The legal issues for Executors and Administrators of bankrupt Deceased Estates

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What is a bankrupt deceased estate?

When the debts of a deceased person exceed the person's assets, the deceased estate is insolvent. It is possible to administer the deceased estate by a grant of probate, or under the Bankruptcy Act 1966 (where a debt exceeds the minimum amount).

What are the risks for Executors and Administrators of managing an estate?

In WA, Executors and Administrators can be personally liable to the estate, including for:

  1. conduct which is in breach of duty to the Estate. For example, conduct which is negligent or giving rise to wilful default because of the loss of a testator's assets;
  2. acting outside of the powers granted to an Executor or Administrator under the Trustees Act 1962 (WA);
  3. commencing or maintaining legal proceedings on behalf of the Estate;
  4. legal costs in relation to any legal proceedings concerning the Estate; and
  5. in relation to bankrupt estates, paying debts of the Estate in priority to other debts.

How can Executors and Administrators protect themselves?

Provided an Executor or Administrator complies with the advertising requirements of section 63 of the Trustees Act 1962, the Executor or Administrator can obtain protection against claims where notice has not been given to the Administrator.

It is advisable to obtain legal advice in relation to bankrupt estates before lodging an application for a grant of probate or a grant of letters of administration.

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