Duties of an Executor – Getting the Most Value Out of the Estate
The job of an Executor is a largely complex and thankless task, and the duties imposed on Executors make their job no less difficult. When the Executor begins to gather up the Estate of the Deceased, the question of debt and the satisfaction of that debt raises a number of further duties.
While it is fairly obvious that the debt ought to be paid, this duty can often come into conflict with the duty of an Executor to extract as much value as possible from the assets of the Estate. Given the current mood of the Federal Parliament with relation to the rolling back of negative gearing, unaffordable housing and the potential for a looming crisis, this article seeks to define the correct course of action for an Executor where he or she is unable to get the ‘market value’ of an asset.
Executors And Real Estate
The duty of an Executor in getting the highest possible value from an asset is well established, both in Australian and English law. The most famous Australian case, Booth v Public Trustee , involved a case in which the Executor (a Public Trustee) failed to have a house independently appraised for its worth, and subsequently sold the Estate’s largest asset at a loss. In doing so, the Court held that the Executor had breached his duties, and ultimately reversed the sale of the house.
While this case ultimately had a (relatively) happy ending for the beneficiaries of the Estate, it is worth remembering that the result was only achieved through extensive litigation – an expense your beneficiaries could no doubt avoid having to incur. So how are situations like these avoided, particularly if the housing market threatens to enormously diminish the value of a property?
Pass The Buck
The first, and perhaps the easiest, solution to this issue is to have the property independently assessed. Sitting on a property for an indefinite period of time runs the risk of needlessly depriving the beneficiaries of the Estate of funds, as well as opening the Executor up to liability for failing to carry out their duties in a timely manner.
By having the house independently assessed, the question of valuation becomes a non-issue – the valuation will be conducted, taking into account the state of the market in order to give you an objective and well thought out idea of the property’s true value. In the face of such a valuation, your impartiality is maintained, the creditors (if any) receive their dues, and the beneficiaries do not go without.
Set Up A Trust
Barring an apocalyptic event of some sort (in which case, your duties as an Executor shouldn’t be the highest priority on your list), property markets tend to rebound after some time. If the residual Estate (that being, everything other than the property concerned) is considerable enough to satisfy the creditors and ensure that the beneficiaries most in need receive some benefit out of the Estate, you may want to consider setting up a limited form of trust.
Although it may seem strange for an Executor to have the authority to set up a trust involving someone else’s property, there is some authority to suggest that this may be possible in extreme circumstances and where due care is used. Section 45 of the Administration and Probate Act 1958 (Vic) grants an Executor the authority to “limit or demise”, or in other words rent out, a property for up to an incredible 50 years . In doing so, the Executor will effectively hold the property in trust for a period long enough to ensure that its value returns to a reasonable rate.
Better Safe Than Sorry
It should be said that the latter of these two practices, although the ideal solution to our problem, still contains elements of risk that arise from conflicting Executor’s duties – in particular, the duty to dispose of the assets within a period of no more than a year.
This being said, where the Executor is no more than a layman in Estate Law, Courts are incredibly forgiving. Given that the job of an Executor can be enormously confusing and time consuming, so long as an Executor truly believes (and has made some effort to confirm) that what he/she is doing is for the benefit of the beneficiaries, most actions are forgivable.
With regards to making sure that your decision in these circumstances is the right one, it is always prudent to contact an Estate Professional for assistance in resolving Estate and Will Disputes. Some sound advice and some small expense is always preferable to the nightmarish and costly experience of a protracted litigation.  VLR 183  Settled Land Act 1958 (Vic), s 41