In this information sheet we cover the potential liability of executors in distributing a deceased estate, and how to ensure they fulfill their legal obligations.
Who is an executor?
An Executor is a person appointed under a person’s Will to be the personal legal representative of the person’s estate after they have died, that is the person with the legal authority to administer the deceased person’s estate in accordance with the Will.
What is distribution?
A key duty of an executor is to administer/distribute the deceased’s estate pursuant to their last Will after approval by the Court ( known as ‘Probate’).
Administering an estate may involve the calling in of funds held with a bank, selling or transferring property to the beneficiaries under the Will, which can include monies on both real property (property, land etc) and personal property (money, household items, cars etc), [paying the deceased person’s liabilities and distributing the estate pursuant to the Will.
What is the process for distribution?
Pursuant to section 92(1) of the Probate and Administration 1898 (NSW) the executor of an estate may distribute an estate to beneficiaries if four criteria are met:
- It has been at least 6 months since the deceased’s date of death;
- The executor has given notice of their intention to distribute the estate via the NSW online registry;
- The notice states that the estate will be distributed after 30 days; and
- The 30 days has expired.
If the above have been complied with, the executor may make the relevant transfers of the property to beneficiaries and thereby discharge their duties under the will.
Can executors be held liable after distribution?
A concern for some executors is that they may be held personally liable if a Will is later challenged and the monies have already been distributed to the beneficiary or beneficiaries.
Under section 58 of the Succession Act 2006 (NSW) an application for family provision (challenging a Will) can be made up to 12 months after the deceased’s date of death.
Section 92(2) of the Probate and Administration 1898 (NSW) and section 93 of the Succession Act 2006 (NSW) provide that an executor cannot be held personally liable after the distribution of the estate if they have lodge the relevant notice advertising their intention to distribute and prior to the expiration of the 30 day period had received no notification of an intention to commence a claim for family provision.
However, if the executor did have notice of a claim prior to distribution, or had otherwise not complied with their other obligations (including the lodgement of the notice), the Court may find an executor personally liable for any monies distributed that cannot be recovered and be ordered to pay the amount of the claim to the estate.
In the case of Ernst v Mowbray [2004] NSWSC 1140 the Court found that if an application to challenge the will was successful, the executors would have personally had to restore the money they had distributed with interest to satisfy the claim as they distributed the estate without giving proper notice. However, as the ultimate claim was not successful no such order was made.
Further, in the cases of D’Albora v D’Albora [1999] NSWSC 468 and Carstrom v Boesen [2004] NSWSC 1109 the Court ordered that the monies distributed despite notice of a claim were to be designated as ‘notional estate’ which enable the claimant to claw back the assets distributed and make a claim on them.
The Court in the above cases urged all executors to refrain from distributing the estate until after the 12 months for an application for family provision has expired if they hold a reasonable belief that an application will be made for family provision orders.
It is therefore prudent to ensure that when acting as an executor, you receive advice from an experienced solicitor to protect both yourself, and the estate, from being liable for claims for family provision.
Contact the experience team at The Law Office of Conrad Curry can help you navigate your role as an executor and ensure you comply with your legal obligations.
