Help for executors / trustees of Wills

Once an executor has obtained probate of the deceased person’s will it is their duty to then administer the estate according to the terms of the will. Sometimes there can be difficulties as to how the estate is to be administered or what an expression in the will might mean in determining how administration is to proceed.

How to administer an estate

A trustee of an estate bears personal liability for their actions and they are at risk from being sued by the beneficiaries if they act in breach of trust by  making  mistakes or wrong decisions in how the estate is to be administered. They are not only personally liable for any loss a beneficiary may suffer but also for any legal costs. They cannot use the trust funds to pay these.

Help is available to Trustees under Section 63 of the Trustee Act 1925. The section provides that a Trustee may seek the opinion advice or direction of the Court as to management or administration of the trust property or the interpretation of the trust instrument, in this case the will.

As far as wills are concerned, advice is often sought where

1. There are disputes between the beneficiaries
2. There are disputes between the beneficiaries and the trustee
3. What a provision in the will may mean as far as administration or distribution is concerned
4. Whether it is appropriate that a Trustee commences or defends legal proceedings particularly where it is alleged the Trustee is in breach of trust and possibly personally liable.

The procedure is by application to the NSW Supreme Court. Generally the proceedings only involve the applicant trustee but other interested parties can be joined in if the Court orders. The applicant provides to the Court a statement setting out the full facts of the case and the advice sought or course of action to be approved. It is of the utmost importance that all relevant material is placed before the Court and great care is needed in this regard. There must be  no  misleading of the Court or concealing any material particular.  Having considered the material, the Court may confirm the advice sought, approve a particular course for the Trustee to follow, give approval for the Trustees to commence or defend legal proceedings,  or give other directions.

The importance of the application is that provided the advice of the Court is followed or implemented, the Trustee is protected from action by the beneficiaries for breach of trust and for personal liability.

In a recent decision of the NSW Supreme Court Application by Latham [2016] NSWSC 1811 the Court needed to consider amongst other matters,  a provision in the deceased’s will where a beneficiary was given a right to select up to 25 items of the deceased’s “personal possessions”. The questions to be considered were:-

• Whether the deceased’s motor vehicles were “personal possessions” such that the beneficiary might select them and

• Where possessions comprised multiple components such as books toy soldiers or a coin collection were to be considered as one item or their individual components.

Justice Stevenson ruled so far as the motor vehicles were concerned, as these were used by the deceased (a doctor) purely for personal and not commercial purposes and were included in a household  inventory made by the deceased they were personal possessions and available for selection by the beneficiary. He also ruled that the executor was entitled to consider a grouping of the books, soldiers or coins where they were in the executor’s opinion to be sets or sub sets, to consider those as a single item of personal possessions.

Whilst the Court can authorise a trustee to commence or defend legal proceedings, it is not in any way deciding the dispute underlying those proceedings. It is, having considered a number of factors, authorising the Trustee to continue those proceedings and to be protected by indemnity out of the trust property for legal costs and immunity from action by the beneficiaries for breach of trust whatever the outcome of the case. This has been confirmed by the High Court in Macedonian Orthodox Community Church St Petka Incorporated –v-His Eminence the Diocesan Bishop of the Orthodox Diocese of Australia and New Zealand [2008] HCA 42. 

Being an executor/trustee of a will can be a very demanding task. There are situations where personal liability can be a real prospect. The power of the Court to provide judicial advice should be borne in mind enabling the executor/trustee to complete the administration of the estate without exposing themselves to claims by disaffected beneficiaries.

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