Administrator vs Executor
An executor is a person nominated by a will to administer the estate of the deceased, while an administrator is a person appointed by the Court generally when the deceased person died intestate (ie without leaving a Will). Both are commonly known as a Legal Personal Representative (LPR).
When a person dies, the LPR's role is to carry out the terms of the Will or the intestacy scheme (if there is a no will) and to administer the estate of the deceased.
What are the duties of an LPR?
The duties of an LPR generally include the following:
Calling in the assets
The LPR has a duty to call in all assets of the deceased. They have the same remedies available to them as the deceased to recover monies due to the estate. The LPR is required to demand payment and if required, initiate legal proceedings to recover the debt.
A Will may assign an executor a duty to sell, call in and convert the whole estate as soon as is reasonably practicable.
Power to Postpone
Wills may also incorporate a power to postpone calling in of the assets.
The power to postpone is a fiduciary duty that needs to be exercised with due care and diligence and solely in the interest of the beneficiaries. It also involves the exercise of an active discretion. For example, this may include deciding whether to postpone the sale of real estate until Spring time so as to achieve a higher sale price.
Ascertain and discharge the liabilities
LPRs have a duty to ascertain the liabilities existing as at the date of death and any debts incurred during the administration process. This can be achieved by making reasonable enquiries to identify any liabilities.
The LPR does not personally take on the liabilities of the estate, however, they can be personally exposed in certain circumstances. This can include distributing an estate to the beneficiaries prior to all debts of the estate being paid or prior to any successful family provision claims being brought, resulting in the LPR being required to personally fund the debts or claims. This is why it is important to obtain appropriate advice when administering an estate.
Both state-based land tax, including Stamp Duty and Land Tax as well as federal tax such as Capital Gains Tax may need to be considered in making decisions about transferring and selling assets.
There are various exemptions, concessions and timelines that need to be factored in when planning the liquidation and administration of an estate.
Keep proper accounts and records
The LPR has a duty to keep proper accounts and records of the assets and liabilities paid. This is so as to account to the beneficiaries and to be able to lodge income tax returns for the estate as required.
Avoid conflict of interest
As a fiduciary, the LPR owes a duty to the beneficiaries to act in their best interests. Additionally, the LPR must avoid any situation that may lead to a conflict between the interest of the beneficiaries and their own interest.
Duty to distribute remaining assets
Distribution may be made when all the assets are called in and all the debts are paid. The LPR may then distribute the remaining assets of the estate to the beneficiaries subject to any administration expenses.
LPRs will need to factor in the “executor’s year” when specific bequests are made to avoid the payment of legacy interest.
Power of Sale
Power of sale is a critical aspect of the ability to administer an estate. The LPR must exercise reasonable care in selling estate assets and obtaining the best possible terms for the estate. If a Will does not expressly include a power of sale, the LPR may still have an implied power of sale for the purpose of administration.
As beneficiaries may question a given sale price for an estate asset, an LPR should conduct the sale in the most transparent way possible to avoid any allegations that they did not act in the best interests of the estate.
What you need to do as a LPR
The administration of a deceased estate can be a minefield of navigating between tax, multiple beneficiaries, advisors and emotions.
Therefore, it is crucial to seek specialist advice about ensuring that you are meeting your duties and obligations as an LPR to avoid a claim being made against you by a beneficiary.
We are here to help
As an executor or administrator you carry an important responsibility to manage the estate with due care. Ensure that you properly complete your duties by seeking expert legal advice. Contact Ilana Kacev, Principal or one of the other members of our expert Wills and Estates Planning Team.
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