Understanding the Estate and its Beneficiaries

The property, money, or other assets owned by a person at the date of their death will fall into the deceased’s estate. This includes assets held solely or as tenants in common with someone else, but does not include assets held as joint tenants with someone else, as those assets will pass to the surviving tenant under the rules of survivorship.

By preparing a will, a person (referred to as the ‘testator’) can nominate who they want to inherit their estate, called “beneficiaries”. Beneficiaries can include individuals, companies, trusts, charities, and other organisations. The testator can leave their estate to the beneficiaries in whatever portion or shares they want. 

The below article is intended as a general guide on the processes leading up to the distribution of a deceased estate to the beneficiaries, and an executor should seek specific legal advice and assistance having regard to the nature of the particular estate. 

The significance of a will in determining estate distribution

Where a testator dies with a will, the estate is distributed in accordance with the terms of the will.

Where a person dies without a will (known as dying ‘intestate’) – the estate will be distributed according to the laws of intestacy. In NSW, the laws setting out the order of distribution of intestacy are found in the Succession Act 2006 (NSW). 

Having a valid will is the most effective way to ensure your estate passes to those you choose.

The Role of the Executor in Distributing the Estate

The role of the executor is to administer the estate, which, among other responsibilities, includes calling in the estate’s assets, paying the estate’s debts, and carrying out the wishes of the deceased by distributing the estate in accordance with the terms of their will.

The Executor’s Liability and How an Executor May Be Personally Liable

While an executor may perform limited duties before obtaining a grant of probate, the executor will only attain authority to administer and distribute an estate once probate has been granted. An executor who administers and/or distributes an estate without first obtaining a grant of probate may be at greater risk of personal liability if a beneficiary suffers a loss because of the distribution of the estate in the absence of a grant of probate.

An executor has a legal obligation to comply with probate laws and regulations and has an overarching duty to act in the best interests of the beneficiaries during the administration of the estate, referred to as a ‘fiduciary duty’. Where an executor commits a breach of a law, regulation, or fiduciary duty that causes a loss to the beneficiaries, the beneficiaries may sue the executor in an effort to hold them personally liable, regardless of whether the breach was intentional or merely accidental.

The Legal Framework: Grant of Probate and Deceased Estates

Where there is a will, the executor is the person who determines whether they need to apply for probate. Whether probate is required will usually depend on whether the estate’s assets can be transferred or dealt with without a grant of probate. Probate is not always required, and the size, nature, and location of the estate will usually guide whether probate is required in a particular case. 

In NSW, where probate is required, an executor is required to apply to the Supreme Court for probate within six months from the date of the deceased person’s death or provide reasons for the delay. 

Where there is no will – that is – the deceased died without a will (known as dying ‘intestate’), there are no named executors and as such the Court cannot grant probate for the estate to an executor. Instead, the next of kin or the person with the largest interest in the estate may apply for “Letters of Administration”. If granted, the Court will appoint someone to administer the estate referred to as ‘the administrator’. The administrator of the estate must administer the estate, much like the executor would have had there been a will. Where there is no will, the method of how the estate is distributed is determined by law based on the laws of intestacy which, in NSW, are set out in the Succession Act 2006 (NSW). 

Key Steps in Distribution of Estate to Beneficiaries

The key steps leading to the distribution of a deceased estate will usually involve those set out below. The steps are generally similar regardless of whether the estate requires a grant of probate or letters of administration. 

Locating and obtaining the original will

The first step in the process is to locate and obtain the original version of the deceased’s last will.

The difficulty in locating a will varies depending on the case. In some cases, the will may be easy to locate where the testator stored it in a known location such as in their personal files, with a known lawyer, or where it is registered with the government (for instance, with the NSW Trustee and Guardian). In other cases, however, wills can be very challenging to locate and may require extensive searches and inquiries to be made, including with localised lawyers, with financial institutions, or in a secret safety deposit box.

What role the executor will play in locating the will usually depends on whether the testator has informed the executor that they have been nominated. Where an executor is aware that they have been nominated as an executor, they may assist in locating the will, but in other cases where the executor is unaware of their appointment, they may have no involvement in locating the will and may only become aware of their appointment once the will has been located.

Notification of death

Once a person dies, usually the executor (or in some cases, close family members) may take steps to inform relevant third parties and government agencies of the deceased’s death.

Examples of agencies that may need to be informed of a death include telephone service providers, financial institutions, healthcare providers, Sydney Water, superannuation companies, local councils, the State Government, and Federal Government agencies including the Australian Taxation Office and social services. 

Applying for a grant of probate

If probate is required, the executor is a person who has the right to apply to the Court for probate. This will require the preparation of Court documentation and an estate inventory listing the estate’s assets and liabilities so the Court can gain an understanding of the size, nature and complexity of the estate and location of the assets which comprise the estate. The executor will usually want to obtain probate before they intermeddle with or deal with the estate to reduce the risk of personal liability.

In NSW, if a grant of probate is required, the executor should apply for probate from the Supreme Court of NSW within six months of the date of death of the deceased person or provide sufficient reasons for the delay.

Identifying and Calling-In Assets

The executor is required to identify and call in the estate assets, which may include property, cash, or other assets.

Identifying and settling debts and liabilities

The executor must also identify and resolve the debts and liabilities of the estate. This may involve paying the debts and liabilities using cash from the estate (or cash from the proceeds of the sale of assets) or resolving the debts or liabilities on some other basis. All debts and liabilities need to be resolved before the final distribution can be made. 

Filing the deceased’s final tax return

The executor is responsible for arranging the preparation and lodgement of the deceased’s tax returns to bring the deceased’s tax affairs up-to-date and will also need to lodge a final return to finalise the deceased’s tax affairs up to the date of death. 

If the estate generated income or bought or sold assets that resulted in capital gains or losses after the deceased’s death, the executor will have to include these tax consequences in their personal tax return as executor. 

Handling claims against the estate

The executor is also responsible for defending claims against the estate, including challenges to the validity of the will on grounds such as a lack of testamentary capacity, suspicious circumstances, undue influence, or fraud, or where a person brings a family provision claim, which, in NSW, must be commenced within 12 months from the date of death.

Depending on the circumstances, the executor may decide to engage in negotiations or mediation with the claimant. If negotiations and mediation fail to resolve the matter and the claimant presses their claim, the matter may proceed to a Court hearing.

Preparing a statement of distribution

Depending on the nature of the estate, an executor may make distributions to beneficiaries that are either interim or final in nature.

Prior to making a distribution, an executor may prepare a statement of distribution that lists the estate’s assets, income, expenses, and other outgoings. The executor will usually request and obtain each beneficiary’s approval of the statement of distribution before any distributions are made. 

The beneficiaries are entitled to details regarding the estate, and the executor is required to provide information to the beneficiaries, including details of the estate’s assets and liabilities, the name of any person making a claim against the estate, the nature of the claim, and the amount of each beneficiary’s distribution.

Notice of intended distribution of the remainder of the estate

Prior to making any distributions, the executor will usually publish a “Notice of Intended Distribution” online via the Court Website which gives members of the public and any creditors notice of the impending distribution. An executor can reduce their risk of personal liability by publishing the various forms of online notices prior to making any distributions, and an executor should seek advice from a lawyer on the protections available. 

If no responses are received in response to the Notice of Intended Distribution, the executor may decide to proceed with making distributions. 

Distributing the estate to beneficiaries

Once all the estate’s debts and administration costs have been paid from the estate and all disputes have been resolved, it is only then that the executor may be able to distribute the remainder of the estate.

As a general rule, an executor is required to pay specific legacys within 12 months of the death or risk being required to pay interest at a rate of 2% above the rate published by the Reserve Bank of Australia. 

Complexities and Challenges in Estate Distribution

An executor or administrator may be held personally liable for making incorrect distributions, which leads most executors to engage a lawyer to assist them with the probate process to reduce the risk of personal liability.

Once an estate has been distributed to beneficiaries, the assets may be impossible to recover, which means the executor may be personally liable to reimburse the estate for any unlawful distributions. 

Navigating a Claim Against the Estate 

The administration and distribution of an estate may be delayed by claims against the estate.

If a person wishes to make a claim against an estate and notifies the executor of their intention to bring a claim, the executor should seek legal advice from a lawyer who has experience in defending wills and estate claims. After seeking advice, the executor may decide to instruct their lawyer to write to the claimant, setting out the legal reasons why their claim is unlikely to succeed, including a detailed reference to any factors in Section 60(2) of the Succession Act 2006 (NSW) that may be relevant to the claim. The claimant should also be put on notice of the potential cost consequences of taking the matter further, should their claim fail.

Depending on the circumstances, the executor may decide to engage in negotiations or mediation with the claimant. If negotiations and mediation fail to resolve the matter and the claimant presses their claim, the dispute may proceed to a Court hearing.

Seek Legal Advice for Executors and Beneficiaries in NSW

If you have been appointed executor or named as a beneficiary of a deceased person’s estate, or looking to make a family provision claim, we recommend you seek legal advice from an experienced wills and estate lawyer as early as possible. 

As an executor, you have the right to seek professional legal advice and assistance in relation to the administration of a deceased estate. 

Navigating Estate Distribution? Ensure Fairness and Legal Compliance With Empower Wills & Estate Lawyers 

If you are seeking estate planning services or have been named executor of an estate, contact Empower Wills & Estate Lawyers on 1300 414 844.

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Disclaimer: the information in this article relates to NSW law as at the date it was written and is general information only. It does not constitute legal advice and should not be relied upon as legal advice. It may contain information or links to sources which are no longer current. If you have a question or legal issue, we recommend you contact a lawyer and obtain legal advice that takes into account your specific facts, circumstances, needs and objectives.