Topic 4 - Estate Administration

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Curtin University *

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Law

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Apr 3, 2024

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Topic 4 – Estate Administration Topic Objectives  Describe the duties, powers and liabilities of an executor;  Explain the implications on an estate if an executor dies;  Identify who may be a suitable executor for a client’s estate;  Define probate and explain the process of probate including situations where probate is not necessary;  Outline the administration of an estate from an executor’s point of view; and  Outline the role of trustees of testamentary trusts. Duties of the executor The process of probate is set out in the Administration Act 1903 (WA). An executor is the person to whom the execution of a will, that is, the duty of carrying its provisions into effect, is confided by the will-maker. The duties of an executor are to:  organise the funeral arrangements;  locate and prove the will;  collect the estate and, as necessary, convert it into money;  determine the liabilities of the deceased;  pay the debts in their proper order;  invest the assets of the estate to create income while the estate is being administered;  maintain the assets of the estate in good condition;  deal with any challenges against the estate;  complete tax returns for both the deceased and the estate; and  pay the legacies and distribute the residue among the persons entitled. Estate Planning – Topic 4 Page 1 Faculty of Business and Law | Curtin Law School CRICOS Provider Code 00301J

Suitability for the executor’s role An executor must be at least eighteen (18) years of age and of sound mind. If a person does not wish to be appointed an executor, though they are named in a will, they can renounce Probate. The choice of an executor depends largely on the complexity of the will, the personal circumstances of the person making the will, and the value and extent of the assets of the estate. It is wise for the person to be named to be consulted on this matter prior to making the will as the executor named has no legal obligation to act and may refuse to accept the appointment. The executor should be informed where the will is kept so that it can be located when the need arises. The executor has complete control over the assets of the estate and must therefore be completely trustworthy, must have the knowledge and ability required to carry out the necessary duties, and must have the time to give those duties the attention they deserve. The most commonly appointed person to act as an executor is the beneficiary of the residuary estate, that is, the person identified in the will who after each of the specific gifts, will take the remainder of the will maker’s estate. It is best to avoid appointing a person who may have a conflict of interest. By way of example, a business partner may be an inappropriate executor in circumstances where the business partner may wish to purchase from the estate the will-maker's interest in the business. Other commonly appointed executors include the solicitor, the accountant and a public trustee company. The length of some trusts set out in the will or other factors of value and complexity often make it desirable for a trustee company or the Public Trustee to be appointed solely or with other persons. The executor's role is voluntary and without reward unless the will-maker has specifically allowed an executor to be paid a fee for services performed. The Public Trustee and the Trustee Companies have authority under Acts of Parliament to charge commission for their services. An individual acting as executor can apply to the Court for commission. It is customary that a person that is appointed an executor is also appointed as a trustee of any trust created under the will, however, this remains subject to the particular circumstances of the will. Joint executor It is possible and sometimes desirable to appoint two or more persons to act jointly or in the event of the prior death of the first choice. Where the deceased has appointed more than one executor of his/her will, each executor is entitled to apply, or not apply, for a grant of Probate of the deceased's will. Estate Planning – Topic 4 Page 2 Faculty of Business and Law | Curtin Law School CRICOS Provider Code 00301J

Those executors who apply for (and receive) a grant of Probate, have equal responsibility and liability in the administration of the deceased's estate (even if, for example, one is a professional executor or trustee and one is not). Any executor who does not apply for a grant of Probate simply does not act as an executor and therefore has no responsibility for the administration of the deceased's estate. That person has no right to enquire into the administration of the estate. However, he/she may apply to take out a grant of Probate at any stage during the administration of the estate, and once having received a grant, will become jointly liable and jointly responsible with any executor(s) who took out the initial grant. Liability of the executor Once the executor has permission from the court to deal with the assets of the estate, they must act promptly to call in the assets of the estate and determine the estate liabilities. Where there is any loss suffered through the neglect of an executor they may be held personally responsible. The executor is able to claim expenses such as funeral, accounting and legal fees from the funds of the estate. If an executor engages a professional person for specialised advice or to carry out the duties of administration, then the fees of that person are charged against the estate. No executor appointed Where no executor is appointed in the will or when a person dies intestate, it will become necessary to apply to the court to appoint an administrator to administer the estate. The court will have regard to the rights of those people named in the will when appointing an administrator. The court will appoint someone who has an in interest in the estate but they have discretion to appoint someone else if the circumstances warrant. If the executor dies If the executor administering the estate dies, then any surviving executor appointed under the will continues as the executor of the estate. If the sole executor to whom Probate has been granted dies, then the executor to whom Probate is granted of his/her estate is granted will become executor by representation of the first estate. Where the executor dies prior to taking out a grant of Probate and no alternate is appointed, the court has the power to appoint an administrator. Protection of estate assets As soon as possible the executor must protect the estate assets and if possible take possession of them. In particular the executor must ensure that the deceased’s home, car Estate Planning – Topic 4 Page 3 Faculty of Business and Law | Curtin Law School CRICOS Provider Code 00301J

and other assets are insured. If something happens to the assets of the estate, the executor may be personally liable. In order to take possession of the deceased’s estate it is wise for the executor to transfer the deceased’s assets into their name “as executor of the estate of the deceased person” and open a bank account in their name “as executor of the estate of the deceased person.” There will not be any tax or stamp duty obligations on a transfer at this stage in the process. Estate debts An executor of the deceased’s estate is personally liable to pay the estate debts out of the estate, ideally within 12 months from the date of death. It is therefore prudent for the executor to delay the final distribution to beneficiaries until they are certain that have been paid. Estate debts are:  all tax owed by the deceased and the estate of the deceased;  all debts that the deceased owed; and  all the costs of administering the estate such as funeral, legal and accounting costs. All debts are paid from the estate assets. If the estate does not have enough liquid assets to satisfy the debts then the executor will need to consider selling estate assets (like a home or shares). If the estate does not have enough assets to satisfy the debts then the estate is insolvent and may need to be declared bankrupt. If this is the case then the executor should seek the advice of an accountant or lawyer specialising in the area of bankruptcy. Generally all secured and some special creditors are paid first. If there is anything left the estate’s other creditors get so many cents in the dollar. Advertising to creditors The executor can publicly advertise that they are about to distribute the estate. This alerts creditors that they need to inform the executor about any debts or the executor will distribute the estate. Any unknown creditors then have to collect the debt directly from the beneficiaries. Advertising only protects the executor . It does not stop the creditor from seeking payment direct from the beneficiary. This process is particularly important where there may be debts in a personal capacity that the executor is no aware of, for example a person operating a business as a sole trader. The executor should advertise in both the WA Government Gazette and in a major Western Australian newspaper (eg. The West Australian or Sunday Times ) as follows: Estate Planning – Topic 4 Page 4 Faculty of Business and Law | Curtin Law School CRICOS Provider Code 00301J

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