What are my duties as Executor?

Something we get asked all the time is, “what do I have to do now that I’m executor?”.  Whilst people generally realise they need to attend to estate tasks like arranging funerals, applying for probate and generally administering the Estate of the deceased, they do not always realise all that goes into the administration of an Estate. The ramifications for an executor who does not perform their role diligently and competently can be serious and wide reaching.

DID YOU KNOW

1. Your position as an executor is a fiduciary position – i.e. one of trust. That means your duties to the beneficiaries of an estate are akin to a lawyer and their client, employer and employee or doctor to patient. It is a serious responsibility which ought to be treated as such.
2. You need to keep clear records of the accounts for the deceased. That is, if you are paying for necessary expenses and disbursements which you intend to claim reimbursement for, you must keep clear accounts of those amounts and evidence of your payment. Similarly if you have made payment of liabilities out of the Estate funds, you must keep clear records of these transactions. If a beneficiary challenges the executor’s management of an estate and calls them to file and pass their estate accounts to the Court, they must provide documentation of the management of estate funds. Any discrepancies may result in further legal action being brought against the executor.
3. Where executorial expenses have arisen as a result of the executor acting beyond their power, or without care and diligence, they will be unable to claim reimbursement for those expenses (Re Hutchison [2019] VSC 495).  In Chick & Anor v Grosfeld (No 3) [2012] NSWSC 1536, White J said:  “As a general rule, an executor is expected to carry out his or her duties, including keeping accounts, personally.  If he or she chooses to employ another person to carry out executorial tasks, the charges will be to his or her own account.  However, where, having regard to the size and nature of the estate and the tasks that need to be carried out, it is reasonable for the executor to engage the services of another, the expense may be allowed as a disbursement.”
4. The executor must preserve the Estate in the condition it was as at the time of the deceased passing away. Therefore, spending large sums of money out of Estate funds before Probate or Letters of Administration are granted, can result in serious legal action being brought against the executor, regardless of whether you are entitled to those funds as a beneficiary. The executor should seek legal advice if they intend to make any interim distributions before the finalisation of an estate.
5. The executor must provide information as to the estate assets and financial details to all beneficiaries, including residuary beneficiaries if requested (Re Hutchison [2019] VSC 495). A key obligation of the executor is to hold and deal with the estate for the benefit of the beneficiaries and therefore, the beneficiaries are entitled to know what is happening with the estate’s finances.

Common tasks performed by executors:

• Liaising with financial institutions;
• Completing further forms and documents to authorise administration of certain assets;
• Selling shares;
• Selling real property;
• Administering trusts;
• Paying any estate liabilities;
• Discussing the estate’s taxation position with an accountant in order to determine whether there will be tax payable by the estate, and lodging a “date of death tax return”; and
• Distributing the estate to the beneficiaries.

As the legal personal representative of the Estate, you may be personally liable if you:

• Do not follow due process of administering the Estate in compliance with the relevant legislation – for example, you may be personally liable if you distribute the Estate without satisfying the advertising requirements and if you distribute the Estate prior to the expiry of the 6 month period following the Deceased’s Estate (see section 92 of the Probate and Administration Act 1898 (NSW)). If you comply with the requirements, then you will not be personally liable (see section 93 of the Succession Act 2006 (NSW)).  You may be able to make a partial distribution of the Estate prior to this period if you are positive that the remainder of the Estate assets will be adequate to cover any outstanding liabilities and/or any potential family provision claim that may be made.
• Distribute the Estate without paying liabilities of which you have notice.
• Distribute the Estate despite having notice of a claim by the Australian Taxation Office (ATO).