Fiduciary Duties of an Executor in Victoria

What Is a Fiduciary Duty?

A fiduciary duty is a special kind of legal obligation owed by a person who occupies a position of trust and confidence to another. The fiduciary — the trusted person — must put the interests of the person they represent ahead of their own. They must act honestly, in good faith and for the proper purpose for which the role was given to them. They must not use the position to make a personal profit and they must avoid conflicts between their personal interests and their duties.

Fiduciary relationships arise in many settings. Common examples include:

• trustees of trusts;
• company directors and certain senior officers;
• solicitors acting for clients;
• attorneys appointed under enduring powers of attorney; and
• executors and administrators of deceased estates.

The common thread is that the fiduciary has been given power to make decisions that affect another person's property, money or interests, and the law requires that power to be exercised for that other person's benefit — not the fiduciary's own.

Why Do Executors Owe Fiduciary Duties?

An executor is appointed under a Will to carry out the wishes of the deceased. Once a grant of probate issues from the Supreme Court of Victoria, the executor holds legal title to the estate assets and has authority to collect those assets, pay debts and distribute the balance to the beneficiaries named in the Will.

That authority is not granted for the executor's own benefit. It is granted so that the deceased's wishes can be carried out and so that those entitled under the Will receive what the deceased intended for them. Because the executor is making decisions about someone else's property — including the property of beneficiaries who may have no day-to-day say in what happens — the law imposes fiduciary obligations on the executor from the moment they accept the role.

These duties apply in addition to the executor's general legal and executor duties under Victorian succession law. An executor must act in good faith, with reasonable care and skill, and must put the estate ahead of any personal interest. Acting in good faith means more than the absence of dishonesty — it includes a positive duty to act fairly, with proper purpose and with reasonable diligence.

Key Fiduciary Duties of an Executor

Fiduciary duties are not a single rule but a cluster of related obligations. The most important duties owed by an executor in Victoria include the following.

• Acting honestly. The executor must deal with estate assets and information truthfully and must not mislead beneficiaries, creditors, the Court or third parties about the estate.
• Acting in good faith. The executor must approach each decision with the genuine purpose of advancing the estate's interests, not personal, family or political agendas.
• Acting for proper purposes. The executor's powers exist to administer the estate in accordance with the Will. They cannot be used for collateral purposes — for example, to pressure a beneficiary or to retain assets the executor wishes to use personally.
• Avoiding conflicts of interest. Where the executor's personal interests conflict, or might conflict, with their duty to the estate, the conflict must be identified, disclosed and properly managed.
• Keeping estate assets separate. Estate money must not be mixed with the executor's personal funds. Estate accounts should be held in the name of the estate, not in the executor's personal bank account.
• Preserving estate assets. The executor must take reasonable steps to protect and maintain assets until they are sold or transferred, including arranging insurance, securing property and monitoring investments.
• Treating beneficiaries fairly. Subject always to the terms of the Will, the executor must act impartially between beneficiaries and must not prefer one beneficiary over another for personal reasons.

These duties operate together. An executor who acts honestly but ignores a conflict of interest, or who preserves assets but treats beneficiaries unequally, may still be in breach of their fiduciary obligations.

Conflicts of Interest and Executors

Conflicts of interest are one of the most common — and most misunderstood — issues in estate administration. The starting point is that an executor must not place themselves in a position where their personal interest conflicts, or might conflict, with their duty to the estate. In practice, however, some conflicts are unavoidable. The law's response is not always to prohibit the conflict, but to require it to be managed transparently.

Common conflict scenarios include:

• Executor also being a beneficiary. An executor who is also a residuary beneficiary has a personal interest in maximising what is left after expenses and other gifts. This is not, of itself, improper — the Will contemplates it — but the executor must be careful when making decisions that affect the size of the residue.
• Transactions involving estate assets. An executor who wishes to buy estate property, acquire shares from the estate or take a long-term lease over estate land must obtain either the fully informed consent of all affected beneficiaries or the approval of the Supreme Court. Anything less risks the transaction being set aside.
• Self-dealing concerns. The "self-dealing rule" prohibits an executor from purchasing estate property from themselves. Even at fair market value, such transactions are presumptively voidable at the option of beneficiaries.
• Engaging the executor's own business. Where the executor is a real estate agent, accountant or lawyer, engaging their own firm for estate work raises both fiduciary and professional conduct issues. Independent valuations and disclosure are essential.

The protective theme running through all of these scenarios is transparency. Executors who identify potential conflicts early, disclose them to all affected beneficiaries in writing, obtain independent advice and document their decisions are far less likely to face claims later. The article on Can an Executor Be Paid in Victoria discusses one specific area where conflicts must be handled carefully: an executor seeking commission for their work.

Duties When Managing Estate Assets

Fiduciary duties translate into a series of practical obligations in the day-to-day work of administering an estate.

• Bank accounts. The executor should promptly notify the deceased's bank, freeze transactional accounts and arrange for an estate account to be opened in the name of the legal personal representative. All estate income and expenses should flow through that account.
• Investments. Investments held by the estate must be reviewed and, where appropriate, monitored or realised. The executor should consider risk, diversification and the time horizon for the administration. Speculative investments and changes in strategy generally call for advice and the beneficiaries' agreement.
• Real property. Real estate must be kept secure and insured. Where property is to be sold, the executor should obtain independent valuations, market the property properly and account for the sale price and selling costs. Where property is to be transferred to a beneficiary, proper conveyancing and transfer documentation is required.
• Estate records. The executor must keep clear, contemporaneous records of every transaction, decision and communication. Receipts, invoices, valuations, statements and notes of meetings should all be retained. Beneficiaries entitled to an account are entitled to see the detail behind it.

Duties Owed to Beneficiaries

Fiduciary duties are owed to the estate and to the beneficiaries collectively. Beneficiaries are not simply passive recipients — they have legitimate interests in how the estate is administered. The executor's duties to beneficiaries include the following.

• Communication. Beneficiaries should be told they are entitled under the Will, kept reasonably informed of progress, and notified of significant events such as the sale of major assets, the making of distributions and the lodgement of tax returns.
• Accountability. The executor is required to be able to account for the estate at any time — what assets have been collected, what debts have been paid, what is left and how it is proposed to be distributed.
• Providing information where appropriate. Beneficiaries are generally entitled to see a copy of the Will, to be informed of estate assets in broad terms and to receive a statement of account before final distribution. They are not necessarily entitled to every document on the estate file, but reasonable requests should be met.
• Acting impartially. The executor must hold the balance evenly between competing beneficiaries. Where the Will treats beneficiaries differently, the executor must give effect to those differences — but cannot create new preferences of their own.

Where communication breaks down, disputes often follow. Many of those disputes can be avoided through clear, regular updates and willingness to answer reasonable questions.

What Happens If an Executor Breaches a Fiduciary Duty?

A breach of fiduciary duty is a serious matter. The Supreme Court of Victoria has a wide range of remedies available where an executor has failed to observe their obligations. At a high level, the consequences may include the following.

• Personal liability. The executor may be ordered to compensate the estate or affected beneficiaries for loss caused by the breach. In serious cases, the executor's personal assets may be at risk.
• Account of profits. Where the executor has made an unauthorised personal profit from the position, the Court can order the profit to be paid to the estate.
• Setting aside transactions. Transactions tainted by self-dealing or undisclosed conflict may be set aside, with the property restored to the estate.
• Removal applications. Beneficiaries may apply to the Court for the executor to be removed and replaced. The article on Removing or Replacing an Executor in Victoria discusses the grounds and process in more detail.
• Estate disputes. A breach often triggers wider estate litigation, including claims by other beneficiaries, family provision claims and cost orders against the executor personally.

Not every mistake amounts to a breach of fiduciary duty. Honest errors, made in good faith and corrected promptly, are usually treated very differently from deliberate misconduct or persistent disregard of obligations. The Court has power to relieve executors from liability for honest and reasonable conduct, though this is a discretionary remedy and is not to be relied upon as a safety net.

Practical Tips for Executors

For most executors, the path to meeting fiduciary obligations is straightforward in principle, even if time-consuming in practice. A practical checklist includes the following.

• Read the Will carefully and obtain advice on its meaning where any provision is unclear.
• Decide whether to accept the role before intermeddling — if not, consider whether to renounce. The article on Executor Refusing to Act in Victoria explains the options.
• Open a dedicated estate bank account and never mix estate funds with personal money.
• Identify and document every potential conflict of interest at the outset and as new issues arise.
• Obtain independent valuations for significant assets, particularly real estate and unlisted shares.
• Communicate with beneficiaries in writing, proactively and at regular intervals.
• Keep meticulous records — receipts, invoices, statements, file notes and copies of correspondence.
• Obtain professional legal and accounting advice where the estate is complex, where conflicts arise or where a dispute is brewing.
• Do not distribute the estate prematurely; ensure creditors, tax liabilities and notice periods have all been addressed first.
• Consider engaging a solicitor experienced in probate and estate administration at the start, rather than after a problem develops.

Conclusion

Being named as executor is a mark of trust, but it is also a fiduciary appointment with real legal weight. Executors in Victoria must act honestly, in good faith and for the proper purpose of carrying out the Will — keeping estate assets separate, avoiding or properly managing conflicts of interest, preserving assets and treating beneficiaries fairly.

The vast majority of executors who take the role seriously, communicate openly and obtain advice when they need it will discharge their duties without difficulty. Problems tend to arise where executors act unilaterally, fail to disclose conflicts, mix estate funds with personal money or keep beneficiaries in the dark. Early advice is consistently the most effective protection.

For executors and beneficiaries alike, understanding the fiduciary nature of the role is the foundation for a properly administered estate.

Frequently Asked Questions