The Executor’s Duty of Loyalty

The executor had found a buyer for the deceased’s house.

The offer was lower than expected, but it came from the executor’s daughter. There would be no advertising campaign, no open homes and no waiting for an unknown purchaser. The executor believed it was a sensible arrangement. The property would stay in the family, and the estate could be completed quickly.

The beneficiaries saw it differently.

They wanted to know how the price had been calculated, whether better offers might have been available and why the family connection had not been disclosed immediately.

The executor had not necessarily intended to cause a loss. However, the proposed sale illustrated one of the most important principles in estate administration: an executor must not use control of an estate to advance personal interests at the expense of the people legally entitled to it.

This responsibility is often described as a fiduciary duty.

In practical terms, it requires an executor to act loyally, honestly, impartially and for proper estate purposes. The executor must protect the property, follow the valid will, pay lawful debts and distribute the remaining estate to the correct beneficiaries.

The position carries authority, but it does not give the executor ownership of the estate or freedom to make decisions based on personal preference.

## What Is a Fiduciary Duty?

A fiduciary is a person entrusted to act for others in circumstances involving confidence, discretion and control.

An executor occupies that kind of position because they may control:

– Bank accounts
– Investments
– Land
– Vehicles
– Personal belongings
– Business interests
– Insurance proceeds
– Information about debts and beneficiaries

The executor’s role is to gather and administer those assets, deal with claims and liabilities, and distribute the remaining property according to the will. citeturn863497search1turn863497search15turn863497search16

The executor does not become the beneficial owner of everything simply because probate has been granted. Estate property is held for the purposes of administration and for the people ultimately entitled to receive it.

A fiduciary duty therefore affects both what the executor does and how decisions are made.

## Acting in the Beneficiaries’ Best Interests

The phrase “best interests of the beneficiaries” can be misunderstood.

It does not mean giving beneficiaries whatever they request. A beneficiary may want an immediate payment, even though tax remains unpaid. Another may demand that the house be retained, while the estate needs cash to meet debts.

Acting properly may require the executor to refuse both requests.

The executor’s duty is to administer the estate lawfully for the benefit of all those entitled, while also recognising the prior rights of creditors, tax authorities and valid claimants.

That usually means:

– Preserving estate value
– Avoiding unnecessary expenses
– Collecting assets promptly
– Investigating debts
– Paying liabilities before distributing the residue
– Obtaining reasonable values
– Considering credible estate claims
– Following the will
– Avoiding improper preference between beneficiaries

Before money or property can be distributed, the executor must identify estate debts, pay tax obligations and address claims affecting the estate. citeturn863497search15turn863497search16

A beneficiary’s impatience does not change that order.

## Following the Will, Not Personal Ideas of Fairness

Executors sometimes believe their role includes correcting the will.

They may think one child deserves more, a charity received too much or a financially secure beneficiary does not need their inheritance. They may also know that the deceased regretted a particular gift but never updated the document.

Those beliefs do not normally authorise the executor to redesign the estate.

If the will is valid, the executor must distribute according to its terms unless a legal rule, binding agreement or court order changes the result. citeturn863497search27

The executor may explain the will, seek advice about an unclear clause and respond appropriately to legal claims. They cannot simply substitute their own moral judgement.

A beneficiary can choose to give away an inheritance after receiving it. That is different from an executor withholding or redirecting the gift without authority.

## Treating Beneficiaries Impartially

Impartiality does not always mean equality.

A will may leave one person a house, another a cash gift and a third the remaining estate. Those beneficiaries have different entitlements, and the executor must respect those differences.

Impartiality means the executor must not improperly favour one person while administering the estate.

Examples of unfair preference may include:

– Paying one beneficiary early because they are a close friend
– Allowing one relative to remove belongings before an inventory
– Giving one beneficiary private access to estate property
– Delaying another person’s payment out of personal dislike
– Selling an asset cheaply to a favoured family member
– Sharing confidential information selectively to influence a dispute
– Charging one beneficiary an expense that properly belongs to the estate

The executor should use the same standards for everyone.

Where a decision affects beneficiaries differently, the executor should be able to explain why the decision was based on the will, estate needs or reliable professional advice rather than personal allegiance.

## Recognising Conflicts of Interest

A conflict of interest arises when an executor’s personal interests may compete with their estate duties.

This is common because executors are often also:

– Beneficiaries
– Surviving partners
– Adult children
– Business partners
– Creditors
– Co-owners of property
– Occupants of the deceased’s home

Being both executor and beneficiary is not automatically improper. Many wills deliberately appoint a family member who will also inherit.

The problem arises when the executor uses the role to benefit themselves unfairly or fails to manage the conflict transparently.

Examples include:

– Buying an estate asset below market value
– Living in an estate home without paying appropriate expenses
– Repaying an alleged personal debt without evidence
– Charging unauthorised fees
– Choosing a sale method designed to favour themselves
– Withholding information about an asset
– Settling a claim in a way that protects their inheritance rather than the estate

A conflict should be identified before the decision is made, not defended after someone discovers it.

## Buying Property From the Estate

An executor who wants to buy the deceased’s house, vehicle or valuable collection faces an obvious conflict.

They may be both the seller responsible for obtaining a proper estate outcome and the buyer hoping to pay the lowest price.

A careful process may require:

– Independent valuation
– Full disclosure to co-executors
– Independent handling of the sale
– Proper marketing or evidence that marketing is unnecessary
– Informed beneficiary agreement where legally appropriate
– Separate legal advice
– Court approval in a difficult case

Beneficiary consent is not always a complete answer. Creditors, absent beneficiaries, minors and potential claimants may also have interests that cannot be waived casually.

The transaction should be demonstrably fair rather than merely convenient.

## Protecting Estate Property

Fiduciary responsibility begins long before distribution.

An executor should take reasonable steps to prevent estate property from being stolen, damaged, uninsured or wasted.

This may include:

– Securing the deceased’s home
– Changing locks where necessary
– Controlling access
– Maintaining insurance
– Complying with vacancy conditions
– Photographing valuable items
– Creating an inventory
– Arranging urgent repairs
– Protecting vehicles and equipment
– Preserving business records
– Storing cash and jewellery securely

The executor is not an insurer against every accidental loss. Liability is more likely where a foreseeable danger was ignored or estate property was handled carelessly.

An empty home with unknown key holders requires more protection than an occupied home supervised by a surviving co-owner. The steps taken should reflect the actual risk.

## Making Careful Investment and Cash Decisions

An estate may hold money for months while property is sold, tax is calculated or claims are considered.

The executor should avoid both recklessness and neglect.

Leaving a large amount unsecured, exposing it to unnecessary risk or speculating with estate money can breach the duty to preserve value.

Executors should not:

– Gamble on shares or cryptocurrency
– Lend estate money to relatives
– Place funds in their own business
– Mix estate money with personal savings
– Chase unusually high returns
– Make investments inconsistent with the expected administration period

The aim is not to maximise returns at all costs. It is to preserve estate property prudently while retaining enough liquidity to pay expenses and distributions.

Where a will creates an ongoing trust, additional trustee obligations may apply after the ordinary administration phase.

## Keeping Estate Money Separate

Estate funds should be kept separate from an executor’s personal money.

Once formal authority is available, an estate account can be used for:

– Account balances collected
– Investment proceeds
– Property-sale proceeds
– Rent
– Refunds
– Insurance proceeds
– Estate expenses
– Creditor payments
– Beneficiary distributions

Mixing money creates tracing problems and can make innocent transactions appear suspicious.

Suppose an executor deposits $30,000 of estate funds into a personal account and then pays household bills from the same account. Even if the executor believes enough money remains, it becomes difficult to show which funds were used and whether the estate received all interest or income due to it.

Separation protects both the beneficiaries and the executor.

## Record-Keeping Is Part of the Duty

Good records are not optional housekeeping. They are evidence that the executor administered the estate properly.

The executor should retain:

– Bank statements
– Asset inventories
– Valuations
– Sale agreements
– Receipts
– Invoices
– Tax returns
– Creditor correspondence
– Insurance records
– Property inspection notes
– Beneficiary communications
– Legal advice
– Distribution calculations
– Proof of every payment

Maintain a transaction ledger showing:

– Date
– Amount
– Payee or payer
– Purpose
– Asset or expense category
– Supporting document
– Approval where several executors act

A future reader should be able to follow estate money from the deceased’s original assets to the final beneficiary payments.

## Preparing Estate Accounts

Before final distribution, the executor should prepare clear estate accounts.

These commonly show:

– Assets at the date of death
– Amounts collected
– Changes in value
– Income earned
– Property-sale proceeds
– Funeral expenses
– Administration expenses
– Debts
– Tax
– Professional fees
– Executor reimbursements
– Specific gifts
– Interim distributions
– The remaining balance
– Each beneficiary’s entitlement

Estate accounts explain why the final amount may differ from the value beneficiaries first imagined.

A house valued at $900,000 does not create a $900,000 residue if it carries a mortgage and incurs sale costs, maintenance, rates, legal expenses and tax-related work.

Transparent accounts can prevent suspicion from becoming litigation.

## Communicating Without Surrendering Control

Beneficiaries should receive meaningful information about the progress of the estate.

That does not require the executor to provide daily updates or seek a vote on every administrative decision.

Useful updates explain:

– What has been completed
– Which assets remain outstanding
– Whether probate has been granted
– Whether property is being sold
– What liabilities or tax matters remain
– Whether a claim affects distribution
– When the next update will be provided

Avoid promising an exact distribution date unless every material uncertainty has been resolved.

The executor may hold sensitive financial, family and legal information. Disclosure should be relevant and measured rather than indiscriminate.

The executor’s lawyer ordinarily acts for the executor in that representative capacity, not automatically for every beneficiary. Beneficiaries may need separate advice where their interests diverge.

## Reimbursing Expenses Without Taking Profits

An executor may incur legitimate expenses while administering the estate.

Examples include:

– Document fees
– Travel for estate business
– Locksmith charges
– Postage
– Property maintenance
– Storage
– Necessary professional services

Reasonable expenses can generally be reimbursed from estate funds when supported by evidence.

That is different from paying oneself for time.

An executor should not decide privately that the work was worth a particular amount and withdraw it from the estate. Entitlement to remuneration may depend on the will, beneficiary agreement, statutory powers or a court order.

Secret or poorly documented payments create both conflict and accounting problems.

## Avoiding Premature Distribution

A fiduciary must protect the estate from foreseeable liabilities.

Before distributing, the executor should consider:

– Known debts
– Tax
– Funeral and administration costs
– Unresolved ownership questions
– Relationship-property rights
– Family-protection claims
– Testamentary-promises claims
– Will-validity disputes
– Property-sale expenses
– Final professional fees

Paying beneficiaries too early can leave the estate unable to meet a later claim.

If beneficiaries refuse or are unable to return the money, the executor may face personal exposure.

An interim distribution may sometimes be appropriate, but only where the estate is clearly solvent and a conservative reserve is retained.

## Responding to Mistakes Openly

Even careful executors can make errors.

A minor accounting mistake does not necessarily amount to serious misconduct. The response matters.

After identifying a problem, the executor should:

1. Stop any affected transaction.
2. Preserve all records.
3. Inform co-executors.
4. Calculate the possible loss.
5. Obtain appropriate advice.
6. Correct the accounts.
7. Disclose the issue where necessary.
8. Avoid further distribution until the position is clear.

Concealment can turn an honest mistake into a breach of trust.

Do not alter records, create retrospective invoices or move money between accounts to make the original transaction less visible.

## What Happens When Fiduciary Duty Is Breached?

Consequences depend on the nature of the conduct and whether the estate suffered loss.

An executor may be required to:

– Repay misused funds
– Restore lost estate value
– Account for personal profits
– Return unauthorised remuneration
– Pay interest
– Provide formal accounts
– Compensate beneficiaries
– Pay some legal costs
– Be removed or replaced

Not every disagreement proves a breach. A house selling below a later market peak does not automatically mean the executor acted improperly. The question is whether the process and decision were reasonable at the time.

An executor with proper valuations, recorded advice and documented reasoning is in a much stronger position than one who says, “I thought it was probably fine.”

## A Practical Fiduciary Decision Test

Before making a significant estate decision, ask:

### Is this authorised?

Check the will, probate, relevant law and any court order.

### Is this for a proper estate purpose?

The decision should help collect, preserve, manage or distribute estate property.

### Does anyone involved have a conflict?

Identify relationships and personal interests before proceeding.

### Is the process fair?

Obtain valuations, compare options and involve co-executors where necessary.

### Can the decision be explained?

Keep enough evidence for beneficiaries, creditors or a court to understand the reasoning.

### Is the transaction recorded?

Every payment, transfer and approval should leave a reliable paper trail.

Fiduciary duty is not an abstract legal phrase reserved for courtroom disputes. It appears in ordinary decisions: who holds the keys, how a house is sold, whether an expense is reimbursed and when beneficiaries are paid.

The executor fulfils that duty by making each decision as a custodian of another person’s estate, not as its new owner.

## Frequently Asked Questions

### 1. Is an executor a fiduciary in New Zealand?

Yes. An executor occupies a position of trust and must administer estate property loyally and for proper purposes. The executor must follow the will, protect assets, pay valid liabilities and distribute the remaining estate correctly.

### 2. Must an executor do whatever beneficiaries request?

No. The executor must consider beneficiaries’ rights but must also pay debts, deal with tax, preserve assets and address legal claims. A request can be refused where complying would expose the estate to risk or conflict with the will.

### 3. Can an executor also be a beneficiary?

Yes. This is common and not automatically a conflict that prevents appointment. The executor must still act impartially and must not use the role to obtain an unauthorised advantage.

### 4. Can an executor buy an estate asset?

Potentially, but the conflict must be managed carefully. Independent valuation, full disclosure, separate decision-making and professional advice may be required to show that the transaction is fair to the estate.

### 5. What records must an executor keep?

The executor should keep asset schedules, bank statements, valuations, invoices, receipts, tax documents, sale records, creditor correspondence, beneficiary communications and proof of every distribution.

### 6. Can an executor reimburse personal expenses?

Reasonable expenses properly incurred for estate administration can generally be reimbursed when supported by receipts and records. Reimbursement is different from taking payment for time or effort.

### 7. What happens if an executor favours one beneficiary?

Improper preference can amount to a breach of duty. The executor may need to reverse the transaction, restore estate value or compensate affected beneficiaries, depending on the circumstances.

### 8. Can an executor be personally liable for breaching fiduciary duty?

Yes. Personal liability may arise where the executor causes loss through misuse of assets, unmanaged conflicts, premature distribution, careless administration or another serious breach. The precise consequences depend on the conduct and loss involved.