The role of executor involves quite a range of responsibilities and potential liabilities, many of which you are probably unaware.
We would like to set out the major responsibilities of the role so that you have an understanding of them and so that you are better equipped to provide us with specific instructions for the administration of the estate.
Burial or cremation of the deceased’s body
As executor you have the legal right to brief custody of the deceased’s body for the purposes of arranging a respectful burial or cremation.
You are entitled to select a funeral director to assist you with all the arrangements.
You may decide whether the deceased will be buried or cremated. You are not bound in your decision by anything the deceased may have said or even written in their Will. However, we strongly recommend you have regard to any wish that was expressed by the deceased, especially if it was expressed in their Will. You may also have regard to any wish expressed by the close family or friends of the deceased. Ultimately however, this is a matter for you to decide, subject only to the following restrictions:
- Burial or cremation must not take place until a Death Certificate has been issued or an appropriate certificate has been issued by a medical practitioner or the Coroner. Usually, the required certificate will be obtained on your behalf by the funeral director.
- It is an offence to cremate the body if you are aware of a written direction left by the deceased (usually in their Will) stating that the deceased did not wish to be cremated.
- If the deceased left a written direction that they did wish to be cremated and that this take place by a certain method (eg. with their ashes scattered by the sea), it is an offence to cremate the person other than in accordance with the particular method the deceased desired.
- Similar to the previous restriction, if the deceased left a written direction that they wished to be cremated, but that it not take place by a certain method (eg. with their ashes not to be scattered by the sea), it is an offence to cremate the person by that method.
The executor is entitled to reimbursement from the estate of all reasonable expenses incurred in relation to the deceased’s burial or cremation.
Read the Will
It is important to be very familiar with the terms of the Will and to identify quickly any areas of ambiguity.
In some cases, if the meaning of the Will is not clear it is necessary to ask the Court for a ruling on its meaning. This can be avoided if all the beneficiaries are in agreement about the meaning or interpretation of the Will.
Probate
The executor should apply to the Court for Probate of the Will. Strictly, the executor’s authority only commences on the grant of Probate by the Court.
Some property, such as real estate, is incapable of distribution until a grant of Probate has been made.
In some cases, where the estate is very small and depending on the type of assets involved, there may be no need to apply for Probate.
However, the decision not to apply for Probate should only be taken on legal advice.
It is only on a grant of Probate by the Court that the Will is legally “proved”. More importantly, it is only on the grant of Probate that legal title to the property of the deceased vests in the executor. From the time of the death of the deceased until the grant of Probate the property of the deceased is in fact vested in the Public Trustee. For this reason, the executor should be cautious about dealing with any property of the deceased until Probate has been granted. Before then, the executor does not have proven legal title to deal with the property and could be held personally liable if the property is dealt with inappropriately.
Once Probate is granted it has retrospective effect from the date of the deceased’s death and will validate any acts of the executor carried out between the date of death and the date of the grant if those acts were for the benefit of the estate or done in the course of the administration of the estate.
Consider potential Family Provision claims
Consideration should be given to whether a claim is likely to be made against the estate by a dependent or former dependant of the deceased who has not been provided for, or who has been inadequately provided for, under the terms of the Will.
The people eligible to bring claims of this kind against the estate include a former spouse or de facto spouse of the deceased and any child of the deceased.
Such claims may be made any time up to 12 months after the date of death of the deceased.
Before distributing the estate in accordance with the terms of the Will it is prudent for the executor to determine if any eligible claimant exists. If there is an eligible person the executor should:
- deal with any claim made (so as not to unduly delay the administration of the estate); or
- in the absence of a claim, wait until the expiry of the 12 month limitation period before proceeding to distribute the estate.
Ascertaining the assets & liabilities
It is your responsibility to identify all the assets and liabilities of the deceased and do everything reasonably necessary to maximise the value of the estate. The executor must:
- call in all the assets;
- call in all debts owed to the estate, including debts owed to the deceased by family, friends or beneficiaries under the Will;
- pay all debts and discharge all liabilities of the estate;v
- subject to the terms of the Will, apportion the burden of payment of the liabilities among the beneficiaries;
- keep accounts and proper records of all dealings with the assets and liabilities of the estate;
- deliver accounts to those entitled to them; and
- distribute the net assets of the estate to the people entitled to receive them.
Duty of care
An executor owes a general duty of care towards the beneficiaries and, in particular, the executor should:
- act personally, with such professional assistance as may be required;
- avoid acting in his/her own interest to the prejudice or disadvantage of the beneficiaries;
- act impartially towards all beneficiaries, avoiding any preference to the interest or wishes of one over another;
- take care to observe and comply with particular testamentary directions and trusts which are contained in the will or court orders affecting the entitlement to benefit;
- avoid delay in the realisation and investment of the estate assets;
- make the assets productive for the beneficiaries;
- obtain the best possible price in realising assets of the estate;
- be aware of the statutory powers of investment, subject to due diligence and prudence and the duties, including that of periodic review, provided under section 14A of the Trustee Act;
- disclose the entitlement to the beneficiaries, the nature and extent of that entitlement, and the estimated time of distribution, indicating whether, having regard to the nature and extent of the assets and liabilities, it may be possible to make an interim distribution to beneficiaries, particularly those in need;
- preserve the estate for the benefit of the beneficiaries; and
- be aware of the trustees right under Section 63 of the Trustee Act, to seek the opinion, advice or directions of the Supreme Court in complex issues regarding the management or administration of the estate assets, or regarding the interpretation of the Will or other testamentary instruments. (However, the Court will not provide advice on commercial decisions to be made by an executor.)
An executor, in performing the office, must conduct the business of the estate and its trusts with the same care as an ordinary prudent business person would apply in their own business affairs.
If there is a dispute about the validity of the last Will, then there may be considerable delay before a grant of Probate is made. The validity of the Will may be challenged on a number of grounds, most commonly that the deceased lacked testamentary capacity at the time the Will was made due, for example, to the onset of dementia. In such situations, consideration should be given to the appointment of an independent interim administrator as assets may need to be protected, monies collected, payments made and real estate rented. An application may be made to the Court to grant administration pending the outcome of the dispute.
Multiple Executors
If there is more than one executor then the acts of one will bind the other/s, as in law they are considered to be the one legal person.
Unless special leave is granted by the Court, all executors must join the sale, lease or mortgage of real estate.
Generally, all executors should be joined in bringing or defending actions, such as Family Provision claims. If an executor does not consent to be joined as a plaintiff, he or she must be made a defendant in the proceedings.
When is it Safe to Distribute?
There is no general rule of law that an executor is liable only for the debts of which he or she is aware. The executor is liable to pay all debts to the extent of the value of the estate. This applies even if, having acted in good faith and without notice of a debt, you have already distributed the whole of the assets to the beneficiaries.
The mere fact that the debt in question has not crystallised at the date of death gives no defence to an executor who is unable to meet a subsequent claim because the estate has already been distributed.
However, the executor can be protected from the claims of unknown creditors if the executor has:
- advertised the proper notice of intention to distribute the estate; and
- at least 30 days has passed since advertising the notice; and
- at least 6 months has passed since the date of the deceased’s death.
If the executor is not made aware of any remaining debt within the above mentioned notice period then it is safe to distribute and you cannot be held personally liable for such debts.
So, we strongly recommend that you instruct us to distribute on your behalf in accordance with this procedure.
It is important to note that this procedure does not render void any late claims by beneficiaries or creditors. The procedure simply protects the executor from further claim. Under section 95 of the Probate & Administration Act 1898 a creditor or beneficiary may still pursue a remedy against the persons to whom the assets of the estate have been distributed.
Tax
If the deceased earned a taxable level of income either through personal exertion or the earnings from property or investments an income tax return should be lodged on behalf of the deceased for the tax year to the date of death.
If the estate earns taxable income during the stage of administration then an estate return will be required. If an estate return is necessary then the estate will need a tax file number.
If either of the above applies then you will need to file the returns and we would recommend you engage a tax agent for that purpose. The deceased may have had an accountant and, if so, that person should be requested to assist.
The estate may incur a liability for Capital Gains Tax depending on the asset, what is done with the asset in the administration and the time within which the asset is dealt with. These are important considerations and must be discharged having regard to your duty to the beneficiaries. Advice should be sought in relation in relation to specific assets and the potential tax consequences.
We hope this advice is of assistance. Please don’t hesitate to call Bahlmann Burke Lawyers if you require assistance.