You’ve been appointed executor. The will is lodged, probate is pending, and now the bills start arriving: solicitors, accountants, valuation reports, property agents. Your first instinct is to reach for your own wallet. But should you?
The answer depends on something most people have never heard of: the executor’s right of indemnity.
It’s not a personal benefit or a bonus. It’s the legal mechanism that allows you to do the job without funding the estate from your own pocket. But there’s a boundary. Cross it, and you’re paying personally.
Most executors discover this boundary when it’s already too late.
Key Takeaways
- Right of indemnity is not automatic reimbursement: you can recover costs from the estate only if the expense was properly and reasonably incurred in administering the estate
- Proper estate costs are covered: legal fees, probate costs, valuations, agent fees, and professional advice necessary for administration
- Personal or unreasonable costs are excluded: expenses tied to your own interests, avoidable disputes, or conduct that breaches your duties are not recoverable
- Estate assets fund the right first: your indemnity operates against estate assets, not a personal claim you can enforce elsewhere
- Beneficiaries can challenge costs: if they believe expenses were improper, unreasonable, or unnecessary, they can object and force you to justify the claim
- Document every decision: keep records of why each cost was incurred, what advice supported it, and how it served the estate’s interests
What the Executor’s Right of Indemnity Actually Means
It means this: when you incur a cost in the proper administration of the estate, you can recover that cost from estate assets.
Not might. Can.
The right sits at the intersection of trust law and practical necessity. An executor is not expected to bankroll someone else’s estate. The law recognises that proper administration costs money: solicitors to obtain probate, accountants to prepare estate tax returns, agents to sell property, valuations to distribute assets fairly.
The right applies whether the cost is an expense you’ve already paid (reimbursement) or a liability you’ve incurred on behalf of the estate (indemnity for future payment). Either way, the estate bears the burden.
But only if the cost was properly incurred.
That phrase, “properly incurred”, is where most disputes live.
The executor’s right of indemnity is not a blank cheque. It is a mechanism that protects you when you act appropriately, and exposes you when you do not.
Where Does the Right Come From?
The right of indemnity is both an equitable principle and, in some states, a statutory entitlement.
At equity, it’s a long-standing rule that trustees and personal representatives are entitled to be reimbursed for costs properly incurred in the execution of their duties. Courts have recognised this principle for centuries because without it, few people would agree to take on the role.
In several Australian jurisdictions, legislation reinforces the right. Victoria’s Trustee Act allows an executor to reimburse proper costs from the estate. Queensland, South Australia, and other states have similar provisions. New South Wales relies more heavily on the equitable principle but recognises the right through case law and the Probate and Administration Act framework.
The practical effect is the same: you can recover proper costs. The source of the right varies by state, but the boundary between what’s proper and what’s not is remarkably consistent.
Can you describe, in one sentence, the last major expense you incurred on behalf of the estate and why it was necessary?
If you can, you’re probably within the boundary. If you can’t, that’s a warning sign.
Before engaging any professional or incurring a significant cost, ask yourself whether a reasonable beneficiary, knowing all the facts, would agree this expense serves the estate’s interests. If the answer is uncertain, document your reasoning or seek judicial advice.
What Expenses Are Usually Covered
Proper estate expenses fall into categories. Understanding these helps you distinguish between costs the estate should bear and costs that cross the line.
Probate and administration costs. Solicitor fees to prepare the application for probate, lodge the will, obtain the grant, and advise on basic administration steps. Court filing fees. Advertising for creditors if required. These are textbook examples of properly incurred costs.
Professional advisers necessary for administration. An accountant to finalise the deceased’s tax return and prepare estate accounts. A valuer to determine the market value of real property or shares. An actuary to value a defined benefit superannuation interest. Each of these serves a clear estate purpose.
Property management and sale costs. Real estate agent fees, conveyancing fees, and necessary repairs to maintain or prepare a property for sale. If the estate includes rental property, costs to manage tenants and collect rent until the property is distributed or sold.
Defending or pursuing proper estate claims. If a creditor makes a claim against the estate, and you engage solicitors to assess and respond, those legal fees are properly incurred. If a beneficiary challenges the will and you must defend the estate’s position, your costs of doing so are generally recoverable.
Insurance and statutory obligations. Public liability insurance on estate property. Workers’ compensation if the estate employs someone. Statutory lodgements and compliance where the deceased carried on a business.
The common thread: each cost is incurred because the estate needs it, not because you need it.
If the expense advances the administration, protects estate assets, or discharges a legal obligation the deceased left behind, it is likely within the boundary. If it serves your personal interests or responds to a dispute you caused, it is not.
What Expenses Are Usually Not Covered
Now the other side of the boundary.
Your own time. The right of indemnity does not cover payment for your time or effort unless you are a professional trustee or the will specifically grants you commission. You can recover out-of-pocket costs, but not your labour.
Personal legal advice. If you engage a solicitor to advise you on your personal exposure, your rights as a beneficiary, or a separate dispute with another beneficiary, those fees are yours. The estate does not fund advice that protects your interests rather than the estate’s.
Costs of unreasonable conduct. If you litigate a dispute you should have settled, pursue a claim with no reasonable prospects, or refuse to follow clear advice, the costs of that stubbornness are personal. Courts will disallow indemnity where the executor’s conduct was unreasonable, even if the initial decision to act was proper.
Costs tied to a breach of duty. If you distribute assets prematurely and a creditor later claims, the cost of defending that claim may be yours. If you fail to obtain proper valuations and beneficiaries dispute the distribution, the cost of rectifying the error is likely personal.
Mixed family and estate issues. You are both executor and a beneficiary, and a dispute arises about the interpretation of the will. Your solicitor’s fees may be partly recoverable (the estate component) and partly personal (your beneficiary interest). Courts expect you to separate the two and charge the estate only for the administration element.
The real risk is not that you incur a cost and fail to claim it. The real risk is that you pay a cost from the estate, a beneficiary objects, and the court orders you to reimburse the estate personally.
That’s not theoretical. It happens.
The executor’s right of indemnity protects proper administration. It does not shield you from the consequences of poor judgment, self-interest, or breach of duty.
How the Right Differs from Executor Commission and Fees
People often confuse three separate entitlements: reimbursement of expenses, indemnity for liabilities, and executor commission.
The right of indemnity covers the first two. Commission is different.
Reimbursement means you’ve paid a cost personally and you recover it from the estate. You engage a valuer, pay the invoice, then reimburse yourself from estate funds.
Indemnity means you’ve incurred a liability on behalf of the estate and the estate discharges it directly. You instruct solicitors, they bill the estate, and the estate pays the invoice.
Commission is payment for your work and time. In some states, you may be entitled to a small percentage of the estate’s value as compensation for the effort of administration. This is not indemnity. It’s a fee.
Many executors assume they can claim both commission and reimbursement of all costs. You can, but they’re separate claims. And commission is far from automatic. In New South Wales and Victoria, commission is rare and usually requires court approval or agreement from all beneficiaries. In Queensland and South Australia, modest rates are more commonly recognised.
If you claim commission, you must justify it by reference to the time, complexity, and skill involved. If you claim indemnity for costs, you must prove the costs were properly incurred. One does not justify the other.
Can you distinguish between the cost of a solicitor’s advice to the estate and the value of your own time spent implementing that advice?
If you cannot, you’re at risk of conflating commission and indemnity.
Keep separate records for expenses you’ve paid or arranged on behalf of the estate, and time you’ve spent administering it. The first may support an indemnity claim. The second may support commission. Do not treat them as the same entitlement.
What Happens in a Disputed or Litigious Estate
Disputes change everything.
When the estate is uncontroversial, the right of indemnity operates quietly in the background. You pay costs, reimburse yourself, and no one objects. But when litigation arises, whether a contested will, a family provision claim, or a dispute about administration, the costs escalate and so does scrutiny.
Defending estate claims. If a family provision claim is brought against the estate, you’re expected to defend it on behalf of all beneficiaries. Your legal costs of doing so are properly incurred and recoverable from the estate. Even if the claim succeeds and the estate must pay the claimant, your costs of defending remain an estate expense unless your conduct was unreasonable.
Pursuing estate claims. If the estate has a claim against a third party, whether to recover a debt, challenge a transaction, or enforce a contract, you can engage solicitors to pursue it. The costs are recoverable if the claim is reasonably brought. If the claim fails, you may still recover costs unless the court finds the litigation was imprudent or unjustified.
Disputes between beneficiaries. This is where the boundary blurs. If beneficiaries dispute the interpretation of the will or the correct method of distribution, your role is to seek judicial advice or act neutrally. Your costs of doing so are recoverable. But if you take sides, advocate for one beneficiary over another, or pursue a position that serves your personal interest, your costs become personal.
Unreasonable litigation. If you refuse a reasonable settlement offer, pursue a hopeless claim, or litigate out of stubbornness rather than prudence, a court can disallow indemnity for some or all of your costs. The test is whether a reasonable executor, properly advised, would have acted as you did.
Litigation is expensive. The right of indemnity lets you defend and protect the estate without personal financial ruin. But it is not a shield against bad decisions.
You can recover costs of properly defending or pursuing claims on behalf of the estate. You cannot recover costs of advancing your own interests, taking unreasonable positions, or ignoring clear advice.
When Beneficiaries Can Challenge Your Claim for Costs
Beneficiaries are not passive. If they believe you’ve overcharged the estate, acted unreasonably, or claimed costs that should be yours personally, they can object.
Objections usually take three forms.
Disputing whether the cost was necessary. A beneficiary questions whether you needed to engage a particular adviser, obtain a specific report, or pursue a course of action. They argue the expense was discretionary, excessive, or served no estate purpose. You must then justify the decision by reference to the circumstances at the time.
Challenging the reasonableness of the amount. The beneficiary accepts the cost was incurred but argues the amount is too high. Solicitor fees, in particular, attract this kind of challenge. Courts will assess whether the fees were proportionate to the work, the complexity, and the outcome.
Alleging breach of duty. The beneficiary claims the cost arose because you breached your duties as executor. You failed to obtain advice, acted precipitately, or ignored an obvious risk. If the breach is proven, the court may deny indemnity and order you to repay the estate.
Beneficiaries can raise objections during the administration, when you seek their approval for a course of action, or later when you prepare estate accounts for approval. They can also apply to the court for an order that you justify the costs or repay amounts improperly charged.
The onus is on you to prove the costs were properly incurred. Courts do not assume every invoice is legitimate. You must show the work was necessary, the expense was reasonable, and the cost served the estate’s interests.
How would you respond if a beneficiary asked you to explain, line by line, why each professional fee was charged to the estate?
If that question makes you uncomfortable, your record-keeping may not be adequate.
Maintain contemporaneous records of every major decision, the advice you received, and the reason for each significant expense. If challenged, you need to show not just that you paid the cost, but why it was proper to do so at the time.
Costs in Estate Litigation: Indemnity Basis vs Party-Party Basis
When litigation involves the estate, the question of costs has an extra layer: what basis does the court apply?
Indemnity basis. If you’re defending or pursuing a claim on behalf of the estate, and your conduct is proper, courts often award costs on an indemnity basis. This means the estate recovers a higher proportion of its actual legal costs, subject to the test of reasonableness. The indemnity basis is more generous than the standard party-party basis.
Party-party basis. If the court finds your conduct was not entirely proper, or if you pursued a position that mixed estate and personal interests, costs may be awarded on the party-party basis. You recover less, sometimes significantly less.
No order for costs. In some estate disputes, particularly will challenges involving genuine ambiguity or family provision claims, courts may order that each party bear their own costs or that all costs come out of the estate. The rationale is that the dispute was caused by the deceased’s drafting or circumstances, not the parties’ conduct.
The critical point: even if you win the litigation, if the court finds your conduct unreasonable, you may be denied full recovery of your costs. Conversely, even if you lose, you may still recover costs if your decision to litigate was reasonable at the time.
This is where early advice matters. A solicitor can tell you whether the position you want to take is defensible, whether the cost is proportionate to the issue, and whether a court is likely to view your conduct as proper.
Winning the dispute does not guarantee full recovery of costs. The court assesses whether your conduct throughout the litigation was reasonable, prudent, and consistent with your duties as executor.
What to Do Before You Pay Costs from the Estate
You avoid disputes by acting deliberately, not reactively.
Before you pay any significant cost from estate funds, ask yourself these questions:
Is this cost necessary for the administration of the estate? Can you point to a specific task, obligation, or decision that requires the expense? If the answer is vague or self-serving, do not proceed without advice.
Is the amount reasonable? Have you compared quotes, considered alternatives, or assessed whether the cost is proportionate to the benefit? Courts expect executors to act prudently with estate money, as they would with their own.
Have I documented the reason for this expense? Write a file note, keep the email chain, record the advice you received. If challenged later, you need evidence of your reasoning at the time, not a reconstruction months later.
Is there a conflict between my interests and the estate’s interests? If the cost relates to a dispute in which you’re also a beneficiary, or advice that protects your position, separate the estate component from the personal component. Charge only the former to the estate.
Should I seek judicial advice before proceeding? If the expense is large, the risk is high, or beneficiaries are likely to object, consider applying for judicial advice. The court can approve the course of action in advance, giving you protection from later challenge.
If you cannot answer these questions confidently, stop. Seek advice before you commit the estate to the cost.
The right of indemnity protects you when you act properly. It does not rescue you when you act carelessly.
If a beneficiary asks, “Why did you do that?”, and you do not have a clear answer supported by advice or documentation, you have a problem. Build the answer before you make the decision, not after the objection arrives.
How Judicial Advice Works and When to Use It
Judicial advice is one of the most underused tools available to executors.
It allows you to ask the court, before you act, whether a proposed course is proper. If the court approves, you’re protected from later claims that the decision was a breach of duty or the costs were improperly incurred.
When to consider judicial advice. Large or contentious decisions: selling estate property at a particular price, distributing assets when the will’s meaning is unclear, pursuing or settling litigation, engaging in a transaction that benefits one beneficiary more than others. If the decision is likely to attract criticism or involves significant cost, judicial advice can pre-empt disputes.
What the court will do. The court examines the proposed action, the executor’s reasoning, and whether the decision is consistent with the executor’s duties. If satisfied, the court makes an order approving the action. That order protects you from personal liability, provided you act in accordance with it.
The cost of judicial advice. Yes, applying for judicial advice costs money: solicitor fees to prepare the application, court filing fees, possibly a barrister if the issue is complex. But compare that cost to the cost of defending a beneficiary’s claim later that you breached your duties. Judicial advice is insurance.
Limits of judicial advice. The court will not approve action that is clearly improper, conflicts with the terms of the will, or breaches the executor’s duties. Judicial advice is protective, not permission to do whatever you want.
If you’re facing a decision where reasonable minds could differ, where the stakes are high, or where beneficiaries have already signalled objections, judicial advice is the prudent path.
Judicial advice is not an admission of weakness. It is a sign of prudent administration. Courts respect executors who seek guidance on difficult decisions rather than ploughing ahead and hoping for the best.
State and Territory Variations: What Changes and What Does Not
The broad principle is the same across Australia: executors can recover properly incurred costs from the estate. But the source of the right, the way it is framed, and some procedural details vary by jurisdiction.
Victoria. The Trustee Act provides a statutory right for trustees and executors to reimburse proper costs from trust or estate property. Courts apply this alongside the equitable principle. Executor commission is rare and requires court approval or unanimous beneficiary consent.
New South Wales. The right is primarily equitable, reinforced by provisions in the Probate and Administration Act. Judicial advice is available through the Supreme Court. Executor commission is uncommon and typically requires a court order.
Queensland. The Trusts Act grants trustees and executors a right of indemnity for costs properly incurred. Modest executor commission is more commonly recognised, but still requires justification. The Supreme Court can grant judicial advice.
South Australia. The Trustee Act includes similar indemnity provisions. Executor commission at modest rates is more accepted than in New South Wales or Victoria. Courts assess commission by reference to the estate’s size, complexity, and the executor’s effort.
Western Australia and other jurisdictions. Comparable legislative frameworks exist, with minor variations in wording and procedure. The substantive test (properly incurred, reasonable, in the interests of the estate) is consistent.
Practical takeaway. If you’re administering an estate in Victoria, Queensland, or South Australia, the statutory provisions give you a clear textual basis for the right. In New South Wales, rely more heavily on equitable principles and case law. Either way, the boundary between proper and improper costs is the same.
The principle is national. The statute that names it varies by state. Focus on whether the cost was properly incurred, not on which section of which Act applies.
What Happens When the Estate Is Insolvent or Illiquid
The right of indemnity assumes there are assets to indemnify from. When the estate is insolvent or illiquid, the right is tested.
Insolvent estates. If the estate’s liabilities exceed its assets, the executor is still entitled to proper administration costs, but those costs rank in the order of priority for estate debts. Funeral expenses and administration costs generally rank ahead of ordinary creditors. Your right of indemnity does not evaporate, but it competes with other claims. You may recover only part of what you’re owed, or nothing if the estate is exhausted.
Illiquid estates. If the estate’s only significant asset is real property and it takes months to sell, you may incur costs that cannot be reimbursed immediately. Your right of indemnity is preserved; you simply must wait until the property sells and funds become available. Some executors pay costs personally in the interim and reimburse themselves later. Others arrange for solicitors and other professionals to wait for payment until settlement.
Can you be personally liable if the estate cannot pay? Generally, no. If you’ve acted properly and the costs were properly incurred, your liability is limited to estate assets. The creditor or professional cannot pursue you personally unless you gave a personal guarantee or acted in breach of duty. But if you’ve distributed assets to beneficiaries and a creditor later claims, you may be personally liable for distributing prematurely.
The practical lesson: assess the estate’s solvency early. If assets are marginal, obtain advice on the priority of debts and whether you should seek protection before incurring significant costs.
If the estate is insolvent or close to it, do not distribute to beneficiaries until all creditor claims are resolved and all administration costs are paid. Premature distribution exposes you to personal liability.
Deeds of Indemnity and Release: What They Are and When You Need Them
Sometimes, before taking a risky or contentious step, executors ask beneficiaries to sign a deed of indemnity and release.
What it is. A deed in which the beneficiaries agree to indemnify the executor for a specific action or class of actions, and release the executor from liability if the decision later proves costly or incorrect.
When it is used. When the executor must make a decision that is commercially sound but legally uncertain. For example, selling a property at a price that one beneficiary disputes, or distributing an asset in a particular way when the will’s wording is ambiguous. The deed gives the executor comfort that they will not be personally sued if the decision is later challenged.
What it does not do. It does not override the executor’s duties or excuse a breach. If you act improperly, a deed of indemnity from beneficiaries will not protect you from court scrutiny. And if a beneficiary signs under duress, misunderstanding, or without proper advice, the deed may be set aside.
Is it a substitute for judicial advice? No. Judicial advice is court approval of the action. A deed of indemnity is a private agreement with beneficiaries. The former protects you from court challenge; the latter protects you from beneficiary litigation. They serve different purposes, and sometimes you need both.
If beneficiaries refuse to sign a deed of indemnity, that refusal is a signal. It tells you the decision is contentious and you should not proceed without judicial advice.
Never treat a deed of indemnity as permission to act improperly. It is a risk management tool for borderline decisions, not a shield for breaches of duty.
What to Do If a Beneficiary Objects to Your Costs
You’ve administered the estate, prepared your accounts, and disclosed your costs. A beneficiary objects, claiming the legal fees are excessive or unnecessary. What now?
First, listen. Do not dismiss the objection. Ask the beneficiary to specify which costs they dispute and why. Sometimes the objection is based on misunderstanding; a clear explanation resolves it.
Provide detailed records. Give the beneficiary copies of invoices, a breakdown of what each professional did, and your reasoning for engaging them. Transparency often defuses objections.
Distinguish between quantum and propriety. Is the beneficiary saying the cost should not have been incurred at all, or that the amount charged is too high? If it’s the former, you must justify the decision. If it’s the latter, consider whether the invoice can be reviewed or negotiated down.
Consider mediation. If the objection persists, mediation can resolve it without court proceedings. A mediator can assess whether the costs were reasonable and broker a compromise.
If the beneficiary applies to court. The court will examine your records, the circumstances, and the advice you received. You must prove the costs were properly incurred. If you succeed, the beneficiary may be ordered to pay your costs of defending the application. If you fail, you may be ordered to repay the estate and bear your own costs.
The worst response is defensiveness. The best response is transparency, documentation, and a willingness to explain.
Objections are not personal attacks. They are a beneficiary exercising their right to scrutinise the administration. Respond with facts, records, and calm professionalism.
The Real Cost of Getting It Wrong
When executors misjudge the boundary between proper and improper costs, the consequences are not abstract. They are financial and personal.
You repay the estate. If a court finds you’ve claimed costs improperly, you must reimburse the estate from your own funds. If you’ve already distributed assets and the estate is exhausted, you pay the beneficiaries directly.
You lose credibility. Beneficiaries who trusted you to act properly lose that trust. Even if the error was innocent, it damages relationships. If you are also a beneficiary, it poisons your share of the inheritance.
You bear legal costs. Defending a challenge to your costs requires solicitors. If you lose, you pay both your own legal costs and, often, the beneficiary’s costs. The disputed amount may be modest; the legal bill to defend it can dwarf it.
You delay distribution. Disputes about costs delay finalising the estate. Beneficiaries wait longer for their inheritance. Tension escalates. The estate that should have been wrapped up in months drags on for years.
You face removal. In serious cases, beneficiaries can apply to remove you as executor. If the court finds you’ve breached your duties or acted improperly, it can replace you with a professional trustee or another person. You forfeit any commission you might have claimed and lose control of the administration.
The cost of a single poor decision, inadequate documentation, or failure to seek advice compounds quickly.
Compare that cost to the cost of obtaining advice early, keeping proper records, and acting transparently. The difference is obvious.
The executor’s right of indemnity is your protection when you get it right. When you get it wrong, it offers no shelter at all. The single best investment you can make is professional advice before you commit the estate to a significant cost.
What You Should Do Now
If you’re an executor facing costs, decisions, or disputes, the pathway forward is straightforward.
Assess the estate early. Understand the assets, liabilities, and likely administration costs before you incur them. If the estate is marginal or insolvent, seek advice on priorities and your exposure.
Document every major decision. Write down why you engaged a professional, what advice you received, and why the cost serves the estate’s interests. Contemporaneous records are your best defence.
Seek advice before acting. Litigation, property sales, disputes about interpretation, and large expenses all justify early legal advice. The cost of advice is small compared to the cost of rectifying a mistake.
Be transparent with beneficiaries. Keep them informed of significant steps and costs. Transparency reduces suspicion and objections.
Know when to seek judicial advice. If the decision is contentious, high-stakes, or legally uncertain, apply for judicial advice. The court’s approval protects you from later challenge.
Keep estate and personal interests separate. If you’re also a beneficiary, be scrupulous about distinguishing costs that serve the estate from costs that serve your own position. Charge only the former to the estate.
Litigation is complex, yes. Estate administration is demanding. But the pathway to protecting your right of indemnity is simple: act properly, document your reasoning, and seek advice when the decision is difficult.
The right lawyer will not just process the estate. They will help you navigate the decisions that expose you to risk, advise you on whether a cost is properly incurred, and give you confidence that your conduct will withstand scrutiny.
Clarity is the most powerful tool you can take into any executorship.
Important: This article provides general information only and does not constitute legal advice. The content is based on Australian law as at the date of publication. Every estate is different, and the application of legal principles depends on the specific facts and circumstances. If you are an executor facing decisions about costs, disputes, or your right of indemnity, you should obtain tailored legal advice before acting. Aptum Legal can assist executors and beneficiaries with estate disputes, judicial advice applications, and contested administration matters.
