What happens in South Australia when an executor loses mental capacity?

An elderly farmer has been managing a farm as the executor/trustee of his father-in-law’s Will. The Will provides that the farm is to be managed under a simple testamentary trust for the benefit of the farmer’s wife (the Will maker’s daughter). This has been going on for the last twenty years, and now recently the farmer has lost mental capacity. Who can take over the management of the farm?

The executor plays a crucial role in administering a Will. So, what happens if, at the time of your death, the person you have chosen to be your executor has lost capacity and can no longer act, or perhaps loses capacity after receiving probate of your Will?

What are the duties of an executor?

Generally speaking, an executor must see that the terms of the Will are carried out. Their basic duties include submitting a Will for probate, collecting the assets of the deceased person, paying the debts of the estate and distributing the estate to the beneficiaries.

This may mean making funeral arrangements, dealing with the deceased’s bank, selling a house, locating property that belongs to the deceased, communicating with the beneficiaries about how the estate is being distributed and managing disputes.

To do all these things the executor must be mentally competent.

What happens if your executor loses capacity?

A well drafted Will usually incorporates provisions allowing a substitute executor to be appointed if the primary executor loses capacity. In the absence of such a backup:

  • In a situation where probate has not yet taken place and the executor has lost the capacity to act, the executor may simply be skipped as the executor of the Will before they have had a chance to commence their duties, that is the executor is passed over.
  • If the executor becomes incapacitated after probate has been granted, the executor must be removed, and their executor duties come to an end.

In both cases, interested parties, (usually one or more of the beneficiaries of the Will), must make an application to the Supreme Court, accompanied by supporting evidence, that the executor lacks capacity. In granting the application, the Supreme Court will consider what is required for the due and proper administration of the estate, as well as the best interests of the beneficiaries.

The Court will also assess whether the executor’s condition is temporary or permanent. If the condition is temporary, the court will appoint someone to act on the executor’s behalf for a limited period. In cases of permanent incapacity, the court will remove the executor and appoint an administrator.

What happens if the trustee of your estate loses capacity?

Your Will may refer to your ‘executor’ or ‘trustee’. Often in practice, these are the same person. However, they are quite distinct roles. Usually, the trustee’s role starts after the executor’s role ends, that is after assets have been collected, debts paid, and assets have been distributed to the beneficiaries, (i.e. after the estate has been properly ‘administered’). The trustee is responsible for on-going tasks with respect to certain assets, for example if the Will establishes a testamentary trust for one or more beneficiaries, or assets must be managed and maintained for minor beneficiaries.

If the trustee of your estate becomes incapacitated and the Will does not provide for a replacement on loss of capacity, then section 36 of the Trustee Act 1936 (SA) (the Act) allows a beneficiary to apply for an order from the Supreme Court for the appointment of a new trustee. In making such an order, the Court will consider the interests of the beneficiaries and the objects of the trust.

How we can help

We can prepare a Will on your behalf that anticipates the loss of capacity by your executor and trustee. We can even act in this role for you, if you do not have a suitable backup. If you are the beneficiary of a Will where the executor or trustee has lost capacity, we can also assist you in applying for that person to be passed over or removed and a new executor or trustee to be appointed.

Call Andreyev Lawyers on 1300 654 590 or email us if you have any questions about how to proceed if the executor or trustee of a Will has lost capacity.

[1] Section 17(8) of the Trustee Act 1936

The information contained in this post is current at the date of editing – 1 June 2023.

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