By Alfred Ip, Partner
One of the most common questions we are asked when we prepare Wills for our clients is: who to choose as executors? The answer is not a simple and straightforward one.
Making a Will serves a lot of purposes, including avoiding disputes among beneficiaries and streamlining the probate process. Appointing the right executor is crucial to achieve those benefits.
Re Loo Che Chin
In Re Loo Che Chin  6 HKC 303, with OLN acting for one camp of beneficiaries, the Court exercised its power under s36 of the Probate and Administration Ordinance to “pass over” the executor appointed by the Will and appoint an alternative administrator on the “necessary or convenient” ground.
In that case, the Deceased appointed his wife, who predeceased him, and his youngest son, who is a medical practitioner, as the executors, and bequeathed his whole estate, which is worth HK$1.2billion, to his five children and one son in law in equal shares. Three of the beneficiaries applied to Court to have the remaining executor removed from the executorship, and appoint two professional accountants as administrators instead.
Hon. Poon J in his judgment emphasised that the court’s discretion to pass over the executor under the “necessary and convenient” ground “must depend on the particular facts of the case before the court… The court would approach the evidence objectively and with a good dose of common sense to see if on the facts of the case the “necessary or convenience ground is made out.”
One of the factors that the Court considered is the strained relationship among the beneficiaries and the remaining executor, leading to a complete breakdown of relationship and mutual distrust between the parties. The Learned Judge found that the attitude of the remaining executor, fuelled by hostility, resulted in a lack of effective communication among the parties which rendered the effective administration of the estate most difficult and not conductive to the expeditious administration of the estate.
The widely publicized case of Fok Chun Yue Benjamin v Fok Chun Wan Ian and Ors (HCA2155 of 2011), involved disputes among the executors of the Estate of Fok Ying Tung Henry, a legendary business tycoon. This is only one of the three legal actions. More than 17 barristers were retained by the parties, nine of whom were Senior Counsel.
These cases show the undesirability of appointing family members as executors when there is substantial value in the estate and the beneficiaries are not on amicable terms. It can be a trigger for rivalry.
Criteria of a Good Executor
Of the upmost importance is honesty and integrity. The executor is entrusted with the administration of the estate, and the whole estate will be at his or her disposal in the course of the administration, which could last a number of years if there are minor or life interests in the estate.
For married couples with young children, this is of particular importance should both parents pass away in a tragic incident, and relatives such as their siblings are appointed as guardians to their children. Appointing the guardians as the executors may sound practical as they would have unfettered access to the estate to cover the children’s needs, but nobody would be able to supervise the use of the estate for the benefit of the children only. This could put the children in a vulnerable position if the guardians did not apply the estate to their benefit.
Another factor is the knowledge and skill in estate administration. Estate administration is not a common skill set which people can easily acquire in their daily life. Any omission in the course of administration, such as failure to ascertain the assets and liabilities of the estate, maintaining the assets in the estate such as real properties or stock and shares properly or report to the beneficiaries openly and regularly, may attract disputes or, even worse, personal liability.
Multi-jurisdictional estate administration is increasingly common nowadays due to the advancement of technology and the rise of overseas investment. Inheritance processes can vary drastically between countries, and complex issues such as inheritance tax clearance and forced heirship can complicate estate administration.
The obvious benefit of appointing professional executors to administer the estate is that they are experienced in handling estate administration. As they are not beneficiaries, they can administer the estate in the most impartial manner, and they can administer the estate for the benefit of the all beneficiaries without any vested interest. This greatly minimizes the risk of disputes.
Professional executors also often have established contacts with professionals in other jurisdictions who can assist them in multi-jurisdictional estate administration.
Solicitors and trust companies are the obvious choice as professional executors. In Hong Kong solicitors’ firms practice either in sole proprietorship or partnership, with unlimited liability, and it is compulsory to take out professional liabilities insurance. Trust companies in Hong Kong are registered under the Trustee Ordinance (Cap. 29) and, subject to the Companies Ordinance (Cap. 622). Trust companies are also required to have at least HK$3,000,000.00 issued and paid up share capital and a sum not less than HK$1,500,000.00 deposited in the name of the Director of Accounting Service with a bank in Hong Kong, or alternatively a bank guarantee of that amount.
The fees of professional executors are varied, while some charge on a percentage of the net assets value of the estate, others charge on time spent basis. The fees of solicitors in Hong Kong are subject to the scrutiny of Legal Practitioners Ordinance and High Court taxation rules.
Non-professional executors cannot charge their time in estate administration unless they are a professional such as a lawyer or accountant. For the lay person, it can be a thankless job, especially when the executor is not a beneficiary himself.
Effective estate administration is essential for the protection of the interests of your beneficiaries, an extremely important consideration in estate planning. Choosing professional executors instead of relatives or beneficiaries may be desirable when the administration is likely to be complicated by issues such as multi-jurisdictions, tax, vulnerable beneficiaries such as minors and disabled persons, or if the overall family dynamic merits it.
If you wish to speak to an experienced probate lawyer we can help you make the right decisions in relation to your estate planning so that your loved ones can avoid potentially costly and stressful litigation after your passing.
OLN Estate Planning Team