Executors have a number of responsibilities as a legal personal representative (“LPR”) when acting in the administration of the estate. They can generally be categorised as follows:
- take steps to collect and realise the deceased’s assets;
- pay any liabilities owing by the deceased at death, or, liabilities incurred in the due administration of the estate; and
- attend to the distribution of the estate in accordance with the will (or under the relevant legislation/rules in the absence of a will, or by way of a Court order/agreement).
It is imperative to ensure (in the case of solvent estates) that the LPR attend to the payment of liabilities. Generally, the liabilities can be categorised into:
- liabilities inherited from the deceased; and
- liabilities incurred in the administration of the estate.
A LPR has a responsibility to discharge the debts of the deceased from the assets of the estate; including the tax liabilities. Where the assets of the estate are insufficient to discharge the liabilities then the estate will be administered in bankruptcy. The Succession Act 1981 (Qld) provides for the priority of the payment of expenses.
A LPR is personally responsible for liabilities incurred during the administration of the estate, including contractual liabilities, those arising from carrying on a business of the deceased, in tort and for the deceased’s actions as a trustee.
Also, it is important to ensure that all liabilities are adequately accounted for as given there is a personal liability, this will extend beyond the distribution of the estate. In particular, in certain circumstances, the ATO will hold the LPR liable if there are outstanding taxation liabilities. Therefore, it is an imperative to ensure that taxation matters are attended to, including those relating to:
- the deceased personally, such as:
- income tax returns;
- any entity returns in which the deceased had an interest;
- superannuation obligations;
- the estate, such as;
- taxation returns (including accounting for any income of the estate such as employment or long service leave entitlements);
- any transfer duty or capital gains tax liabilities stemming from the disposal or transfer of assets; and
- dealing with any entity interests, such as partnerships and the implications of death on a partnership and corresponding taxation implications (eg, income assessable to the estate).
Accordingly, to ensure that LPRs discharge their duties, it is recommended that they seek advice in the event of uncertainty about any aspect of the administration of the estate.