Fiduciary Duties of an Executor in Victoria

What Is a Fiduciary Duty?

A fiduciary duty is a legal obligation owed by a person who occupies a position of trust and confidence. The precise duties vary with the role, its source and its context, but they typically require the fiduciary to act with loyalty and in good faith, to use the powers of the office only for their proper purpose, to avoid unauthorised conflicts between duty and personal interest, and to avoid unauthorised profits from the position. In many roles the fiduciary is also required to keep proper records and to account for the administration of the property or interests in question.

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 or take steps that affect another person's property, money or interests, and the law requires those powers to be exercised for the purpose for which they were given rather than for the fiduciary's own advantage.

Why Do Executors Owe Fiduciary Duties?

An executor derives their authority from the Will; the grant of probate issued by the Supreme Court of Victoria confirms that authority and enables the executor to deal with third parties (banks, share registries, land registrars and others) as the deceased's legal personal representative. An administrator's authority is conferred by a grant of letters of administration on similar terms. In either case the personal representative holds legal title to the estate assets and is empowered to collect them, pay debts and distribute the balance in accordance with the Will or the intestacy rules.

That authority is not granted for the personal representative's own benefit. It exists so that the deceased's testamentary intentions can be given effect, or (on intestacy) so that the estate can be distributed according to statute. 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 assume the role.

These duties operate alongside the executor's other legal and executor duties under Victorian succession law, and alongside the trustee duties in the Trustee Act 1958 (Vic) once estate property is held on trust for beneficiaries. Acting in good faith is not simply the absence of dishonesty; it includes a positive obligation to act fairly, for proper purposes and with reasonable diligence.

Key Fiduciary Duties of an Executor

Fiduciary duties are not a single rule but a cluster of related obligations. Duties commonly 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 administering the estate in accordance with the Will and the law, rather than for personal or collateral objectives.
• Acting for proper purposes. The executor's powers exist to administer the estate in accordance with the Will and the statutory framework. They cannot be used for collateral purposes — for example, to pressure a beneficiary or to retain assets the executor wishes to use personally.
• Avoiding unauthorised conflicts. Where the executor's personal interests conflict, or might conflict, with their duty to the estate, the conflict must be identified and managed — including by disclosure and, where appropriate, obtaining consent from those whose interests are affected or seeking Court directions or approval.
• 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.
• Acting consistently with the Will and statutory framework. Subject to the Will, statutory powers, the classes and interests taking under the Will or intestacy rules, and the executor's duty to administer the estate properly, the executor must not prefer one beneficiary over another for personal reasons.

These duties operate together. An executor who acts honestly but ignores an unmanaged conflict of interest, or who preserves assets but disregards the distributive scheme, may still be in breach of fiduciary obligations.

Conflicts of Interest and Executors

Conflicts of interest are a frequent issue 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, some conflicts are unavoidable. The law's response is not always to prohibit the conflict, but to require it to be addressed transparently and, where necessary, with appropriate authority.

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 should 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 consider the no-conflict and no-profit rules. Whether the transaction can properly proceed will depend on any express authority in the Will, fully informed consent by all persons whose interests are affected, applicable statutory provisions and, in some cases, directions or approval from the Supreme Court of Victoria. Without a proper basis, the transaction may be voidable at the option of affected beneficiaries.
• Self-dealing concerns. The "self-dealing rule" applies where an executor proposes to purchase estate property from themselves. Such transactions are, without proper authority or informed consent, generally voidable at the option of affected beneficiaries even at fair market value.
• 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 relevant considerations.

The protective theme running through these scenarios is transparency and proper authority. Executors who identify potential conflicts early, disclose them to those whose interests are affected, obtain independent advice and document their decisions reduce the risk of later challenge. 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. Depending on the decision, relevant beneficiary interests, any express powers in the Will, professional advice and applications for Court directions may need to be considered.
• 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. The scope of any account or supporting information a beneficiary may seek depends on the beneficiary's interest, the stage of administration, applicable privilege or confidentiality and, where relevant, Court supervision.

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. The scope of a beneficiary's entitlement to information depends on their interest in the estate and the stage of administration. Residuary beneficiaries generally have wider entitlements than specific-gift beneficiaries. Reasonable requests to see the Will (once probate has issued), to be informed of estate assets in broad terms and to receive a statement of account before final distribution should be met; not every document on the estate file is disclosable, and privileged or third-party material may need to be withheld.
• 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 range of discretionary, fact-specific remedies available where an executor has failed to observe their obligations. At a high level, the potentially available consequences may include the following, depending on the evidence, proof and (where relevant) causation.

• Equitable compensation. The executor may be ordered to compensate the estate or affected beneficiaries for loss caused by the breach, subject to establishing causation and loss.
• Account of profits. Where the executor has made an unauthorised personal profit from the position, the Court may order the profit to be paid to the estate.
• Setting aside or tracing. Transactions affected by unauthorised self-dealing or undisclosed conflict may be set aside, and proprietary or tracing remedies may be available in appropriate cases.
• Removal or replacement. Beneficiaries may apply to the Court to have the executor removed and replaced under s 34 of the Administration and Probate Act 1958 (Vic), or for a replacement trustee under s 48 of the Trustee Act 1958 (Vic) where applicable. The article on Removing or Replacing an Executor in Victoria discusses the grounds and process in more detail; removal is discretionary and requires evidence.
• Costs. Costs orders may in appropriate cases be made against an executor personally where their conduct has caused unnecessary litigation.

Not every mistake amounts to a breach of fiduciary duty, and not every breach leads to any particular remedy. Honest errors, made in good faith and corrected promptly, are typically treated differently from deliberate misconduct or persistent disregard of obligations. The Court has power to relieve trustees (and executors) from liability for honest and reasonable conduct where the statutory conditions are met, though this is a discretionary remedy and is not to be relied upon as a safety net.

Practical Tips for Executors

A practical checklist for meeting fiduciary obligations 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 keep estate funds separate from personal money except where a lawful accounting arrangement requires otherwise.
• 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.

Executors carry duties of loyalty, care and proper purpose. Acting unilaterally, failing to disclose a conflict, blending estate funds with personal money or leaving beneficiaries uninformed can expose an executor to complaint or removal. Obtaining early advice can help executors identify and address issues before they escalate.

For executors and beneficiaries alike, understanding the fiduciary nature of the role is an important starting point for a properly administered estate.

Frequently Asked Questions