What are the duties of an administrator of an estate?

The starting point before considering the duties of an administrator of an estate, is the general principle expressed in Re Tankard; Tankard v Midland Bank Executor and Trustee Co Ltd [1942] Ch 69 – “There is a general principle, falling short of a rule of law, that the executor should complete the administration within one year from the date of death of the testator. This is sometimes referred to as “the executors’ year.”

The general principle shows the importance of an administrator to act expeditiously.

An administrator has the following duties:
− ‘get in’ the estate; that is to collect and consolidate the estate’s assets, including to liquidate them where appropriate;
− to keep estate accounts;
− to maximise the estate’s assets, by leasing real property for example;
− to pay the deceased’s debts and the estate’s liabilities with due diligence;
− to manage and, if possible, compromise any claims against the estate;
− to file, verify and pass estate accounts if required in accordance with s 85;
− to distribute the estate in accordance with ss 92-94 to the persons entitled, pursuant to the will or the rules of intestacy.

An administrator has a duty to pay the deceased’s debts and the estate’s liabilities with due diligence.

There is a various authority for this proposition –McGrath v Troy (as administratrix of the estate of the late Wade) [2010] NSWSC 1470, Re Owens; Jones v Owens (1882) 47 LT 61 and s 49(2) of the Trustee Act.

McGrath considered a claim against the defendant for wrongly applying assets of the estate in payment of the claimed debt. The relevant sections are below:

[54] Under s 49(2) of the Trustee Act an executor or administrator may pay, allow or compromise any debt or claim on any evidence the administrator thinks sufficient. In making that judgment, an executor or administrator must exercise his or her duties of honesty and reasonable care.

[55] An administrator is not guilty of wilful neglect or default and is not liable for losses sustained to the estate if he or she, having exercised reasonable diligence makes an honest judgment, that it is in the interests of the estate to delay collecting debts due to the deceased, as distinct from merely standing by and doing nothing at all to collect the debts (Re Owens; Jones v Owens (1882) 47 LT 61). In the same way an administrator is not chargeable if, after the exercise of due diligence he or she forms an honest judgment that the deceased owed a debt and pays the same, rather than defending the claim. Nor is an administrator chargeable if, after the exercise of due diligence, he or she forms an honest judgment that it would be in the best interests of the estate to pay the claim rather than to incur expense and delay in defending a claim whose outcome is doubtful.

By Bernard McAuley, Solicitor
McAuley Hawach Lawyers
11 Fennell Street, Parramatta NSW 2124
Telephone: (02) 9633 1826
Facsimile: (02) 9687 8114 (02) 9687 8114
Web: www.mcauleyhawach.com.au
Email: reception@mcauleyhawach.com.au

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