Estate Administration: Executor vs Beneficiary and the Court as Umpire

Often the process of administering a deceased estate can be an ongoing tussle between the executor and the beneficiaries.  Applicable legislation and case law establishes rights of beneficiaries, as well as a corresponding duty of executors to administer the estate correctly.

The role of the executor is fiduciary in nature and akin to that of a trustee.  If a solvent estate is efficiently administered the executor’s role will eventually become that of a trustee. 

Immediately upon the death of the deceased the clock begins ticking for an executor to take steps to attend to their duties.  The executor has a six week window from the date of death to apply for Probate, failing which any interested party under the will, creditor or State Trustees may apply to the court for orders that the right of administration be taken from the executor and granted to someone else.[1]  This reflects the high standard required of executors and the diligence that beneficiaries might expect in the administration of the estate.

This is a central concern of both the Administration and Probate Act 1958 (Vic) and the Trustee Act 1958 (Vic) which to a high degree govern the performance of executors and trustees, including the keeping of accounts[2] and the investment of estate funds with a requisite level of care, diligence and skill.[3]  There are also other obligations of which executors must be cognisant including the prohibition against self-dealing[4], the duty to keep beneficiaries informed and the duty to avoid conflicts of interest.  In respect of the latter, see the Queensland case of MacIntosh[5] where an executor mother took steps to have a superannuation death benefit transferred to her personally, rather than having the benefit paid to the estate.  The court found she had put her own interests ahead of the interests of the estate (and of other estate beneficiaries) and had therefore breached her obligations to the estate as executor; a neat example of the intersecting aspects of rights and duties in estate matters.

Similarly, the legislative right of a beneficiary to inspect a will[6] creates a corresponding duty on the executor to allow inspection to take place.  (Of course, the reality is that once probate is granted that any person can access a copy of the will as a public document.) These examples show how executor’s duties and rights of beneficiaries are reciprocal.

But there are limits. Whilst in administration phase, the right of a beneficiary is essentially a chose in action exercisable against the executor to administer the estate correctly.  It is not a property right as such and cannot form the basis of a claim to an interest in the estate until the executorial role changes to that of trustee.[7]  A beneficiary is entitled at their own cost to request a copy of estate accounts[8] and to inspect documents demonstrating the way in which estate assets are administered[9].  The right to access information however is not extended to much of the correspondence between an executor and third parties.  A beneficiary’s right to information in relation to reasons for an executor or trustee’s decisions is also particularly limited.[10]

In the case of a wrongful distribution of assets, a beneficiary’s claim may follow assets into the hands of whom they have been wrongfully distributed[11], however re Diplock[12] is authority for proposition that the claimant must exhaust any primary remedy against the executor before tracing money into the hands of those to whom it had been wrongly paid. 

Beneficiaries’ rights to bring actions against recalcitrant executors are not therefore unlimited.

These is more scope however, to address difficulties which potentially can (and often do) arise between beneficiaries and executors. using the civil jurisdiction of the Supreme Court[13] which establishes a framework for an executor or beneficiary to apply to the Court to seek a range of orders or remedies depending on the nature of the issue.

In particular, Rule 54 of the Supreme Court (General Civil Procedure Rules) 2015 (Vic) operates to permit a broad range of applications covering:

  • issues relating to the administration of an estate,
  • composition of beneficiaries,
  • genuineness of debt claims against the estate,
  • sale or purchases of estate assets[14], and
  • any other transactions or questions relating to the estate.

By seeking the Court’s early advice or intervention on these matters a party can protect themselves in terms of costs and a concerned executor may even ask the Court for a right of indemnity in respect of decisions to be made.  For any beneficiary questioning an executor’s methods or decisions, or any executor dealing with litigious beneficiaries, this is an attractive way of resolving estate issues.

[1] Section 15 of the Administration and Probate Act 1958 (Vic)

[2] Section 28 of the Administration and Probate Act 1958 (Vic)

[3] Section 6(1)(b) of the Trustee Act 1958 (Vic)

[4] Re Chomley [2014] VSC 220

[5] McIntosh v McIntosh [2014] QSC 99

[6] Section 50 of the Wills Act 1997 (Vic)

[7] Commissioner of Stamp Duties (QLD) v Livingstone [1965] AC 694; Official Receiver v Schultz (1990) 170 CLR 306

[8] Re Estate of Ford [2012] NSWSC 1165)

[9] Hartigan Nominees v Ridge (1992) 29 NSWLR 405

[10] See re Londonderry settlement 1968). 

[11] Section 43 of the Administration and Probate Act 1958 (Vic)

[12] [1948] 1 CH 465

[13] Supreme Court (General Civil Procedure Rules) 2015 (Vic)

[14] See for example Morris v Smoel & Ors [2013]VSCA 11

 

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