An executor is often tasked with liquidating a deceased estate’s assets. After the sale of the assets, the executor distributes the proceeds of the sale to the beneficiaries. Sometimes, a beneficiary will complain that an executor won’t sell a property according to the wishes of the beneficiaries or as instructed in the Will. There may be a legitimate reason for a delay in disposing of a property. However, if the executor fails to liquidate property in the interests of the estate, he or she may be guilty of a breach of their fiduciary duty.
Executor’s duties
An executor may have a variety of duties in administering a deceased estate. One of their first jobs is to prepare a list of assets and liabilities and to do whatever is required to preserve the assets and satisfy the debts. Sometimes a testator will leave instructions in a Will that the executor sell certain assets to discharge debts. Even without such instructions, an executor’s duty to discharge all the estate debts may require the liquidation of estate assets.
The sale of deceased estate assets must be transparent, and the executor must keep meticulous accounts of all transactions. In order to have the legal authority to sell real property of the estate, the executor needs court authorisation. The Supreme Court of NSW can issue a grant of probate to validate a Will and authorise an executor to deal with a deceased estate’s assets.
Executor’s delays in sale
An executor is required to finalise a deceased estate within a reasonable period. Typically, an executor is expected to sell a property within the “executor’s year” following the death of the testator. When the executor does not anticipate selling a property within this year, they should seek professional advice to ensure that this will not be considered executor misconduct.
If the executor won’t sell for an indefinite period of time, then they may be found to be unreasonably withholding funds from the estate’s beneficiaries. This opens the executor up to personal liability for failing to resolve the estate in a timely manner.
Obtaining market value
The executor’s obligation to sell assets in a timely manner can conflict with the executor’s other responsibility to extract as much value as possible from the sale of assets. Properties in deceased estates are often sold at auction as this is demonstrably reflective of market value, but only if the auction is a suitable mechanism to achieve the best price.
The fiduciary duty of an executor to achieve the best price in a property sale was reiterated in the case of Booth v Public Trustee (1954). In that case, an executor sold a property without obtaining an independent valuation, and the plaintiffs asserted that the property was sold well under market value. The court found that the executor had breached his duty, and the sale was reversed. It is therefore highly advisable for an executor to obtain a formal valuation of any real property in the deceased estate. A formal valuation will incur costs on the estate, but it will protect the executor from liability for underselling the property.
The executor may believe that the property will not achieve the best price in the current market and therefore, it is not in the beneficiaries’ interests to sell immediately. However, if the market has dropped, the executor has no obligation to wait for the market to rise, and can sell at the current market value. If the executor’s opinion is that it is in the beneficiaries’ interests to delay the sale, they should seek the beneficiaries’ cooperation in this delay. Additionally, such a course of action would only be appropriate if there are sufficient other assets in the estate to discharge debts and meet the estate’s requirements. In that case, the executor won’t sell the property but would set up a limited form of trust to hold the property until the property sale.
Misconduct by executor
Sometimes an executor won’t sell a property because they are neglecting their duty towards the estate or have other, unlawful intentions. In that case, the beneficiaries can ask the court to remove the executor on the grounds that their continued tenure is detrimental to the interests of the beneficiaries and the estate.
Here to Help
If an executor won’t sell a deceased estate asset, or sells the asset undervalue, contact us for free no obligation initial telephone advice. We can provide comprehensive and timely advice to help you understand your legal options.
