Risks and Obligations of being an Executor

A case currently before the NSW Supreme Court highlights that being an executor carries both risks and obligations and should not be taken lightly.

The case arises from the collapse of the Allco Financial Group in 2008.  One of the directors of that company committed suicide not long before the collapse.  At the time of his death he held 7.38 million shares in Allco, through a private holding company, with a value of $8.73 per share.  The beneficiaries allege that following his death the executors allowed the private company to hold onto the shares for longer than it should have, even though the Allco share price was rapidly declining, and did not sell them until they were valued at only 13 cents each.  The beneficiaries allege a loss of close to $18 million and that the executors are responsible for that loss.

Although final judgment has not been handed down, and it is not clear whether the executors were in fact responsible for the loss in this case, it does highlight that any executor can be in the firing line if there is a loss to estate assets or their value.  Judgments in past cases have stressed that it is not enough for an executor to maintain the status quo at the date of death, and that executors must ensure that they are fully informed about estate assets and must take reasonable steps to ensure maintenance of the value of the estate.  The Court has yet to rule in this case on whether the executors did in the circumstances fulfil those obligations.  In a judgment on a preliminary point, the Court has confirmed that an executor has the same responsibilities and standard of care as a trustee who has been given power to sell trust property, and must act responsibly, methodically and prudently.

The key is to remember that the executor is looking after others’ interests (and that those others may question his or her actions), and to obtain expert professional advice.

If you require legal services please call Sarah Hatch on (02) 9411-4161 or email sarah@taurusfinancial.com.au

Securitor Financial Group Limited is not responsible for advice provided by Solicitor Sarah Hatch of Hatch & Associates Pty Ltd.