In our recent article about applications for letters of administration de bonis non (which you can read here), we talked about who is entitled to apply to run the estate. Letters of administration de bonis non is quite a complex application and our article wasn’t able to go into extreme detail on any one part of it – otherwise, it would have probably been too long! However, it occurred to me that it is a valid question (that we often receive) to ask who is entitled to apply to run the estate where the person who has died has not appointed anyone to do so (or the people who have been appointed cannot or will not perform their role).
When the person appointed to run the estate has been appointed in a will, they are called the executor, and when they have been appointed where there was no will, they are called the administrator. For a handy comparison between probate (where you have an executor) and letters of administration (where you have an administrator), see our article on that subject here.
There are many situations where this issue comes up, such as:
- letters of administration de bonis non where something has happened to the people who were appointed part way through their administration of the estate so they can no longer fulfil their roles;
- simple letters of administration where the person who has died never wrote a valid will; and
- letters of administration with will annexed where the person who has died did write a valid will, but all of the executors under that will have died, lost mental capacity or are unwilling to take up the role of executor.
There are two main situations to deal with:
- where there is a will (but for some reason none of the people listed in the will are willing or able to apply for probate and become the executors); and
- where this isn’t a will.
When there is a will
When there is a will, there are two main options:
- chain of representation; and
- the beneficial interest in the estate.
Chain of representation
The first and best option is that, if the executor appointed in the will has died and that executor who has died has appointed their own executor for their estate, their executor can act in the shoes of the executor who has died to administer this estate.
This is called the chain of representation.
This only works when the executor who has died made a will to appoint their executor and that executor becomes the executor by successfully applying for probate. If the executor who has died did not have a will or there was no one willing or able to apply for probate, then “the chain of representation is broken” so to speak and this option cannot be used.
Beneficial interest in the estate
When the chain of representation does not apply, the court prefers to allow the people who are entitled to most of the assets of the estate to run the estate.
This is quite an understandable principle in that the people who are entitled to receive the bulk of the estate are likely to be the best people to run the estate because they have their own interests at heart.
When there is a will, then the will sets out who receives what in the estate and this is simple to work out.
When there isn’t a will
When there isn’t a will, chain of representation cannot be used, so the question goes straight to who has the most beneficial interest in the estate.
When someone has not written a will, the government has essentially written a will for them in a piece of legislation called the Administration Act and this has a list of who receives what which starts at the top with the spouse or de facto partner and children and goes all the way down to nieces and nephews, grandparents and cousins if there is nobody else.
Working through this list, one can find out who has the largest beneficial entitlements to the assets of the estate.
The court’s discretion
Unless there is a will where the person who has died has appointed people to be their executors, there is no absolute right to become the administrator and the court has the discretion to decide what is in the best interests of the estate.
If two or more people have the same entitlement to the assets of the estate (or someone wishes to apply where there are people with a bigger entitlement than they have), then whichever of them wish to apply to become the administrators of the estate will need the consent of the people with a greater or the same entitlement as they do.
A situation where this court discretion is most often needed is when more than one person is wanting to apply as above, and they cannot agree who should apply. It is then up to the court to decide who it considers to be the best administrator in the interests of the estate.
The court has some basic rules that it follows in making that decision:
- lineal descendants are preferred to lineal ancestors;
- relatives who are related fully by blood are preferred to relatives who are only half – blood;
- the interests of the majority are preferred to the interests of the minority;
- a sole administrator is preferred to more than one administrator (because the administrators must always act with each other and agree with each other and in this situation, they already don’t agree, so asking them to work together is unlikely to work out well);
- someone who is a person of business is preferred to someone who has no skills in business (because a lot of estate administration has parallels to the business world);
- the party who applies first is favoured; and
- an older administrator is preferred to a young one provided the choice is not against the interests of the majority.
When an estate is struggling with debts, the administration can even be granted to a creditor in some circumstances.
In the end, the court will appoint whoever the court feels will do the best job in administering the estate.
For more information
If you are struggling with working out who should run an estate in a scenario like those described above, please get in touch with our probate specialist Jenny Lowe on 04 916 0153 for assistance.