This obligation is crucial to ensure transparency and accountability in the distribution of estate assets, and plays a significant role in safeguarding the interests of beneficiaries, creditors, executors and administrators.
The Supreme Court has the power to scrutinise the accounts at the request of either a beneficiary or an executor, to ensure the executor has complied with their obligations. This is known as a “passing of accounts”.
What is a passing of accounts?
Passing of accounts is a legal process that involves the examination and approval of the financial transactions conducted by the executor or administrator of an estate. This comprehensive review is undertaken to verify the accuracy of the financial statements, ensuring that all assets and liabilities are accounted for transparently.
The legal rights are set out in Rule 37 of the Non-Contentious Probate Rules 1967 (WA) and section 43 of the Administration Act 1903 (WA).
The primary objective is to provide beneficiaries, creditors, and the court with a clear understanding of how the estate's assets have been managed and distributed.
When is a passing of accounts appropriate for a beneficiary?
The passing of accounts process offers beneficiaries and creditors a mechanism to voice concerns and seek redress if they believe their interests are not adequately addressed.
A beneficiary may want to request that the Supreme Court require an executor to pass accounts if the executor or administrator is refusing to provide accounts, or if the beneficiary has concerns about the value of the estate, or the expenses incurred by the executor. It may also be an appropriate first step if an executor or administrator is slow or uncooperative.
If an executor does not pass the accounts when required, the executor may be removed.
When is a passing of accounts appropriate for an executor or administrator?
An executor or administrator only needs to pass the accounts if a beneficiary requires them to do so, or if they decide that they would like to pass the accounts.
An executor or administrator may want to pass the accounts to justify their actions if a beneficiary has alleged that the administration of the estate has been improper, or if a beneficiary has made allegations about delay, the value of the estate or the amount of distribution to the beneficiary.
Once the accounts are passed, an executor will gain protection offered by section 43(2) of the Administration Act 1903 (WA). That is, the order of the Supreme Court allowing the accounts will be evidence of the correctness of the accounts and the executor or administrator will be released 3 years from the date of the order.
What is the process?
An executor or administrator needs to prepare and file accounts in the form required by the Supreme Court, and verify the accounts are accurate by swearing an affidavit.
The accounts must include the money coming into the estate, the money paid from the estate, the assets left in the estate and the plan for the distribution of the estate. The accounts will also need to include evidence for the money coming in, and money coming out, such as invoices and bank statements.
The beneficiaries will have an opportunity to object to the accounts.
The Supreme Court will then review the accounts, and the objections, at a hearing, and will make a decision about whether the expenses incurred are reasonable estate expenses.
The Supreme Court has the power to disapprove any expenses. If the Supreme Court is satisfied that all expenses are reasonable, an order will be made approving the accounts.
Who pays the legal costs?
The executor’s legal costs in passing the accounts are generally legitimate estate expenses, and will be paid from the estate funds, provided that the executor has acted reasonably.
The Supreme Court may decide whether the costs of the objecting parties should be paid from the estate.
Conclusion
The passing of accounts is a vital legal process that ensures the proper and transparent administration of estates.
Executors and administrators should approach this procedure with diligence, recognising its significance in upholding the principles of fairness, accountability, and adherence to the law.
Douglas Cheveralls Lawyers provides advice and representation to both executors and beneficiaries in passing of accounts applications. If you would like advice about whether a passing of accounts may be appropriate for you, or passing of accounts generally, please contact one of the lawyers at Douglas Cheveralls Lawyers.