Wills, Intestacies, Estates and Funerals

Procedure for Winding Up the Estate

Powers of the Personal Representative who Obtains a Grant

After a grant the personal representative has all the powers necessary to carry out his or her duties and to enable the estate to be administered according to law. The powers given by law, and any powers given by the will, may, if required, be extended by the court: ss 81-84 of the Trustee Act.

Only four powers will be referred to here. Others are implicit in the personal representative's duties.

• Power to Delegate: a personal representative who has taken out a grant may appoint the Public Trustee, a trustee company or a solicitor to discharge all or part of her or his duties as personal representative.
• Power to Sell: the personal representative has the power to sell real and personal property in the estate for the purposes of administration. The power of sale is discussed more fully at [33.10.2.2] B. Payment of debts due by the estate, at "Sale of estate assets and administration of assets for the payment of debts: solvent estates".
• Power to Lease and Mortgage: the power to lease or mortgage is dealt with in the Administration and Probate Act ss 50 and 51.

Duties of the Personal Representative

The duty of the executor is, in principle, to protect the estate and to carry out the terms of the will in accordance with law. The duty of the administrator is to protect the estate and to administer the estate in accordance with law, and to divide the net estate in accordance with the intestacy law (or in accordance with the will if there is one). Sometimes the testator chooses as executor a person whose own interests conflict with his or her duties as executor. This would occur, for instance, where the executor, given very little under the will, is a claimant for family provision. Such an executor should seek professional advice, and, if the conflict cannot be resolved by negotiation, the advice and direction of the court should be sought: see Court Procedures Rules r 2701, or Trustee Act s 63.

In more detail, the duties of the personal representative are to:

(a) collect and get control of the assets:Collecting and taking control of the estate assets ;

(b) discharge the estate liabilities: Duty to discharge estate liabilities: solvent estates

(c) distribute the net assets: Duty to distribute net assets;

(d) account for his or her administration: Duty to account; and

(e) deliver up the grant if and when required by the court to do so.

The first four of these will be dealt with in order.

Collecting and taking control of the estate assets

A. Protecting estate assets; urgency

Urgent steps may be taken by any interested person, whether named in the will as executor or not, to protect estate assets, but professional advice should be sought. In an emergency, the best step is to telephone the Public Trustee. It may be advisable to seek an emergency grant for the purpose of collecting and protecting the assets(ad colligenda bona) where court authority is needed urgently. The personal representative should not allow relatives to swoop on the deceased's assets and carry them off, and wasting assets must be dealt with promptly. An executor (or close relative or even a stranger) is entitled, even before grant, to care for her or his animals and sell perishables.

B. Inventory and protection of assets

Making an inventory of all the deceased's assets and liabilities is an essential step in taking control of the estate. (The inventory of assets has already been prepared for the Application for Grant.)

Duty to discharge estate liabilities: solvent estates

We are concerned here with solvent estates: if the estate is insolvent it should be administered under the Bankruptcy Act 1966 (Cth). Professional advice should be sought, and the work of administration is done by the trustee in bankruptcy rather than the executors. Proceeds of life insurance policies are generally protected against creditors of an insolvent deceased estate.

A. Funeral accounts

Banks will, before grant, apply funds held by them to funeral accounts on production of the account, a copy of the will and a death certificate.

B. Payment of debts due by the estate

The personal representative is obliged to pay the deceased's debts as well as debts which the personal representative incurs during administration.

Sale of estate assets and administration of assets for the payment of debts: solvent estates

The personal representative has an overriding power to sell any or all assets for the payment of debts or for the administration generally. The personal representative would not usually, and should not, exercise his or her powers of sale without consulting beneficiaries. The decision remains with the personal representative, however. The net estate of the person who has died has to be distributed among his or her beneficiaries according to the will. The will gives certain classes of beneficiaries a claim to estate assets which takes precedence over the claims of other classes of beneficiaries. The testator is free to dictate the order in which assets are to be applied for the payment of debts, but if he or she does not, then the law lays down a statutory order of application of assets for the payment of debts: Administration and Probate Act 1929 s 41C and 4th Schedule Part 1.

Duty to distribute net assets

Once provision has been made for debts, or they have been paid, the personal representative is under a duty to distribute the net assets to the beneficiaries or to trustees as the case may be. The personal representative will be personally liable for an incorrect distribution, and, if he or she pays improperly, he or she will not be indemnified unless he or she has acted strictly within the terms of the Administration and Probate Act ss 63, 64, 65, 66 and 67, the Family Provision Act s 21 (if appropriate) and the Trustee Act s 60. These sections require that the personal representative advertise her or his intention to distribute.

The personal representative may distribute property mentioned in the will as specific gifts, and even proportions of residue before payment of debts, if it is clear that creditors will not be prejudiced and the personal representative has sufficient assets in hand to cover all claims. It follows that there will often be more than one distribution to beneficiaries. However, since the personal representative will have to be careful not to distribute assets which might be needed for the payment of debts, the procedure adopted is not to distribute assets or funds until the personal representative is quite sure that:

(a) the asset(s) will not be needed for the payment of debts;

(b) the distribution is in accordance with the terms of the will or the intestacy law as the case may be;

(c) the asset(s) will not be needed to satisfy a claim for family provision; and

(d) the required notice of the personal representative's intention to distribute has been published in good time in advance.

The personal representative does this at her or his own risk, however, and if it turns out that the personal representative paid a beneficiary (or creditor) too much the personal representative will be personally liable for the resulting shortfall. So, the personal representative who intends to distribute before all debts are paid should, in addition to advertising her or his intention to distribute, require an indemnity from the prematurely paid beneficiary.

Duty to account

Any person interested in the estate can require the personal representative to provide an itemised account of the administration so far. Thus, it was held in Spellson v George(1987) that even a potential object of the exercise of a discretionary power has the right to have the trustee account for his or her management of the trust -- that is, to seek and obtain from the trustee information concerning the trustee's management of the trust fund. The exercise of that right is not dependent upon an allegation of fraud or other breach of trust.

The personal representative does not have to submit accounts to the Registrar unless required to do so, or he or she is applying for commission.

Departing from the Terms of the Will

In principle, the duty of the executor is to carry out the terms of the will, and it is generally a breach of trust to do otherwise. This is true even if the terms of the will are onerous and inconvenient. There are, however, a few situations in which the terms of the will may properly be departed from:

(a) where the condition or provision in the will is legally void or unenforceable;

(b) where the terms of the will express no more than a wish;

(c) where the court authorises a departure from the terms of the will. This may happen when the executor requires powers of administration which are not given by the will;

(d) where all the beneficiaries are of full age and capacity and consent to a distribution different from that provided for in the will. This agreement is called a "Deed of Family Arrangement". Precedents for Deeds of Family Arrangement will be found, with discussion, in the Australian Encyclopaedia of Forms and Precedents, Vol 6 under the heading "Compromises and Releases".

In all these situations professional advice should be obtained.

Commission

The Supreme Court is empowered to allow a commission or percentage to executors, administrators and trustees for their pains and trouble. Applications for commission are heard by the Registrar (on notice of motion), who will award commission at her or his discretion up to a maximum of 5 per cent (normally 2½--3 per cent is allowed) of the gross assets (that is, the value of the assets before deducting debts): see Administration and Probate Act s 70. Section 70 as read with Court Procedures Rules r 2748 makes it clear that commission will not (without a special order of court) be awarded until the applicant has had the estate accounts passed by the Registrar. Having the accounts passed can be a long and arduous process.