Beneficiaries are entitled to have the estate administered prudently and distributed in accordance with the terms of the will and within a reasonable time. Where an executor breaches his or her responsibilities, a legal claim can be brought to hold them to account for any loss caused.
On this page
- Executor’s duties under the Trusts Act 2019
- Failure to comply with will
- Not applying for probate
- Prolonged estate distribution
- Neglecting estate asset protection
- Self-benefit through estate property
- Inadequate record keeping
- Inappropriate charges for executor’s time
- Improper reimbursement claims
- Unequal treatment of beneficiaries
- Family Protection Act claimant grievances
Executor’s duties under the Trusts Act 2019
The duties on trustees under the Trusts Act 2019 also apply to executors by section 4B of the Administration Act 1969.
Under the Trusts Act, executors are subject to two types of duties: mandatory duties and default duties.
Mandatory duties apply irrespective of what the will says. They include:
- knowing the terms of the will;
- acting in accordance with these terms;
- acting honestly and in good faith;
- acting for the benefit of the beneficiaries; and
- exercising powers for a proper purpose.
Default duties apply unless the will says otherwise. They include:
- exercising reasonable care and skill, taking into account any special knowledge or experience;
- when investing estate property, exercising the care and skill that a prudent person of business would exercise;
- not exercising a power for the executor’s own benefit;
- considering actively and regularly whether to exercise powers;
- not binding or committing future exercises of discretion;
- avoiding conflicts between the executor’s interests and the interests of the beneficiaries;
- acting impartially towards beneficiaries;
- not making a profit from the executorship;
- not taking any reward for acting as an executor; and
- acting unanimously with any other executors.
Failure to comply with will
Executors are required to comply with and give effect to the terms of the will. If an executor does not comply with the terms of the will, the executor can be held personally liable by a beneficiary who has been disadvantaged. This might occur, for example, if the executor were to give estate property to someone other than the beneficiary named in the will, or if the executor were to divide property between beneficiaries in different proportions than is required by the terms of the will.
Not applying for probate
Other than in small estates, the first step in the administration of an estate (where there is a will) is usually for the executor named in the will to apply to the High Court for probate. It is ordinarily expected that the named executor will apply for probate within 3 months from the death of the will-maker.
If the will-maker passed away more than 3 months ago and no application for probate has been filed, a co-executor or a beneficiary or creditor of the estate can apply to the Court under sections 19 and 53 of the Administration Act 1969 for orders either appointing them as the (sole) executor instead or directing the named executor to apply for probate.
The Public Trust can also apply to be appointed as executor pursuant to section 80 of the Public Trust Act 2001 where the person named in the will has not applied for probate within 3 months from the death of the deceased.
Prolonged estate distribution
Executors are required to administer an estate in a timely manner. It is usually expected that an executor will finalise the administration of the estate and distribute the estate’s assets within 12 months from the date that probate is granted. This period is sometimes referred to as the “executor’s year”.
Finalising the administration of the estate within this period may not be possible if the estate is large or complex. Furthermore, if a claim is made against an estate, the executor is usually not allowed to distribute the estate’s assets until after the claim has been resolved, which will typically take longer than 12 months.
The Court can remove an executor who is not acting diligently in realising and distributing the assets of the estate. Where a failure by an executor to realise and distribute the estate in a timely manner has caused loss to the estate or the beneficiaries, the executor may be personally liable for the loss caused.
Neglecting asset protection
The executor is responsible for safeguarding the assets of the estate. This includes maintaining and insuring any real estate, protecting any investments, and collecting and preserving any income generated by the estate’s assets.
Self-benefit through estate property
An executor is not allowed to use their position to benefit personally from estate property. This means that an executor should not use estate assets for their own personal gain or profit, such as by using estate property for personal use or by selling estate assets to themselves at less than market value.
An executor should also not enter into any transaction with the estate that would put them in a position where their own interests would conflict with that of the beneficiaries. For example, an executor should not enter into any transaction that would benefit them financially, such as investing the estate funds in a venture in which they have a personal interest.
If an executor breaches these duties and benefits from estate property, they may be liable to account for any gain or profit made, and may also be removed as executor by the court.
Inadequate record keeping
An executor is required to keep accurate and detailed records of all transactions relating to the estate, including an inventory of assets and liabilities, receipts for any expenses they incur, and records of the distributions made to beneficiaries. If an executor fails to keep proper records, they may be held liable for any financial losses or damages suffered by the estate or the beneficiaries as a result.
Inappropriate charges for executor’s time
An executor is only allowed to charge for their time if they are authorised to do so by the terms of the will or if the beneficiaries or the Court permits them to. Most professionally prepared wills in New Zealand usually only allow an executor to charge for their time if they are a solicitor or other professional.
If an executor is not expressly permitted to charge for their time by the terms of the will, they can only do so with the agreement of all residuary beneficiaries or with the approval of the court.
Even if an executor is entitled to charge for their time, their charges must be reasonable.
Read more about an executor’s ability to charge for their time here.
Improper reimbursement claims
Executors are only entitled to be reimbursed by the estate for expenses that are reasonably incurred. Read more about what expenses an executor can properly charge to an estate here.
Unequal treatment of beneficiaries
An executor has a legal duty to act impartially and in the best interests of all beneficiaries when managing the estate. They should not treat beneficiaries differently or make decisions that would benefit one beneficiary over another.
Failing to recover debts
An executor has a duty to take reasonable steps to recover all debts owed to the estate. Not attempting to recover a debt is a breach of this duty unless the executor reasonably believes that pursuing the debt would be uneconomical or futile.
The executor should seek the consent of the beneficiaries before deciding not to pursue the debt. Failure to recover debts without a valid reason can lead to the executor being held personally liable for any financial loss to the estate.
Family Protection Act claimant grievances
Executors owe duties to eligible claimants under the Family Protection Act. Read about making a claim under the Family Protection Act here.
Distributing estate earlier than 6 months from date of probate
The executors must hold onto the estate’s assets for 6 months from the date of probate to allow time for any person wanting to make a claim against the estate – including under the Family Protection Act – to give notice that they intend to do so. If an executor distributes any of the estate’s assets before then, they may be personally liable to pay the amount of the claim.
There is, however, an exception to this rule. Under section 47(2) of the Administration Act, an executor can usually make a distribution to a person who was totally or partially dependent on the deceased immediately before their death, so long as the distribution is for the purpose of providing for that person’s maintenance, support, or education.
In AB v RT [2015] NZHC 3174, the executors of an estate were held personally liable for $335,000 after distributing the majority of the estate just nine days before the expiry of the 6-month period. The Court held that the executors ought to have known that the deceased’s daughter, who had been left just $25,000 out of an estate totalling $2.4 million, would make a claim under the Family Protection Act once she had been made aware of her mother’s death and the limited provision that had been made for her.
Distributing estate after receiving notice of an intended claim
If, within 6 months from the date of probate, the executors receive formal notice that a person intends to make a claim against the estate under the Family Protection Act, they must hold off distributing the estate for a further period of 3 months from the date of the notice. In some cases, the executor may be held personally liable if they distribute the estate after receiving notice of an intended claim.
Breach of obligations to potential claimants
Executors owe obligations to potential claimants under the Family Protection Act. An executor must not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate, for example by misrepresenting the size of the estate.
There is an open question in New Zealand as to whether an executor who is aware of a person who would be eligible to make a claim under the Family Protection Act has a duty to inform that person of the fact of the death or of the right to make a claim against the estate. For example, it is sometimes the case during the administration of an estate that an executor will be contacted by a child of the deceased who has been left out of the will but who has not indicated any intention to claim against the estate. It is uncertain from a legal perspective whether the executor has any duties towards that child prior to distributing the estate, and if so, what those duties are.
Court removal of executor
Read about when the court will remove an executor here.