When a testator dies and leaves a Will it is the job of the executor (male) or executrix (female) as named in the Will to manage the testator’s estate and to carry out their wishes.
What is an estate?
The estate is all the property and liabilities (debts) of a person that are in existence after his or her death. However, not every asset is considered part of a deceased’s Estate. Instead, there are ‘estate assets’ which can be included in a Will and ‘non-estate assets’ which cannot.
Estate assets as a broad rule of thumb include anything that the deceased has sole ownership over. This includes real or personal property, business ownership, digital assets and intellectual property.
On the other hand, non-estate assets are things the deceased does not have legal ownership over, or has joint ownership with another party. Examples of such include discretionary/family trusts, company assets, life insurance and superannuation
Role of the executor
The executor’s role is often referred to as a trustee or fiduciary role as the executor must act in the best interests of the estate and of the beneficiaries at all times. The beneficiaries are those who have been listed in the Will to ‘benefit’ from the deceased’s estate. For example, the deceased may have left real property, cash or a family heirloom to one or multiple individuals or organisation, making them a beneficiary.
The role of an executor is quite demanding, so an executor has the right to refuse to accept the position and either somebody else steps in, or the Court appoints a replacement. Executors can however delegate some of the responsibilities to others; e.g. funeral directors, lawyers, accountants and real estate agents – thus not all the tasks soon to be discussed have to be carried out by the executor themselves. The executor will simply be responsible for their
Loosely, in order to execute the Estate successfully, the executor must
- Organise the funeral and burial/creation of the deceased
- Notify all beneficiaries named in the Will
- Manage the property or goods left in the will to:
- Take care of any business interests
- Safeguard any income
- Invest money not needed immediately
- Collect any valuables
- Insure all property
- Value the estate and keep a list of the valuations
- Obtain authority to administer the estate
This whole process can often take time which is why the law in Victoria says that the executor has 12 months to distribute the estate. It is only after 12 months that beneficiaries may be entitled to receive interest on the value of their gifts they are yet to receive.
Important tasks explained
- The funeral: The executor is responsible for making the funeral arrangements if the deceased has not already made those arrangements. The executor should follow any directions left by the deceased, but are not bound to do so. If the executor is not an immediate family member they should always consult with the family before making funeral arrangements.
The cost of the funeral is an expense out of the estate, however the executor should adhere to their fiduciary duty in acting in the best interests of the estate and of the beneficiaries at all at times. Accordingly, they must be careful not to incur expenses beyond the available funds in the estate as they could be found personally liable.
- Probate: Aside from the funeral, the first major job as an executor will be applying for probate. Probate is a document given by the Supreme Court that confirms the validity of the Will and officially appoints the executor as the authority for the estate.
The fee for filing a probate application increases annually on July 1, and again is a cost which comes out of the estate.
An application for probate requires the preparation and filing of various documents with the Court which includes: a certified copy of the death certificate; the original will; a statement of assets and liabilities with appropriate valuations of cash, business interests, personal effects, securities, real estate, sale of property, debts due and debts owing; an executor’s affidavit setting out background information about the deceased; as well as an affidavit including a copy of the document which advertised the fact that an application for probate was about to be made. This advertisement is requirement by law to have been made at least 14 days before the probate application becomes logged with the Court.
The process of arranging all the documentation can often take months, which is why the executor is given a year to apply for probate before they are seen as breaching any fiduciary duties.
Once the court accepts the documentation and is satisfied that the Will is the last valid Will of the deceased, probate is granted to the executor and the executor is free to administer the estate.
- Debts: If a deceased has debts (liabilities), the executor must use the estate assets to settle those debts before the estate can be distributed to any beneficiaries.
If there are no assets, or an insufficient amount of assets to pay all the deceased’s creditors, then the estate becomes ‘insolvent’ and should be declared bankrupt. In other words, the deceased has debts in excess of the value of their estate. In such cases where the estate is insolvent, the potential beneficiaries will be excluded from the provision and the remaining assets will be used by the trustee in bankruptcy to pay out the liabilities. The executor will not be liable for the shortfall of a bankrupt estate, provided that they have not already taken any assets from the estate.
- Administering the remainder of the estate: Once probate has been granted and the debts (if any) attended to, the executor must carefully distribute the remainder of the estate to the chosen beneficiaries. The executor must take care in gaining the most competitive price for real property if putting it on the market, and give careful consideration to the household items. For example, some items may be listed in the Will, whilst others are considered the ‘residual’ and could be sold to second-hand dealers, given to charities or disposed of. However, before making these choices it is advised that executors consult with the family of the deceased.
Executors have a duty to ensure that assets do not diminish in value or are otherwise wasted. For example, if money is collected from a sale it should not be distributed immediately, it instead should be invested so to gain some interest. With regards to real property, discussions should be had about whether the property should be sold instantly, or if it instead should be rented so to gain some income. Professional valuations and advice is often sort in these circumstances so that the executor is certain they are acting in the best interest of the estate and the deceased.
- Defending a Will: If a Will is contested by beneficiaries or potential beneficiaries, it is the role of the Executor to defend it. We recommend that as soon as a notice of an intended claim against a Will is received, the executor employs legal advice.
If legal advice at Hentys Lawyers is sort, we would determine whether those making a claim against the Will are eligible, and if so whether they are disputing the Will within time, as there is a limitation period of 6 months after probate has been granted.
If it is determined that both of these elements are true, then discussions with the other side would begin. Once all evidence from both sides have been filed, mediation is usually ordered by the Court. This often narrows the areas of disputes between the parties and is always where we hope to resolve the dispute.
Executing a Will can be complicated which is why it is always a good idea to get advice from a lawyer even before the Will is being challenged. So please, if you have recently found out that you are an executor of an estate, or simply want some extra information, do not hesitate to contact the team at Hentys Lawyers today.