In some circumstances, the estate’s executor or administrator may be required to file, verify and pass the estate’s accounts with the Supreme Court of NSW. The Court can go a step further and require that the estate accounts are passed. The is similar to an audit: a Court officer will review the estate records to ensure that the accounts are correct.

When will the accounts need to be verified and passed?

An executor or administrator has a duty to keep proper financial records for the estate. These include receipts for any transfer of property, and any distributions from or expenses of the estate. Beneficiaries are entitled to inspect these records and may request that the estate accounts be verified and passed. There may be vulnerable beneficiaries who need additional protection during the estate administration, or a beneficiary may perceive that the executor or administrator is in a conflict in their role.

Verified

Generally, the executor or administrator need not file any further documents with the Court after the grant of probate or letters of administration.

Circumstances in which the Court may request that estate accounts be verified and filed with the Court include when:-

1. the executor or administrator is also a creditor of the estate;
2. a beneficiary requests that the estate accounts are filed;
3. one or more public benevolent institutions or charities are a substantial beneficiary;
4. the executor or administrator is the guardian of a minor who is a beneficiary; or
5. the Court determines that in the circumstances the accounts are to be verified and filed.

It may be prudent for the executor or administrator to file and verify the estate accounts if they perceive that there is a risk of a beneficiary or other interested person disputing their management of the estate and the accounts.

The accounts are usually verified and filed towards the end of the administration of the estate, but interim accounts can be filed if administration of the estate is delayed.

Passed

The Court may require the executor or administrator to go a step further and have the estate accounts passed.

If the executor or administrator is applying for commission, the Court will require them to simultaneously apply for the accounts to be passed.

How do I apply to have the estate accounts passed?

The executor or administrator must prepare an application to the Court for the estate accounts to be passed supported by evidence of all the estate assets, liabilities, payments and receipts.

The Court requires a statement of the estate accounts including:

1. any money distributed from the estate including receipts;
2. any income/profit received by the estate;
3. an account of any assets reinvested;
4. an account of any assets realised;
5. any assets transferred to beneficiaries;
6. any assets which are unrealised or are yet to be distributed;
7. any assets lost;
8. any funds spent on professional advice (e.g. from an accountant, solicitor or valuer);
9. reconciliation of the estate accounts with any funds held in the estate bank account or solicitors trusts account.

Once all the documents have been provided to the Court, a Court officer will review all filed accounts and all the supporting documentation. The Court reviews the documentation to ensure that all the accounts balance and reviews disbursements incurred by the estate. Before passing the accounts, the Court may disallow costs for professional fees incurred by the estate which are for non-professional work which is executorial in nature. The executor or administrator will have to reimburse the estate for any amounts the Court disallows as non-professional work.

What does the Court not consider?

The Court is only tasked with ‘auditing’ the estate accounts and determining whether they are accurate or whether they include any disallowable amounts. The Court will not determine as part of an application whether:

1. an asset forms part of the estate,
2. an asset has been undervalued or overvalued;
3. all assets of the estate have been properly accounted for; or
4. an asset, liability or expense should also be included in the accounts.

These matters should be dealt with by an administration suit against the estate or the executor/administrator.

What is the outcome of an application for the passing of the accounts?

Once the Court has reviewed the accounts, disallowed any professional fees, and is confident as to the accuracy of the filed and verified accounts, the Court will issue a Certificate of Correctness of Accounts. The Certificate confirms that for the period that has been reviewed by the Court that the accounts appear to be correct and confirms the dollar value of:

1. any capital assets realised by the estate;
2. any income collected by the estate;
3. any assets transferred to creditors or beneficiaries;
4. any profit and revenue if the estate has carried on the deceased’s business;
5. any rents collected by the executors;
6. the balance of the estate accounts.

If the accounts being passed are interim accounts, the Certificate of Correctness is the starting point for any further accounts to be passed at a later date.

Here to Help

Contact us for help with any aspect of the administration of the estate.