Selecting a suitable executor is an integral aspect of estate planning.

Your executor deals with everything from applying for a grant of probate, collecting your assets and settling your debts, through to distributing your estate in accordance with your testamentary intentions set out in your Will. Your executor should be someone in whose ability to administer your estate appropriately you have complete trust and confidence.

For Australians with trusted family members or friends living overseas, appointing them as executors may seem logical. However, whilst appointing a non-resident executor is legally permissible, it comes with complications.

Following are some considerations if you’re thinking about appointing an executor who resides overseas:

Tax implications for non-resident executors

Under Australian law, an estate is regarded as a trust for taxation purposes. Residency is determined by where the trust is centrally managed and controlled or by the trustee’s residency. The estate is treated as a non-resident trust if probate is granted solely to an executor who is not an Australian resident for tax purposes. This can have significant tax implications.

For example, the estate will be taxed as a non-resident and will lose eligibility for the tax-free threshold of $18,200 usually accessible for up to three years after the deceased’s passing. If your assets in Australia generate income after your death, higher rates of tax will apply on that income.

If the executor is a non-resident, the estate may not be eligible for the 50% capital gains tax discount on the sale of Australian property. The main residence exemption, normally applied on the sale of the deceased person’s principal place of residence, may also be forfeited.

Practical challenges for non-resident executors

An executor located outside of Australia may encounter considerable practical and logistical challenges when administering an Australian estate due to communication barriers. Differences such as time zones and languages can hinder efficient coordination with financial institutions, courts, and beneficiaries and can delay administration of the estate.

Tasks such as opening bank accounts, preparing the deceased person’s your house for sale, including clearing it out, and transferring title of assets can be difficult from overseas. It may not be possible for your executor to spend time in Australia to attend to these.

Document processing can also be complex. It may be difficult to obtain or process promptly the documentation required to obtain a grant of probate from abroad – particularly if the executor is unfamiliar with Australian procedures and laws.

The Supreme Court of NSW can refuse to issue a grant of probate to an overseas executor. In those circumstances, the overseas executor may be able to appoint an attorney located in NSW, using a Power of Attorney, to act on their behalf in applying for probate.

Alternative solutions: appoint a local co-executor

The above tax implications won’t apply if at least one of your executors is an Australian resident. If appointing an overseas executor is important to you for familial or personal reasons, many of the challenges can be alleviated by appointing an Australian co-executor. This could be a friend, a trusted family member, or a professional such as a licensed trustee company, accountant or solicitor. The local co-executor can manage day-to-day tasks and fulfill legal requirements on behalf of the estate. This approach allows a co-executor to handle the estate administration within the Australian jurisdiction.

Here to help

While appointing an overseas executor can be an option in Australia, the tax, legal, and administrative challenges require careful consideration.

Contact us to tailor your Will to safeguard your wishes, reduce the burden on your executor, and achieve the most cost-effective management and distribution of your assets.