When we meet with our clients to take instructions for a legal Will, the first thing we ask them to consider is someone they trust implicitly to carry out the role of executor once they pass on. While being appointed to carry out such an important role is a sign of the implicit trust and confidence of the deceased, the weight of the responsibility and the sheer number of risks and legalities to consider can often make serving as an executor feel like an imposition as best, or a punishment at worst.
If you find yourself in a situation where you have been entrusted to administer the estate of a friend, client or loved one, the information on this page is for you. It includes all the essential information that you need to know in order to gain a basic understanding of the estate administration process in Queensland.
The Executor’s Role
Your appointment as executor under the deceased’s Will means that in very basic terms, you need to:
- ‘Collect in’ the assets of the deceased;
- Pay out the liabilities of the estate;
- Manage the affairs of the estate pending distribution to beneficiaries; and
- Distribute the assets of the estate to the beneficiaries.
This appears to be simple enough, but as you will see below, there are numerous considerations involved in each of these steps. Furthermore, executors must comply with a number of important duties and responsibilities throughout the estate administration process, including:
- Carry out the wishes of the deceased as expressed in their Will;
- Act in the best interests of the estate and its beneficiaries;
- Maintain proper financial and other records relating to the estate administration;
- Protect and maximise the value of the estate assets pending distribution;
- Disclose conflicts of interest to the beneficiaries and obtain their written consent to relevant courses of conduct; and
- Communicate with beneficiaries to update them as to the progress of the administration.
One final important ‘spanner in the works’ is that where there is more than one executor of an estate, all executors should ensure that they jointly make any decisions relating to the estate administration.
Collecting in the Assets
‘Collecting in’ of assets refers to identifying and locating the assets of the deceased and transferring the legal ownership of the assets to the estate. In practice, this means transferring the assets to the executor in his or her separate and distinct capacity as executor of the estate. Executors should never mingle the funds or assets of the estate with their own!
One big-ticket category of asset which needs to be collected in are the proceeds of any bank accounts held by the deceased. This will generally include writing to the banks, filling out any required forms and statutory declarations, and requesting that the accounts are closed and their proceeds transferred to an account opened for the estate.
Another prominent category of asset to be collected in is superannuation and life insurance. While superannuation funds may have their own preferences as to whom death benefits are to be paid to, generally executors have a duty to request that such benefits are paid to the estate. This will require corresponding with the funds and fulfilling their paperwork requirements and it may also require liaising with other potential claimants of the superannuation death benefit.
A third major category of asset is any real estate holdings of the deceased. These must be transferred to the estate using a specialised conveyancing procedure.
Selling major estate assets like houses or cars to collect sale proceeds is another major component of the collecting in process which can involve specialised procedures and dealings with various government and taxation bodies.
When dealing with any of the above categories of assets (and many more), you will find that the institutions you are dealing with will often require that you obtain a Grant of Probate. This is a paper certification from the court proving that the Will is valid and that you are entitled to serve as executor under the Will. They will generally want to see a certified copy of the Grant of Probate before they transfer any assets or funds to the estate.
At Forge Legal, we save you the stress by making the collecting in process a breeze. We can obtain a Grant of Probate for you or help you determine whether one will be required. We regularly deal with banks, superannuation funds and insurers when assisting with estate administration and we know what their requirements are. We operate a trust account so that you don’t risk mingling the funds of the estate with your own. We also have contacts who can assist with the sale of major assets and we can even do the transfers of real estate and cars to the estate along with the conveyancing itself!
Paying out the Liabilities
Contrary to the wishful thinking of some beneficiaries, estates, like individuals, have both assets and liabilities. Just as we need to pay our debts in life, the same applies to deceased estates. What complicates things somewhat for executors is that under Queensland law, there is a specific order in which liabilities must be paid out. In very basic terms, liabilities should be paid out in the following order:
- funeral expenses (this often takes the form of a reimbursement to the person who paid for the funeral);
- other testamentary expenses such as the legal, accounting and other fees expended during the estate administration – including any incurred by you, the executor;
- secured debts of the estate, like mortgages or car loans; and
- unsecured debts of the estate, for instance, monies owed to a local council or water authority.
Executors need to be aware that paying out liabilities in the wrong order could result in personal liability. This becomes particularly important where the estate is insolvent – that is to say, where its liabilities outweigh its assets. In situations where the estate is insolvent, a proper determination needs to be made as to which creditors are entitled to have their claims paid out. It is also best practice to ensure that an advertisement is placed in the appropriate form and publication calling on any prospective creditors of the estate to come forward with their claims within a reasonable timeframe, failing which the estate assets may be distributed to beneficiaries.
At Forge Legal, we have the know-how to ensure that estate liabilities are paid out at the right time and in the right order. We can place appropriate advertisements to put prospective creditors on notice and work out how to best proceed where an estate is insolvent – giving you peace of mind that you will not be personally subject to a claim.
Managing Estate Affairs Pending Distribution
Once the liabilities of the estate have been paid out, a substantial period of time can often elapse before distributions can be made to the beneficiaries in accordance with the Will. There are two main reasons for this:
- The possibility of a Family Provision Claim being made; and
- Provisions in the Will relating to when gifts are to vest in the beneficiaries.
A Family Provision Claim is a claim which may be made by certain categories of persons who feel that they have not been sufficiently provided for under the Will of a deceased. By bringing a Family Provision Claim, such claimants seek an order from the court that further provision is made for them out of the estate than was provided for under the Will. Claimants must provide notice of their intention to bring a claim to the executor within six months and file an Application in the Court within nine months of the deceased’s date of death. The Will could also be challenged on the basis that it is invalid (for example, due to tampering, the existence of a later Will or the deceased lacking mental capacity at the time the Will was made).
This means that prudent executors wait nine months before making distributions to beneficiaries, so as to avoid potentially becoming personally liable for any wrongful distribution, should a Family Provision Claim be successful.
Defending against any Family Provision Claim also falls to the executor, who has a duty to carry out the wishes of the deceased, as expressed in the Will. This can be a lengthy and involved process encompassing the collecting of evidence and testimony and having the matter argued in Court.
Another scenario which can result in executors proactively managing estate affairs for extended periods, is where not all beneficiaries are immediately entitled to their inheritance. Most commonly, this occurs where the deceased set an age (commonly 21) which a beneficiary must attain before receiving their inheritance. Some more complex Wills even establish trusts with periodic distributions which can require administration by the executor (acting as trustee), for decades. This means that in order for executors to comply with their duty to maximise the value of estate assets, such assets will often need to be invested and maintained pending distribution.
At Forge Legal, we are experts in estate administration. We have the expertise to defend a Family Provision Claim should one arise, and we have the contacts and know-how to facilitate the investment, management, and protection of physical and monetary estate assets pending distribution, helping you to comply with the strict duties you must follow as executor.
Distribution to Beneficiaries
The final stage of an estate administration is to make distributions to the beneficiaries in accordance with the terms of the deceased’s Will. Gifts made to beneficiaries under a Will are often referred to as legacies, bequests or devises and fall into two broad categories:
- specific gifts; and
- gifts of residuary.
Specific gifts are gifts of items or sums of money specifically referred to in the Will. For example, a deceased may have provided in their Will that their diamond ring was to go to their daughter, that $5,000.00 was to go to their son or that their motor vehicle was to go to their brother. Logistical issues can arise in making these distributions and executors should remember to wait nine months before doing so.
Gifts of residuary encompass everything left over after the liabilities are paid out and all specific gifts have been distributed. This ‘everything left over’ is referred to as the residuary of estate and it generally comprises the bulk of the estate assets. The deceased may have left the residuary of estate to one person or to multiple people in equal or varying shares. Distribution of the residuary of estate is the last step in any estate administration and executors should make sure absolutely everything else has been finalised (including the payment of any taxation, legal or professional liabilities or reimbursements for any testamentary expenses incurred) before doing so.
At Forge Legal, estate administration is one of the things we’re great at. We know how to deal with beneficiaries, right down to the preparation of appropriate deeds for beneficiaries to sign, confirming that you as executor, are released from all further obligations and claims. As executor, you are our client, and our focus is on taking away the headaches of the administration and ensuring that every ‘i’ is dotted and every ‘t’ is crossed, so that you are protected from scrutiny and liability – giving you time to focus on your own life.