Tips for choosing financial controllers under your estate plan

One of the most fundamental decisions in your estate plan is who to nominate as your financial controllers i.e. your financial attorneys, executors and (if using a testamentary trust) trustees.

While there are some legal rules surrounding who can be appointed to these roles, there are only really a few key requirements:

  • Must not be bankrupt
  • Must be over 18
  • A maximum of four people can act at one time

This doesn’t mean that choosing the financial controllers is a simple decision, especially in a scenario were both spouses have passed away.

When making this decision, I would like to suggest a few general rules:

  1. For couples, it is often simplest to nominate the surviving spouse as the first financial controller.
  2. When contemplating a situation where both spouses have passed away, consider nominating two people, so they can share the responsibility of the role and keep each other accountable. This creates a standard of governance and accountability to ensure that all decisions are made carefully. As an added benefit, if either controller is experiencing events in their life which would cause them to act out of character or impact on their ability to shoulder the responsibility, the other controller is able to immediately identify the issue.
  3. It can also be sensible to nominate a representative from each side of the family, so that all family members feel like they have a ‘seat at the table’ in relation to financial decisions – this is particularly beneficial where there are minor children.
  4. Couples should keep their appointments consistent and nominate the same people under both their documents (other than when they are nominating each other, of course!) i.e. if they each want their own brother to be the back up executor and they each make this nomination in their will, then the back up executor is determined by the roll of the dice based on order of death. For such an important role its prudent to have certainty regardless of order of death, and I would recommend that they either appoint both brothers to act jointly, or make the compromise now, rather than leave it to chance.
  5. The most suitable person is someone who can be trusted to exercise sound financial judgement in accordance with your values. They do not need to be particularly sophisticated – just as you obtain advice from trusted professionals, so can your financial controllers. The more important consideration is trusting that they will get the right advice and exercise sound judgement.
  6. To make the estate plan sufficiently robust, it is prudent to nominate enough successors or ‘back ups’ – you can get quite sophisticated by nominating people to fill particular vacancies, especially if you are aiming to always have a representative from each side of the family.
  7. Nominate the same people across all financial control roles i.e. financial attorneys, executors and trustees of any testamentary trusts. As each state has different rules about how to structure attorney appointments, sometimes this is not completely possible for financial attorneys and we have to get a bit creative. However, try to be as consistent as possible across all roles so that there is a smooth transition across different events. Think about a couple who are in a car crash, resulting in them both being in a coma for some time and then ultimately both passing away (sorry to get so morbid!). If they nominated the same people to act as financial attorney, executor and trustee of the testamentary trust, then the people who have been appointed to manage the financial decisions don’t really care which legal ‘hat’ they are wearing, they can simply focus on getting the job done and don’t have to manage clunky handovers.
  8. Finally, it is best if the people nominated live in Australia – while technology certainly assists with making international transactions simpler, there can be complications from both a taxation and practical perspective with offshore financial controllers.

What other scenarios have you seen implemented which you think should be added to this list?

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