Last updated 5 December 2016

Contracts

As a general rule, the personal representative must perform all contracts entered into by the deceased that were enforceable against them. This rule does not apply if it was expressly agreed that the contract should terminate on the death of the deceased, or if a contract terminates on the death of the deceased, expressly or by implication. A contract will terminate on death if the obligation on the deceased was personal (e.g. if the deceased was to perform a service such as writing a book, conducting a concert or building a house).

Similarly, the personal representative may enforce any contract that the deceased was entitled to enforce.

Payment of debts

The personal representative is liable for all debts owing by the deceased. Such debts and other liabilities of the deceased at death are paid out of the estate. The personal representative is not personally liable for these debts (unless the personal representative failed to give a statutory notice to potential claimants).

The personal representative is personally liable for any debts incurred in the course of administering the estate, but is entitled to an indemnity (repayment) from the deceased’s estate if the debts were properly incurred.

Statutory notice to claimants

To guard against the discovery of a debt after the estate has been administered, personal representatives may give a statutory notice to claimants. This notice advertises the fact that, if any creditors do not notify the personal representatives of their claim within six weeks of the notice, the personal representatives may distribute the estate’s assets only in accordance with the debts of which they have been notified at that time.

The notice should be advertised in a newspaper as described in s 67 of the Trusts Act 1973 (Qld). If the deceased’s last known address is more than 150 kilometres from Brisbane, it should be advertised in a local newspaper circulated and sold at least once each week in the area of the deceased’s last known address; otherwise it should be advertised in a newspaper circulating throughout the state.

Other notices as would be directed by the court to be given in an administration action should also be advertised.

If the personal representatives distribute the estate’s assets without giving the notice, they are personally liable to pay any debt of which they subsequently become aware.

Time for distribution of assets

No beneficiary, whether under a will or on an intestacy, has a right to the estate until it has been distributed by the executor. This can cause serious financial problems if the major beneficiary’s sole source of income was the deceased. If this happens, a spouse can:

  • immediately apply for a pension (see the chapter on Social Security Payments)
  • seek a loan, using their interest in the estate as security
  • receive immediate payment out of the estate for the maintenance of the deceased’s spouse and children, and such payment will be offset against their share in the estate (s 49A Succession Act 1981 (Qld) (Succession Act)).

This situation can be avoided if the beneficiary and the deceased maintained a joint bank account, because on the death of either of the joint account holders, the account passes to the survivor.

Time limit for distribution

Personal representatives do not have a time limit within which to distribute the estate; although, the administration of the estate should be undertaken in a timely manner. Generally, the estate should be dealt with (unless there is litigation or other issues which prevent the proper administration) within 12 months of the deceased’s death. Much will depend on the size of the estate, the number of possible creditors and the possibility of any family provision application.

If the personal representative neglects to distribute the estate of the deceased or is dilatory in carrying out their functions as personal representative, the court may, upon the application of any person aggrieved by such neglect, make orders to speed up the administration of the estate, including an order requiring the personal representative to pay interest on money in their possession.

Payment of interest by executors

To encourage the speedy administration of estates, the law imposes a duty on personal representatives (in the absence of a contrary provision in the will) to pay interest at a rate of 8% per annum, or at such other rate as the court may determine, on general legacies that have not been paid after the first anniversary of the deceased’s death (s 52 Succession Act).

A general legacy is a gift of personal property in general terms to be provided out of a testator’s estate (e.g. a sum of money), as distinct from a specific legacy that earmarks specific property as the subject of the gift (e.g. ‘my oil painting of ships at sea to Sally’). Interest is not paid on specific legacies. This interest is paid out of the estate funds.

Insolvent estates

Personal representatives of a deceased must pay the debts of the deceased that were owing at the time of death. They must also pay any debts that they incur in the course of administration. If the assets of the estate are insufficient to discharge these obligations, the estate is said to be insolvent.

An insolvent estate can be administered by a trustee in bankruptcy in accordance with the Bankruptcy Act 1966 (Cth), or it can be administered informally by the personal representative.

It sometimes happens that a personal representative commences the administration of an insolvent estate without realising that insufficient assets exist to pay the deceased’s debts and the administration expenses. Complex rules that govern the order in which creditors and others must be paid regulate the administration of such an estate (pt 5, div 2 Succession Act).

In this case, personal representatives should seek legal assistance in carrying out the administration.

Two points should be noted:

  • Payment of funeral expenses has first priority.
  • As a general rule, money payable under a policy of insurance on the life of a deceased is protected from the claims of creditors and is therefore available for distribution to the beneficiaries under the will or on intestacy.

Maintenance orders

An order for the maintenance of a party to a marriage or a child of a marriage ceases to have effect upon the death of the party or child who stands to benefit under the maintenance order. Similarly, an order with respect to the maintenance of a party to a marriage or a child of a marriage ceases to have effect upon the death of the person liable to make payments under the order unless the order was made:

  • before the 1983 amendments to the Family Law Act 1975 (Cth) (Family Law Act) and is expressed to continue in force throughout the life of the beneficiary
  • for a period that has not expired at the time of the death of the person liable to make the payments (ss 82(2)–82(3) Family Law Act).

In either case, the order is binding upon the personal representative of the deceased.