Duties of an Administrator
Section 44 of the Probate and Administration Act (NSW) provides that upon Grant of Letters of Administration all assets of the deceased (both real estate and personal property) vest in the Administrator (also know as the Legal Personal Representative). In this role as Administrator you will be charged with the important task of administering the assets and liabilities of the estate and the important consideration of such are set out below.
While the Grant of Letters of Administration in NSW occurs well after the deceased has been buried, it is not uncommon that you will be called upon to arrange the funeral of the deceased (but not in your official capacity).
It is the duty of the executor to bury or cremate the deceased as soon as is practicable following their death. Where there is no executor, this duty and the right to bury the deceased passes to the person with the highest right to administration.
The person with the highest right to administration in NSW is the Spouse of the deceased, followed by the children, followed by a fit and competent person and then a creditor. If there is no one who fits this description then the owner of the house where the deceased resided will be granted the right to bury.
The reasonable costs and expenses of the funeral are to be paid from the estate monies.
Once the funeral has taken place and Letters of Administration obtained, the Administrator has the following duties:
1. Call in the Estate.
As noted above, the Probate and Administration Act provides that upon the Grant of Letters of Administration all assets of the deceased (both real estate and personal property) vest in the Administrator.
While section 44 provides the Administrator with the legal authority to deal with those assets, in practice the Administrator will need to provide a copy of Letters of Administration, Death Certificate and various other forms as required by the asset holder in order to register the transfer of the asset from the name of the deceased to the name of the Administrator (for instance, for land and real estate the NSW Department of Lands require a Transmission Document to be lodged. Most financial institutions will also require account closure forms to be executed and Share Registries require Transfer of Share paperwork to be provided).
Along with calling in any assets held in the name of the deceased, it is also the responsibility of the Administrator to prosecute any claims the deceased may have against third parties, provided that the entitlement to pursue such did not cease upon the testator’s (the deceased's) death (for instance the deceased may have loaned money to individuals which out to be collected by the Administrator in accordance with the terms of the loan agreement. Probate Sydney are able to advise you on the types of claims which survive death (both against and in favour of the estate) and the claims which do not).
Joint assets and Superannuation.
Assets held by the deceased jointly with another person do not form part of the estate and cannot be called in by the executor as at law the deceased ceases to hold an interest in those assets as at the date of their death, with the surviving joint tenant taking all. Despite joint assets not forming part of the estate, the Administrator should declare any assets held jointly by the deceased as at the date of death in a separate schedule at the time of lodging the application for Letters of Administration. This schedule does not affect the calculation of the Supreme Court of NSW filing fee nor the professional costs charged by Probate Sydney to obtain Letters of Administration
Superannuation is another species of property that generally does not form part of the estate as it is instead a contract between the deceased and superannuation trustee to pay a particular beneficiary, or class of beneficiaries upon the happening of a certain event, namely death. The superannuation benefit may form part of the estate where the superannuation trust deed provides for such, or where the superannuation trustee has paid the benefit to the estate in the exercise of their discretion.
2. Preserve the Estate from Waste.
An Administrator must ensure that the assets of the estate are not wasted due to any action or inaction of the Administrator. By failing to act promptly in the administration of the estate, or by failing to take proper advice, the Administrator may be held personally liable by a beneficiary or creditor if the action or inaction has lead to the reduction of the estate assets.
It is for this reason that the Administrator must ensure that proper accounts (receipts) are kept and that any assets sold or invested are done so in accordance with the law of intestacy and in accordance with suitable advice (for instance an Administrator selling real estate must ensure that the estate is not wasted by selling the property in a manner which may lead to a sale price that cannot be regarded as fair market value (such as in a fire sale without a proper marketing campaign).
Running a business.
While generally an Administrator can ensure that the estate is not wasted by acting promptly and by seeking professional advice (such as from Probate Sydney to obtain Letters of Administration, an accountant to prepare and lodge tax returns and from a real estate agent when selling land), difficulties can arise where the deceased was a business owner.
Often a business will be one of the largest assets of the estate. If the deceased played a major part in the success and running of the business, death will invariably lead to a negative impact on the day to day activities of that business and ultimately the profitability and value of the business itself.
Unless an order is obtained from the Court, the Administrator has no power to carry on the business (as opposed to closing the business to realise the assets) and any act of the Administrator, such as signing contracts, purchasing goods etc, will be done without authority leaving the Administrator exposed to being held personally liable and unable to be indemnified from the assets of the estate.
To avoid this situation an Administrator should seek an order of the Court to allow for the carrying on of the business and such order will protect the Administrator from being held personally liable. Probate Sydney is able to obtain orders from the Court of this nature along with quick limited Grants of Letters of Administration to ensure assets are not wasted.
3. Pay Debts.
Once the estate assets have been called in, it is the duty of the Administrator to pay the debts of the estate. The Administrator will be aware of these debts from the enquiries and searches conducted prior to filing the application for Letters of Administration and also from the Notice of Intended Application published in the newspaper by Probate Sydney.
The manner and order of the payment of the debts will depend on whether the estate is solvent (where there are enough assets to pay all liabilities) or insolvent (where there are insufficient assets to pay liabilities).
Regardless of whether the estate is solvent or insolvent the funeral, testamentary and administration expenses of the estate (such as the fees charged by Probate Sydney to obtain Letters of Administration) are paid in priority of any other debts.
It is the Administrator’s role to ensure that the debts of the estate are paid using the correct assets of the estate. In most instances Letters of Administration would have been applied for because there is no Will and as such the type of asset used to pay debts matters not apart from the deceased’s personal effects and residence which in some circumstances must be paid to the deceased’s Spouse (see who is entitled to the assets of the deceased if there is no Will).
Probate Sydney should be consulted if you are unsure of which assets should be used to pay the debts of the estate.
4. Distribute Estate as directed by the Will or by Law.
Once the estate assets have been called in and debts paid the final duty of the Administrator is to distribute the estate as directed by the Will, or where the Will does not dispose of assets, in accordance with the rules of intestacy. More information on distribution where there is no Will can be found by clicking here.
To get started with the application for Letters of Administration simply complete your details by clicking here, or contact us on 1300 4 PROBATE (1300 477 622).
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