will need to open bank accounts, transfer title to property and shares etc. This will be difficult to do outside of the country.


And keep in mind that when you do your will you might have no connections to non-residents in the family, but when you die your children could all be living and working overseas and be non-residents for tax purposes. So make sure you have nominated a few back up executors so the any non-resident ones could decline to act in the role to avoid the above problems.

 

Not to mention the legal issues. A resident beneficiary may seek action to have the foreign executor terminated if a non-resident was appointed as sole executor as the control of assets could be at risk such that a bneficicary may lose some or all entitlement to the share of the estate. A costly Supreme Court matter.

Solution ? A trustee company may be wise.

 

Does non resident executor follow the same definition as non tax residency?

 

Yes I should have specified, residency for tax purposes here.

 

For tax purposes executor is not defined. LPR is. Trust non-residency (tax) rules prevail. A trustee that is no-resident meansd the trust is a non-resident trust. CGT issues etc

Perhaps a land tax issue too?

 

I've got no family here, so my solicitor is my executor: I suspect his bill could be $50K, not that I'll be here to worry about it. Assuming he decides to sell off all my IPs immediately with tenants in place, every last rent payment and outgoing during the selling period will need to be accounted for, another six minutes billed for each one. But for the reasons Terry cited, appointing a family member is not an option, and I've heard rather mixed reports about State Trustees.

 

State trustee is one (state) option. There are commercial trustee services like Perpetual, AET etc
Register of certificates of transfer for licensed trustee companies | ASIC - Australian Securities and Investments Commission

Where specific instructions are to be given its less problematic than where they need to use discretion. They can take a very strict approach to avoid commerical and litigation risk. eg They likely would sell and liquidate all things. And distribute cash. They tend to do that rather than any asset distributions. And will seamlessly address taxes and debt discharge etc. They have published scales of fees which are tiered with a minimum of around $20K . Generally very concessional fees apply for a former home. But they also have fees for selling a property that can rival a real estate agent.

A good paper on the issues and the fee disclosure problem
https://www.lawsociety.com.au/sites/default/files/2018-10/files.pdf

 

Keep this in mind for all back up executors too