Finalisation of the Estate: Preparation of Estate Accounts
Responsibility Of Handling Estate Accounts
As an executor of an estate, there is a responsibility to handle often very large sums of money and to ensure all portions of the whole are paid as required under a Will or the applicable legislation. Given the various interests involved, the executor has an important obligation to keep accounts.
Keeping Accounts
“Keeping accounts” means showing all money that has been collected and paid on the estate’s behalf. This considers the various aspects of the executor’s role including but not limited to:
- Paying funeral expenses;
- Paying the deceased’s debts;
- Collecting the deceased’s assets;
- Protecting the estate;
- Distributing the estate; and
- Receiving a commission (depending on circumstances).
The executor has a duty to keep an accurate record of how the estate has been administered. This means keeping a documentary record of:
- Receipts;
- Invoices;
- Expenses; and
- Assets that have been transferred to the beneficiaries.
It is often recommended that an executor set up a new bank account for the purposes of administering the estate and keeping a thorough record.
In some cases, accounts must be filed, verified or “passed” by the Court.
Filing Accounts
Filing accounts in the Court is a way of ensuring the accounts are available to all interested parties.
By publishing a Notice of Filing Accounts, this acts as an alert to any beneficiaries and creditors that accounts are to be filed with the Court.
Thereafter, beneficiaries and creditors may then choose to inspect the accounts so filed.
This is a stage before “passing” accounts, covered below. If any interested person or entity objects in any way to the accounts being passed in the format provided, or to the claim for a commission by the executor, they can be added a defendant in proceedings.
- Paying funeral expenses;
- Paying the deceased’s debts;
- Collecting the deceased’s assets;
- Protecting the estate;
- Distributing the estate; and
- Receiving a commission (depending on circumstances).
Passing accounts
Passing of probate accounts is where the Registrar checks over the accounts and ensures that:
- The accounts correspond correctly with how the executor has managed the estate; and
- The accounts are as per the terms of the Will and the provisions of the relevant legal provisions.
Accounts will typically go through this process in circumstances such as the following:
- There has been a request by a beneficiary for accounts to be passed;
- The executor is a creditor of the estate;
- The executor is the guardian of a minor who is a beneficiary;
- A significant portion of the estate is to be distributed to charities or public bodies;
- It is expected that there will be a dispute as to how the estate has been managed;
- The executor will be applying for a commission; or
- The Court decides that it is appropriate in a particular case.
Executor’s Commission
Understandably, beneficiaries and the Court have a legitimate interest in verifying exactly how much an executor has paid themselves by way of commission.
An executor is usually entitled to apply for a commission. This is done in compensation of the time and effort – or “pains and trouble” as it is often referred to by the Court – it took to manage the affairs of the estate, which can be lengthy and involved.
Often if the executor was known to the Will maker or is already receiving a distribution from the Will, they will not receive a commission, although they may receive a commission where, for instance:
- The Will expressly states that the executor is to receive a commission;
- A gift to the executor is included in the Will in lieu of an application by the executor for a commission;
- All beneficiaries agree that the executor should receive a commission, and agree on an amount;
- The Court determines that the executor is entitled to a commission.
Given the delicacy of an executor’s role of overseeing the distribution of funds to others, and also making payment to themselves in the event of a commission being deemed appropriate, it is especially important in this instance for an executor to keep extremely fastidious records of what they have in fact done in their role to ensure the commission, and commission amount, are justified.
Time For Filing Accounts
Accounts are usually filed within twelve (12) months of probate being granted.
If the process of administering the estate takes more than twelve (12) months, accounts would then usually be filed at 12-month intervals as interim accounts.
An order for the filing of accounts can be made at the time probate is granted, although a Court can make an order extending or dispensing with time required to file further accounts.
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