One of the most important pieces of advice that a person should receive if appointed to act as executor in a Will, is that the duties of an executor in administering a deceased estate are onerous.
The duties of an executor are set out in the legislation, case law and the deceased’s Will or other testamentary document.
This blog will highlight some of the principal duties of an executor and provide practical examples to illustrate how these duties are performed in reality. It is not intended to be a comprehensive summary of the duties and should you wish to find out more information about these, please do not hesitate to contact us.
This is arguably the most important duty of an executor. An executor must collect and get in the personal and non-personal assets of a deceased person.
- Get in the Assets of the Deceased
Some obvious examples of personal assets include real property, motor vehicles, household possessions and bank accounts. Non-personal assets are sometimes more complicated, such as debts owing, interest in a partnership, shares and superannuation (if there is a valid nomination in favour of the estate).
Likened with this duty, is the duty of an executor to manage and preserve assets or income earning investments of the estate for the benefit of those entitled them.
For example, executors must maintain a policy of insurance over estate property and in cases where the deceased held an interest in rental properties, continue to collect rent. In more complex scenarios, the Court has recognised this duty extends to commencing legal proceedings to collect in estate property.
If a solicitor is assisting with the estate administration, the solicitor’s account will usually be used to collect estate monies.
- Duty to Account
An executor can be called upon by the Court to exhibit a full inventory of the estate and render an estate account if required.
Whether or not a demand has been made, an executor has a duty to account to the beneficiaries of an estate. This can be done informally, if no demand has been made. There is no format for accounting in an informal way. However, an executor must provide the beneficiaries with an itemised list of the following:
- assets transferred;
- assets realised and still held;
- funds received from all sources;
- payments for estate liabilities, distributions and money retained; and
- provision for liabilities not yet paid – attention must be taken to ensure sufficient funds are withheld to pay all tax assessments.
If a formal account is demanded, further details are required, in addition to original supporting documents of the estate administration. These include receipts, statements and invoices. It is therefore imperative that an executor maintain accurate and detailed records during the estate administration.
- Fiduciary Duties
It is important for an executor to understand that they are in a position of trust and therefore, owe fiduciary duties to beneficiaries of an estate.
An executor must not place themselves in a position of conflict between their duties to the estate and their personal interest. For example, there is a conflict if an executor entered into a transaction for the sale of estate property to a related party (i.e. his or her spouse) for less than market value.
Another key fiduciary duty is to not obtain any unauthorised benefit from the fiduciary relationship, often referred to as the “no-profit rule”.
An executor also has a fiduciary duty to exercise the powers and perform the duties of an executor in good faith, in the interests of the beneficiaries and to use reasonable care in doing so.
Other duties of an executor including paying the debts of the deceased, paying legacies given by the Will (and interest where applicable) and distributing the estate according to law.
As mentioned above, there are duties that we have not discussed here, and if you would like information on those, please do not hesitate to contact us on 07 3839 7555.