Deceased estates: Probate and administration
Assets of the deceased and how they are distributed.
When a person dies, the deceased’s financial affairs have to be finalised. The process is called the “administration of the deceased’s estate”. Each beneficiary expects to receive their inheritance. CKB helps administer the assets of the person who died. Claims are to be paid. A beneficiary should get his or her inheritance.
The process of administration finishes when:
- The funeral and testamentary expenses and any creditors are paid.
- The deceased’s remaining assets are distributed to beneficiaries, who are either the persons named in the deceased’s will or who are family members entitled under intestacy. Each beneficiary should receive their inheritance.
Questions you might have:
- Who is in charge of the estate?
- What are the steps to finalise the estate?
- Issues about specific types of assets – are they “estate assets”?
- Was the deceased the sole director of a company?
- How do we claim the life insurance?
- How do we claim superannuation death benefits?
- How do we claim the family trust fund entitlement?
- What if an asset is subject to a security like a mortgage or charge?
The person in charge is either the Executor named in the will or is the Administrator of the estate. An administrator is necessary where either there is no will naming an executor or because the executor named in a will is unable or unwilling to act as executor.
With larger estates it is usually necessary to apply for a grant of either Probate or Letters of Administration from the Supreme Court. A Grant is an order of the Supreme Court confirming the authority of the executor or administrator to deal with the deceased’s assets.
In most states of Australia it is mandatory to obtain a Grant from the Supreme Court of New South Wales if the deceased owned real estate in the state in his or her name (excluding joint tenancies). The situation is a little different for real estate in Queensland because its legislation is slightly different however it might be prudent to obtain a grant in that state in any event.
It is possible with smaller estates to avoid the need to obtain a grant from the Supreme Court. For example, many banks will allow smaller accounts to be closed and the funds released to an executor however the bank will treat each case on its own merits. You will save time and money if it is possible to avoid obtaining a grant from the Supreme Court. Sometimes however that is simply not possible.
Call us on 02 8014 5839 or send us an email for advice on the best course of action.
What are the steps to finalise the estate?
Assuming that the estate is solvent, after the payment of all expenses and creditors, the remaining assets are distributed amongst the beneficiaries.
In most cases this involves:
- Arranging for the funeral of the deceased including arrangements for burial or cremation as applicable.
- Advertising for creditors to lodge claims against the estate.
- Dealing with any claims against the estate for an increased share under Family Provisions legislation.
- Identifying all of the assets of the deceased.
- Ensure appropriate asset preservation strategies e.g. insuring major assets such as the home or any motor vehicle.
- “Getting in” all estate assets. This includes activities such as closing bank accounts, considering superannuation accounts, life insurance claims, transferring real estate into the name of the Executor.
- It may be necessary to sell assets such as land or shares.
- It may be necessary to operate the deceased’s business to preserve it as an asset for the estate.
- Finalise the deceased’s tax affairs including preparation of a tax return(s) up to the date of death and ensuring the accuracy of prior tax returns.
- Consider capital gains tax issues for various assets and obtain any relevant valuations for assessment of CGT.
- At the appropriate time arrange payment of funeral expenses, testamentary expenses and any creditors of the estate. An executor would have to consider the position of secured creditors of the deceased and the implications of that security arrangement on any specific gifts in the will.
- Once all liabilities of the estate have been paid, an Executor or Administrator must ultimately carry out the plan of the deceased as set out in his or her will and distribute the gifts to the relevant beneficiaries. If there is no will, distribute the remaining assets amongst the beneficiaries under intestacy in accordance with the legislation.
- Sometimes specific assets can be transferred direct to a beneficiary. Sometimes assets have to be sold to raise cash to pay creditors or other expenses or it may be difficult or impossible to divide a single asset between a number of beneficiaries.
- Prepare estate financial accounts which identify all the assets that have been will dealt with and a statement of all receipts and payments made by the Executor. If necessary, lodge them with the Supreme Court.
- An executor or administrator may apply for commission for their efforts in administering the estate.
This is an overview of the work required to finalise most estates. There are many unique arrangements made by a deceased during his or her lifetime and those arrangements will affect what has to be done to complete the administration of the estate.
Please call us on 02 8014 5839 or send us an email so that we can help you with the estate.
Issues about Specific Asset Types – Are They Estate Assets?
Assets owned by the deceased with another person(s) as “joint tenants” are not assets of the estate. Examples include assets such as a bank account or shares in joint names or where a couple own their home as “joint tenants”. The surviving joint owner(s) automatically own the deceased’s share of the asset. Usually notice of the death has to be given to the land titles registry, the bank or the share registry so that the change of ownership can be recorded.
Care should be taken where 2 or more people own land or real estate as “tenants in common”. Each owner’s share will be an asset of their estate as there is no right of survivorship.
Life insurance policies over the life of the deceased person are usually owned by the deceased and in that case the proceeds are paid to the executor or administrator as they are assets of the estate for beneficiaries. If the policy was owned by some other person such as a super fund or a spouse then the proceeds are paid to that person and not to the estate;
Superannuation benefits – the rules of the superannuation fund determine who is entitled to the death benefits, or there may be a Binding Death Benefit Nomination in place;
Trust funds – the rules of the fund and its accounts from prior years determine whether a person has any rights to be paid money or other assets from the fund;
Assets which are owned subject to a security such as a mortgage or charge can only be given once the mortgage debt (or obligation) has been paid off or discharged either from the asset or from some other source.
Was the deceased the sole director of a company?
Did the company operate a business?
Do you need to urgently appoint a replacement director because you need a director able to make decisions for the company?
Call us 02 8014 5839 as we can advise you of the best course of action to keep the company operating.