The administration of estates

Contributed by Maree van der Kwast and current to 1 September 2005

INTRODUCTION

Following the death of a person two distinct phases occur in winding up of that person’s affairs. Firstly, the necessary documents must be prepared for the Grant of Probate or Letters of Administration. Secondly, once the grant has been obtained the property of the deceased must be collected and distributed in accordance with the terms of the will or the statutory order of intestacy.

EXECUTORS

Several problems may arise with respect to executors. Some of these are set out below.

No executor appointed

The court may, upon application, appoint an administrator of the estate of the deceased. This administrator will then carry out the wishes of the deceased as expressed in the provisions of the will (s.36 Administration Act). Executor does not wish to act A person appointed as executor is not compelled to accept that responsibility. If a person refuses to act as executor, a substitute executor named in the will shall perform all duties. If there is no other executor named in the will, then upon application an administrator may be appointed by the court as above. If a person refuses to act as executor then all their rights as an executor cease and administration of the estate takes place as if the appointment had never been made (s.32 Administration Act).

Executor dies

If there is no surviving executor, the executor of the deceased executor’s will becomes the executor for the deceased will maker. This can lead to unsatisfactory situations and it is best to appoint more than one executor, or consider appointing the Public Trustee, a private trust company or a firm of solicitors.

Executor is under 18 years of age

Where the sole executor is under 18 years of age the court will make a grant to his or her guardian or such other person as it may approve until the executor turns 18, when probate may be granted.

DUTIES OF EXECUTORS

The basic duty of an executor is to collect the assets of the deceased, pay the debts and distribute the estate to the beneficiaries under the will. The way this is done depends upon the terms of the will and the nature of the estate. If specific items were left to beneficiaries they would be given them. In the case of items such as personal belongings, this may be done soon after death. If the deceased left gifts of money the deceased’s assets may have to be sold in order to obtain money for distribution of those gifts.

The executor is responsible for the disposal of the deceased’s body according to their wishes (cremation or burial).It is important to bear in mind that although the executor usually respects the wishes of the deceased, they are not bound to do so. The only exception is that the will maker can prevent their body being cremated if they leave written instructions to that effect.

The duty to distribute assets must be performed with diligence by the executor. This includes within a reasonable timeframe. The general rule is that a year is a reasonable time. If the executor does not act diligently the beneficiaries may complain to the Supreme Court. This is the only right of a beneficiary before distribution. A beneficiary does not own the property until the executor distributes the estate of the deceased.

PAYMENT OF EXECUTORS

The deceased may specifically state in the will the amount that the executor, in the case of a friend or relative, shall be paid for his or her work in administering the estate. The Public Trustee or private trustee companies charge a percentage of the estate for their fee. Lawyers also have a basic fee although it is not calculated on a percentage basis.

TRUSTEES

In many cases a person is appointed as both as an executor and as a trustee. There is a difference in the function between the two. The executor’s role ends when the assets of the estate have been collected and distributed to the beneficiaries. Where the terms of the will create continuing duties such as the support and maintenance of young children, or the administration of a sum of money or a property for someone’s benefit, these duties are performed by a trustee. The duties and responsibilities of a trustee are set out in the Trustees Act 1962 (WA) although they may be varied or added to by the terms of the will. Generally trustees have a duty to act honestly, in good faith and with great care when carrying out particular duties of the trust conferred upon them by a will.

A beneficiary who is dissatisfied with the performance of a trustee may complain to the Supreme Court.

THE TIME FOR PAYING OF GIFTS

No beneficiary has a right to the goods of the deceased or gift of money until the executor distributes the estate. This can cause hardship if the principal beneficiary is the spouse with no source of income. Some possible means of avoiding the harshness of this situation are:

• a widow should immediately apply for a Social Security benefit;
• a widow or widower may be able to obtain a loan, using the interest in the estate as security; or
• the situation could be avoided by the husband and the wife maintaining a joint bank account.

THE TIME FOR PAYING OF DEBTS

Creditors of an estate must wait until the assets have been collected before they may receive payment.

The estate of the deceased is liable for reasonable funeral expenses and these are to be paid before any creditors. Surviving members of the family who authorised the funeral would be responsible for those costs if the deceased left insufficient assets for payment of funeral expenses.

SURVIVAL OF LEGAL ACTIONS OF DECEASED

Legal actions by and against the deceased (with some exceptions) may continue after the death of the deceased.

BENEFICIARY DYING BEFORE THE WILL MAKER

If a beneficiary dies before the will maker dies, the will maker dies intestate as to the interest of that beneficiary, unless that possibility has been allowed for in the will. This is an example of partial intestacy and the statutory rules about intestacy apply. The only exception to this rule concerns a child of the deceased who is named as a beneficiary, in which case the children of the beneficiary will receive that share (s.27 Wills Act), unless there is any contrary intention in the will.