What is "The Executor's Year"?

There is a general principle that a 'legal personal representative' (i.e. the estate’s appointed executor(s) or administrator(s), as the case may be) has an obligation to realise an estate's assets, pay debts and expenses and distribute the estate within 12 months of the deceased’s death. This principle is what is commonly known as "the executor’s year". 

The executor’s year principle extends to the payment of any legacy (e.g. a gift or bequest) left by a Will in that interest will not be payable on a legacy until 12 months after the deceased’s death, unless the contrary intention is contained in the Will.

In Western Australia, the executor’s year principle is reflected in Rule 37 of the Non-Contentious Probate Rules 1967.  Rule 37 requires the legal personal representative to file:

• the estate’s accounts, more commonly known as the ‘passing of accounts’, and
• a plan of distribution

with the Probate Registry within 12 months of the grant being issued or such further time as a Judge or Registrar may allow. 

What happens if takes longer than a year?

Whilst the executor’s year principle applies, in practice, it depends on what is reasonable in the circumstances. Matters such as the size or complexity of the estate or litigation which is commenced against the estate may delay completing the administration of the estate within the executor’s year (Atkins v Godfrey [2006] WASC 83).

The onus will shift onto the legal personal representative to justify the delay. 

What about the Executor’s commission?

A failure to finalise the administration of the estate within the executor’s year may affect the right of the legal personal representative to claim an executor’s commission and/or the amount of commission claimed (Atkins v Godfrey). 

An executor’s commission is a remuneration to a legal personal representative to compensate them for the effort expended and their ‘pains and trouble’ in administering an estate. It is usually a percentage of the estate (up to a maximum of 5%). 

What are some of the other important tax and financial issues with a delay?

Further, a delay in administering the estate can also incur the estate (and potentially therefore its beneficiaries) additional unnecessary costs and adverse financial consequences . These can include:

- Capital gains tax on the deceased’s principal place of residence if the residence is sold more than 2 years after the deceased’s death

• An estate has an exemption from paying capital gains tax if the property is sold within 2 years of the deceased’s death provided the property was used as the deceased’s principal place of residence and not for income producing purposes); 

- Land tax on the deceased’s principal place of residence if the residence is not dealt with within 1 year of the deceased’s death

• An estate may have an exemption of up to 1 year after the deceased’s death subject to certain qualifications, these being if:
• the property the deceased’s principal place of residence and would have been exempt if they had owned the property and had been using it as their primary residence on 30 June before their death;

 - The legal personal representative is the owner of the property at midnight 30 June in the financial year in which the deceased died; and

• the estate does not derive any rent or income from the property between the date of the deceased’s death and the end of the assessment year;

  - Adverse tax consequences

• For the first 3 years, the deceased estate income is taxed at the individual income tax rates but these rates increase if the estate continues to be administered beyond the third year); and

  - Legal costs due to a claim from an aggrieved beneficiary. 

A legal personal representative of an estate should therefore be acutely be aware of the executor’s year and should ensure that they promptly and proactively seek to complete the administration of the estate within the executor’s year where it is practicable to do so.

If you are a Will-maker, Executor, a Beneficiary or even an advisor and you require advice or information on any aspect of the proper estate administration processes including your rights and obligations, please contact a member of Murfett Legal’s estate planning and administration team.