Executor’s duties and liabilities – Debts of the deceased

Date: Mar 26, 2012
Document Type: Article

Depending the size of an estate and the nature of the will, being appointed and executor can be an onerous task. For example if the estate is large and includes a variety of assets an executor may spend many hours arranging the sale of those assets to realise their value before distribution. If the will is contentious the executor may be named as a defendant in proceedings brought by beneficiaries or claimants under the will.

One of the key duties of an executor is to discharge the just debts of the deceased. Again depending on the deceased’s financial arrangements this aspect of estate administration can be complex. The executor is not required to repay these debts out of their own pocket, rather the debts are paid from the assets of the estate. In some cases an executor will need to realise the estate’s assets before debts can be paid.

As well as discharging any just debts of the deceased the executor may have a duty to complete a tax return for the estate or pay tax on behalf of beneficiaries. Again such taxation is paid for from the assets of the estate. If the executor incurs any tax liability in their role as executor this is distinctly different from their own personal tax liability.

Dealing with the debts and tax liability of the estate is crucial as no distributions can be made to beneficiaries until those debts and taxes are paid.

Before an executor makes a distribution of estate monies, under s92 of the Probate and Administration Act 1898 (New South Wales), they must publish a notice of their intention to do so. The notice must:

  • be published in a publication circulating in the area in which the testator resided at the time of their death
  • provide the full name, occupation, and area of residence and date of death of the deceased
  • include the date on which probate or letters of administration was granted
  • provide a date on which the estate will be distributed which is no less than 30 days from the date of publication

Additionally the executor cannot make a distribution of the estate if less than 6 months has elapsed since the deceased’s death unless the executor is certain that following such interim distribution there will be sufficient funds to cover and debts or tax liabilities incurred by the estate. If the executor fails to give adequate notice of a distribution and fails to pay a debt the executor may become personally liable to pay this debt.  However, if the executor has given adequate notice as outlined above he or she will be free from liability for such claims. Similarly if the executor miscalculates the funds left in the estate so that debts or taxes cannot be covered by estate funds the executor may also be personally liable to pay such debts or taxes.

Acting as an executor can be an onerous and potentially dangerous task if you do not know your duties. If you need advice in relation to the role of executor or drafting your will call Dominic Wilson on 02 8268 4000.

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