What are your powers under the will

Executors powers are defined according to the will and under statute such as the Trustee Act 1925 (NSW). Most wills make specific provision for broad powers in addition to the statutory powers of executors.

In exercise of their power executors stand in a fiduciary relationship with the beneficiaries of the Estate – fiduciary relationships occur were a person, the trustee or executor, stands in a position of trust because they hold property or are required to discharge duties for the benefit of another, the beneficiaries.

However, conflict can and often arises where an executor in the exercise of a power acts to the detriment of a beneficiary and to the executor’s own benefit.

For example, conflict can occur where an executor makes an application to the deceased’s super fund in relation to payment of the deceased’s death benefits. The executor may, outside of his or her executorial role, have a legitimate claim to the deceased’s super, but in making an application the executor is putting his/her personal interest ahead of the executorial duty and this puts him or her in conflict with other claimants to the deceased’s super.

A simple no conflicts clause in the will would overcome this restriction on the executor.

Where executors are unable to agree

Executors may invariably disagree on the administration of the estate (i.e. if property should be sold now or postponed).  A power giving the executors the right to postpone sale overcomes any disagreement. Absent such a power, an executor cannot postpone the sale of property unreasonably.

Executors exercising powers outside of their authority (“fraud on the power”)

The exercise of the Executor’s powers is generally limited to the purpose of the Executor’s appointment.  On his or her appointment, the Executor is required to:

  • obtain Probate (i.e. have the will sealed by the Supreme Court of NSW as the deceased’s final will;
  • call in the assets by bringing them under the control of the Executor;
  • pay the debts of the deceased including funeral and testamentary expenses,
  • distribute the assets according to the will of the deceased.

Executors who act outside of their appointment are exercising a power contrary to the authority vested in them under the will of the deceased. In circumstances where the Executor exercises a power for a purpose different to the purpose for which the power is vested or given, the Executor has exercised a discretion which is referred to as a “fraud on a power”.  The phrase “fraud on a power” simply means that “the power has been exercised for a purpose, or with an intention, beyond the scope or not justified by the instrument (eg the will) creating the power (Vatcher v Pail [1915] AC 372,378).

Executors who act outside of their powers or exercise a power for a purpose not consistent with their appointment may be personally liable to the beneficiaries of the Estate if a beneficiary or the Estate has suffered loss as a result of the exercise of that power.

Beneficiaries who believe that an Estate is being mismanaged by an Executor may be able to make an application for replacement of the Executor on the grounds that the Executor has committed a “fraud on the power” of their appointment

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