Note for Executors: Deceased estates will not wait for COVID-19

As COVID-19 closes down our society, it’s understandable that executors of estates would like more time to deal with matters. The problem is: the administration of deceased estates will not wait for the passing of the COVID-19 crisis.

If you’re an administrator or executor, you run some real risks of overstepping legal deadlines as well as leaving the estate more vulnerable to challenge by a family member.

The good news is that there are ways in which estate executors can execute their legal responsibilities despite the restrictions imposed by COVID-19.

In this blog, I explain how.

Social distancing and the law

With current government social distancing directives now restricting the number of funeral attendees to a maximum of ten people, and many law firms now closing their doors to client appointments, grieving families are set to experience increasing stress as they try to manage their deceased loved one’s affairs.

In most cases, time is of the essence when dealing with a deceased estate. It’s critical that administration of estates is not neglected during this time of social distancing and business closures.

In response to these challenges, the RCT Wills & Estates team are using teleconferencing and video conferencing wherever possible in order to provide clients with information and support on a range of deceased estates matters, including but not limited to: 

1. Applying for a Grant of Probate of a Will;
2. Applying for Letters of Administration where a family member has died without a Will;
3. Obtaining the release of assets held in the deceased’s name;
4. Attending to payment or requesting the urgent suspension or waiver of outstanding debts of the deceased;
5. Filing Superannuation Death Benefit and Life Insurance claims;
6. Reimbursing family members who have advanced funds on behalf of the Estate (i.e. paid for funeral expenses, paid an outstanding utility bill, etc).

**For the purposes of this article, the term ‘Executor’ will be used to refer to both Executors and Administrators appointed under a Grant of Representation made by the Supreme Court of Victoria.

Do not delay in dealing with your deceased loved one’s affairs

Many of our clients have been eager to distribute their deceased loved one’s estate to the beneficiaries. Amid the current economic crisis, this is understandable and to be expected, as every dollar counts.

However, there are other important reasons to make sure that the estate is dealt with in a timely manner:

1. Capital Gains Tax implications on the deceased’s main residence

When dealing with a loved one’s principal place of residence, it is important to note that section 118-195 of the 

Income Tax Assessment Act 1997 (Cth) provides that in order to be eligible for the main residence CGT exemption, the disposal of any property acquired post-September 1985 must occur and be settled within two years of the date of death.

Given the uncertainty of the current economic climate, it is critical that Executors turn their mind to how the Estate property should be dealt with or disposed of so that they can best maximise the value of the property, limit the tax implications to the Estate and to the beneficiaries, all the while fulfilling their fiduciary obligations as the Executor.

It is important to note that there are many other tax implications on deceased estates. Understanding these implications requires an analysis of the assets of the Estate, the terms of the Will, the beneficiaries and, the relevant taxation law. Accordingly, in addition to legal advice, Executors should obtain the advice of an experienced chartered accountant who is proficient in deceased estate taxation to help them navigate any taxation challenges and considerations.

2. Limiting the potential for Testator’s Family Maintenance Provision claims (“Part IV claims”) against the Estate

If an Executor is on notice of any potential claim that may be brought against the Estate by a family member who has been excluded from the Will or is unhappy with their limited entitlement under the Will, it is important that the Executor takes urgent steps to limit the risk to the Estate.

Where there is a risk of a Part IV claim against the Estate, it is important to obtain the grant of Probate or Letters of Administration (as the case may be) as soon as practicable.

Section 99A of the Administration and Probate Act 1958 (Vic) provides that no action lies against an Executor who distributes any part of the estate where that distribution was properly made by the Executor after the expiry of 6 months after the Grant of Probate of the Will or of Letters of Administration and has either:

(a) received no notice of an intended Part IV claim against the Estate; or 

(b) has received notice of the intended claim but has not received notice that an application for a family provision order has been made within three months of receiving notice of the intended claim.

By obtaining the grant at the Executor’s earliest opportunity, the risk to the Estate is minimised by reducing the timeframe available to the claimant to orchestrate their potential claim.

Once the above-mentioned legislative timeframes have expired, the Executor is free to distribute the Estate.

For more information on Part IV claims against an Estate, see our article Feeling left out of a Will? Here’s what you need to know about challenging a Will.

3. The Executor’s responsibility to preserve the assets of the Estate until they are distributed

Under the government’s COVID-19 recommendations, many clients have opted to stay home and socially isolate.

Executors have a duty to preserve the assets of the Estate. This means that despite the current challenges that may prevent us from going about our usual business, it still remains critical that Executors ensure that any assets of the Estate are protected.

From a practical perspective, this means ensuring any real property of the Estate is insured, secured and properly maintained, and free of any hazards such as a fire or electrical hazards. It also means that other property such as cars and belongings are moved to a secure location and kept in good condition.

Given the current markets, preserving the assets of the Estate may also require obtaining advice from an experienced financial advisor on the timing of disposing of certain assets such as shares and real property in order to maximise their value and preserve the overall value of the Estate.

Failure on the Executor’s behalf to act promptly in protecting the assets of the estate may expose the Executor personally to claims by the beneficiaries to recover any loss resulting from the Executor’s failure to act.

If you’re an Executor and you’re unsure about your responsibilities, you must seek legal advice from a lawyer proficient in Estate administration as soon as possible.

4. The Executor’s obligation to obtain professional advice

Executors have an obligation to seek the advice of professionals such as lawyers and accountants where necessary and without delay. Failure to obtain proper advice can result in the Executor unknowingly neglecting their legal duties.

For this reason, we are encouraging clients to be proactive in their role as Executor and to make initial enquiries with our Wills & Estates department.

It is important to note that each Estate is different in its composition. By this, we mean that beneficiaries, assets and circumstances will be different from one Estate to another. Whilst this article serves to remind clients that they should not delay in their duties as Executors, it is not a substitute for full and complete legal advice.

The RCT legal team is here to help where we can, bearing in mind that putting a deceased loved one’s affairs in order is one thing that we can manage remotely and efficiently at a time when support may be needed most.

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