An executor of a deceased estate has an obligation to the beneficiaries to account for their financial management of the estate. A beneficiary can require the executor to have the estate’s accounts scrutinised by the Supreme Court. This is known as ‘passing the accounts’.
Does an executor have to pass the accounts?
An executor only needs to pass the accounts if a beneficiary (or the Court) requires them to. However, an executor may want to complete the process to protect themselves from claims before finalising and distributing the estate. The advantage of doing so is that, once passed, the accounts are taken to be correct unless someone shows otherwise. The executor is then released from further responsibility for them three years after the date of the order.
That release is not absolute. It does not hold so far as a person interested in the estate shows that a wilful or fraudulent error, omission or entry was made in the accounts.
An alternative means for an executor to protect themselves from claims is to have the beneficiaries sign a Deed of Family Arrangement or a Deed of Release. However, an executor cannot compel beneficiaries to do this and absent cooperation, a passing of accounts is the next best option. See Can you change the terms of a Will?
What is involved?
The executor needs to prepare and file the accounts in the form required by the Court (Form 4) and verify the accounts as correct by swearing an affidavit. The accounts are then served on the beneficiaries.
The Accounts will set out the monies the executor has received (receipts), the expenses and funds they have paid (disbursements), the remaining assets, and their plan to complete the administration. An executor will usually have to provide supporting documents (receipts, invoices, bank statements etc).
Beneficiaries can object to items in the accounts. The accounts are usually reviewed, and any objections dealt with, by a Registrar at a Court hearing, who essentially acts as an auditor and has the power to disapprove any expenses if they were not reasonably incurred or require the provision of further information.
This can also be an opportunity to resolve disputes between co-executors. For example, an executor may have incurred legal fees that a co-executor refuses to reimburse from the estate. While there are limits to the powers of the Registrar at a passing of accounts, the procedure is often a good mechanism to resolve more modest disputes in an estate.
Timeframes
The Court Rules contemplate the accounts being passed within 12 months of the grant of representation being issued, but this is not a firm rule. It is usually sensible to pass the accounts after the estate has been largely administered and is awaiting final distribution.
Costs
Provided an executor acts reasonably, they are usually entitled to be reimbursed from the estate for the cost of having the accounts passed. The Registrar has a discretion as to whether the costs of any objecting parties should be paid from the estate. See What an executor is entitled to be paid in WA.
Failure to pass the accounts
If the executor does not pass the accounts when required to, the Court can ultimately remove them from their position. See What are the duties of an executor in Western Australia?
We have extensive experience in representing executors and objecting beneficiaries in passing of accounts and would be happy to advise and assist parties navigate the process. Call the probate team on (08) 9220 4490 or see our estate administration page.
