The powers and obligations of an executor change after a grant has been obtained and also depend on whether the “administration period” is ongoing or whether it has ended.
The administration period starts from the moment of death of the deceased and finishes once the executor has both obtained a grant and paid any debts or other liabilities payable from the deceased’s BVI assets (if any). Since BVI estates of persons domiciled outside the BVI are often very simple, with few debts or liabilities other than legal fees, the administration period will essentially end soon after a grant has been obtained.
Prior to obtaining a grant, the executor’s powers are quite limited. For example, the executor is unable to transfer any shares held by the deceased to the beneficiaries of the estate until a grant has been obtained.
We explain below the powers and corresponding obligations of executors after a grant has been obtained.
Powers of an executor
Once an executor has obtained a grant, the executor has a variety of powers. The executor can essentially act as if they are the deceased ie as the absolute owner of the deceased’s property. By way of illustration the Executor can:
- collect assets;
- pay debts;
- run companies; and
- instruct nominees.
Powers in relation to companies
Where the deceased owned shares in a company, an executor is able to exercise the deceased’s rights as shareholder. These rights may allow the executor to replace the director(s) of the company, including by appointing the executor as a director. If appointed as director, the executor can exercise all the usual powers of a director according to the company’s memorandum and articles of association. Such powers may, depending on the provisions of the company’s memorandum and articles of association, include commencing Court proceedings on behalf of the company, representing the company in conversations with banks, or changing the registered agent of the company, amongst other things.
However, BVI law also allows an executor to transfer shares in a company directly to the beneficiaries, without an intermediate transfer to the executor and in most estates this is what happens.
Powers where assets were held under a nomineeship
Depending on the terms of any nominee agreement, an executor may instruct the nominee to substitute the executor as the beneficial owner of the nominee assets and thereafter exercise the rights of the beneficial owner, such as to replace the nominee. However, the executor may also instruct the nominee to substitute the beneficiaries of the estate as the beneficial owners and, in circumstances where the estate is a simple one (ie without debts and liabilities), the executor should do so.
Communications with beneficiaries
There is no strict duty to inform beneficiaries of their entitlement during the administration period, and many executors do not consider it is necessary to inform those beneficiaries who are only entitled to a small sum of their entitlement.
Likewise, executors are not strictly required to consult with beneficiaries regarding any act carried out during the administration period.
If there is a risk of litigation by beneficiaries in relation to the estate, executors will often consult with major beneficiaries before taking substantial steps so as to minimise the risk of a claim by a beneficiary later on.
Accounts of executorship
In making an application for a grant of probate in the BVI, an executor must undertake to “render a just and true account of my executorship whenever required by law to do so”. In practice, such accounts are rarely required. Nonetheless, the executor must be in a position to account accurately for their administration of the assets if called upon to do so.
Accounting for an executorship would require a valuation of the BVI assets as at the date of the deceased’s death and a valuation of the assets as at the end of the administration period.
An executor is not permitted to charge for their personal time unless authorised by the deceased’s will or the Court. However, an executor may seek payment from the estate for costs incurred by them in relation to their duties, including:
- taking the opinion of legal counsel concerning any matter related to the duties of the executor; and
- employing agents in any part of the world including lawyers or accountants to transact any business in connection with the executor’s duties.
The executor’s costs are taken from the estate before the residue is divided among the beneficiaries. It is not necessary to confirm the quantum of the costs with beneficiaries before paying those costs out of the estate.
If there is a risk that the beneficiaries may later challenge the costs incurred (eg as unreasonably incurred or unreasonable in quantum), it may be advisable for an executor to seek the beneficiaries’ agreement to costs to avoid a dispute later on.
An executor may become personally liable or accountable from their own assets if they violate or neglect their duties in respect of the estate. They owe duties to preserve the assets, to deal with them properly, and to apply them in the due course of administration for the benefit of those interested.
If they breach any of those duties and cause loss to the estate, they are guilty of a “devastavit” and may be personally liable to make good the loss caused to the estate. An executor can be guilty of a devastivit through:
- deliberate abuse (eg using estate assets to pay their personal debts);
- negligence (eg needlessly delaying the payment of a debt and incurring interest, or paying a claim they were not legally required to satisfy).
An executor will not be liable for the actions of another person that causes loss to the estate if the executor was unable to prevent those actions.
An executor has an “executor’s year” from the date of death to administer the estate. After that year, they must be able to show a valid reason for the delay in realising the estate.
Of course in practice most international estates take longer than a year to administer because the executor may need to obtain grants in multiple jurisdictions, and so Courts tend to be lenient towards executors who can show they have acted reasonably, particularly in complex estates. Further, if a beneficiary later sought compensation on the basis of any delay, that beneficiary would need to demonstrate that the delay in fact caused the loss before the executor will be personally liable.
Rights and obligations after the administration period
Once the Executor has obtained the grant and has paid any debts or other liabilities payable from the BVI assets (if any), they are ready to transfer the estate to the beneficiaries (or in the case of a nominee agreement, instruct the nominee to transfer the beneficial ownership of the assets). At this point the administration period ends.
The powers and obligations of the executor after the administration period are governed by the laws of the place of the deceased’s domicile. For example, if the deceased died domiciled in Hong Kong, Hong Kong law would govern the executors’ powers and obligations. Therefore, matters such as to whom the executor must distribute the BVI assets, and in what proportions, would also be governed by Hong Kong law.