I’m an executor – I’ve heard of the executor’s year, but what does it mean for me?

The ‘executor’s year’ is the general principle that the personal representatives of an estate, be it the executors or administrators (in the case of an intestacy), should endeavour to complete the administration of an estate within a year from the date of death of the deceased. They are not bound to distribute the assets of the estate prior to the year’s expiry[1], but the anniversary of the death is the deadline. Therefore, the personal representatives have an obligation to the beneficiaries of the estate to call in all assets, pay any debts or expenses and distribute the estate within 12 months of the date of death, unless a delay is caused by issues beyond the control of the personal representatives.

If the personal representatives fail to do so, without justification, they may expose themselves to potential personal liability or risk an application being brought in the Supreme Court to have them removed as the personal representatives. Likewise, where the personal representatives are seeking to claim commission, they may be prohibited from doing so where the estate has not been administered in a timely manner.  In certain circumstances, such as where a family maintenance claim has been brought against the estate by an eligible person who believes they have not been adequately provided for by the deceased, delay in administering the estate can be unavoidable[2]. However, even in these circumstances, the personal representatives should be cautious when it comes to the payment of pecuniary legacies (i.e. a monetary gift).

A beneficiary who is entitled to a pecuniary legacy under a will, where the will is silent as to the time frame in which payment must be made, has the right to claim interest on any amount that remains unpaid at the expiration of the ‘executor’s year’ until payment is made[3]. Whilst topical for many reasons, the recent interest rate increases have added a further cause for concern to personal representatives. With the legacy interest rate being set at 2% above the RBA cash rate, reset at 1 January each year, the significant increases in the cash rate have seen the legacy interest rate more than double, jumping from 2.1% in 2022 to 5.1% in 2023. A further adjustment will be made next month.

Personal representatives need to be mindful of their obligations to the beneficiaries of the estate and should not unjustifiably delay the payment of pecuniary legacies beyond the ‘executors’ year’. Any additional funds required to make payment of the interest claimed on a pecuniary legacy must come out of the residuary estate. This means that ultimately, it is the residuary beneficiaries who will be paying the interest and thereby reducing their entitlement in the estate. They might press the personal representatives to pay the interest from the personal representatives’ own funds.

If personal representatives are experiencing a delay in administrating the estate, they should be mindful of their obligations to the beneficiaries. Where the estate will not be in a position to make payment of a pecuniary legacy within the ‘executor’s year’, personal representatives should seek advice as soon as possible to attempt to avoid any potential personal liability which may result.

For further information please contact:

Daniela Pavlovic
Principal
T: 03 5225 5227
E: dpavlovic@ha.legal

Tayla Berger
Associate
T 03 5226 8559
E tberger@ha.legal

[1] s. 49 of the Administration and Probate Act (Vic) 1958; Benson v Maude [1821] EngR 223.

[2] Part IV of the Administration and Probate Act (Vic) 1958 and s.90 of the Administration and Probate Act (Vic) 1958.

[3] s. 39B(3) of the Administration and Probate Act (Vic) 1958.