Advertising after the grant
The law requires you to publish a Probate Notice on the Supreme Court website before Probate can be granted (see Estates). This is primarily to establish whether anyone is holding a will made by the deceased that is dated after the date of the will that has been advertised.
In addition, under section 92 of the Probate and Administration Act 1898 (NSW) and section 93 of the Succession Act 2006 (NSW) another advertisement can be inserted after Probate has been granted. It is not mandatory, but it is recommended in most circumstances unless the executor is the sole beneficiary. The purpose of this advertisement is to allow the executor (or administrator) to make distributions from the estate without liability provided the requirements of the section are followed. It is recommended that a lawyer is consulted regarding this provision.
Section 92A of the Probate and Administration Act 1898 allows an executor/administrator to make maintenance distributions within 30 days of death. The section only applies if the beneficiary was wholly or substantially dependent on the deceased person and will be entitled to all or part of the estate if the beneficiary survives the deceased by 30 days or other period specified in the will. The distribution can be made even if there is knowledge of an application for a family provision order. The amount of any such distribution must be deducted from any share the person becomes entitled to. Again, it is suggested a lawyer is consulted before this section is used.
Subject to section 92A, once the deceased’s assets have been collected and any outstanding debts cleared, you can begin to distribute the proceeds or transfer specific assets according to the instructions in the will or the intestacy rules. Items such as personal belongings may be distributed soon after the person’s death, once their value has been assessed.
Rights of beneficiaries and others
Beneficiaries under a will have certain rights and protections under the law. The Grant of Probate or Administration provides some protection to beneficiaries or next of kin. Subject to the family provision sections of the Succession Act (see Family provision orders in the Contesting a will chapter), they can be sure that they are the only people who will receive the property of the deceased person. If someone disputes the claim by producing another will, for example, the only way that person can receive any of the estate is to apply to the court to revoke the Grant of Probate (or Letters of Administration).
If the deceased left gifts of money, assets may have to be sold to obtain the money. If the executor does not act diligently, the beneficiaries may complain to the Supreme Court. This is the only right a beneficiary has before distribution. A beneficiary does not own the property until the executor distributes the estate. Before distribution, the executor is regarded as the ‘owner’ of the assets in so far as the executor holds the estate in trust for the beneficiaries.
If surviving family have no income
Until the estate is distributed, surviving members of the family can sometimes be left without any access to family funds. This could happen where all the family assets have been in the deceased’s name. This causes particular difficulty if the major beneficiary is a spouse who has no other source of income. (The same difficulty will arise if the deceased did not leave a will.) In such cases, the spouse should immediately contact Centrelink to check their eligibility for a pension or allowance. Another option may be to seek a loan, using the estate as security. Spouses can avoid this situation by maintaining a joint bank account. On the death of either of the joint account holders, the right to the whole of the account passes to the survivor. For some people, joint accounts may create problems, so another option is for spouses to have their own accounts to cover this situation.
Under the Probate and Administration Act 1898 (NSW), section 92A, the executor or administrator can make urgent payments from the deceased person’s estate for the maintenance and support of any person who was substantially dependent on the deceased person at the time of his or her death.
Interest on legacies
If a gift of money (a legacy) is not paid within 12 months, the person to receive the money (the legatee) is entitled to interest on the money, unless the will provides otherwise. The current rate can be found in section 84A of the Probate and Administration Act 1898.
Rights of creditors
People who are owed money by someone who has died have to wait until the assets of the estate are available to the executor or administrator (after the Grant of Probate or Letters of Administration) before they receive payment. Secured creditors have special rights over goods or land belonging to the debtor and are paid before unsecured creditors — for example, a bank with a mortgage over a property will be paid out before unsecured creditors.
Payment of executors
The will-maker may specifically state that the executor should be paid for their work in the estate, and how much. Even if this is not done, the executor may apply to the Supreme Court for a commission for the work that they have performed (Probate and Administration Act 1898, section 86). Solicitors who act as an executor may also apply for this commission. Being an executor can involve a lot of time and effort.
Commission cannot be applied for if the will provides an amount for the work and prohibits an application for commission as well.
The executor’s role ends once they have collected the assets of the estate, paid the debts and distributed the balance to the beneficiaries. However, if the deceased has made certain provisions in their will (for example, for the support and maintenance of young children or for the administration of a sum of money for someone’s benefit) a trustee will be needed. Usually, the person appointed as executor is also appointed trustee. A trustee’s role involves managing money or assets for the benefit of certain beneficiaries.
Trustees can be given wide or limited powers under the will. Trustees with wide powers can manage the property for the good of the beneficiary in any way they see fit (subject to their responsibilities, as set out below). Trustees who have limited power must manage the property only in the ways specified in the will.
The duties and responsibilities of trustees are set out both in the will and in the Trustee Act 1925 (NSW), which imposes strict rules on the conduct of trustees. Trustees are generally expected to act honestly and in good faith when carrying out their duties. A professional trustee, such as a trustee company or the NSW Trustee & Guardian, has a higher duty of care and skill than a non-professional trustee. Trustees are also required to act in the best interests of the trust beneficiary at all
times, unless the will states otherwise (as may happen in a discretionary trust will; see Testamentary trust wills, in the Making a valid will chapter).
Accounting by a legal personal representative
A ‘legal personal representative’ includes an executor, administrator or trustee. If a beneficiary has any concerns about the conduct of a legal personal representative they should request that an ‘accounting’ is provided, to show how the estate money has been invested and how income and capital have been used. A legal personal representative who uses estate money improperly may be legally required to repay the beneficiaries. Beneficiaries who suspect improper behaviour from a legal personal representative should seek legal advice.
Collecting assets and clearing debts
The next stage in administering the estate is collecting all the assets and paying outstanding debts. You will usually have to produce the Probate or Letters of Administration document to asset-holders before they will release anything. Before you distribute any of the assets, you must make sure that all debts have been cleared. These include funeral expenses, taxes, debts to any lending institutions or private creditors, and any other outstanding administrative or legal expenses.
If the deceased owned property with someone else
If the deceased owned property as a joint tenant, the property passes automatically to the surviving tenant regardless of a will or the intestacy rules. This joint property is not included as part of the deceased’s estate.
However, if the deceased had held property as a tenant in common (that is, if property was co-owned through having a share in it), the share would pass to their beneficiaries as part of the estate.
Release of assets from financial institutions
Part of the Grant of Probate or Letters of Administration is a photocopy of the list of assets which the executor or administrator submitted as part of their application for the grant. The bank or other body must check that an asset is on the list before it can release it. If no check is made and an asset is distributed, the bank or other institution could be liable for any error.
- Banks — the money in an account held in joint names will pass to the survivor on the death of the other account holder. If the balance of an account in the deceased’s own name is small, the bank may release it without production of Probate or Letters of Administration. Usually the will and death certificate will be required, and sometimes the bank may request consent and indemnity forms from members of the deceased’s family. Where Probate or Letters of Administration have been obtained, these will usually be the only documents required by the bank to release the funds, other than a withdrawal form.
- Building societies — building society requirements and procedures regarding the release of assets vary from society to society. The relevant branch should be contacted, but generally the requirements are the same as for banks.
- Insurance companies — many people have life insurance policies that mature on their death. Generally, insurance companies are prepared to pay out these policies without a Grant of Probate or Letters of Administration when the sum is less than $10,000.
Life insurance and superannuation
Some assets are preserved from the payment of outstanding debts. Unless a contrary intention is expressed in the will, the proceeds of any life insurance policy of the deceased are protected from payment of estate debts except for funeral and testamentary expenses (the costs of administering a will). Proceeds from a life insurance policy may be distributed by the executor in accordance with a will or the intestacy rules (Life Insurance Act 1995 (Cth), section 205).
Superannuation benefits under some government funds are protected by legislation and the protection cannot be revoked by a will. For more information see Superannuation benefits below.
Transfer of real property
When the deceased was sole owner of a property, or was a tenant in common (that is, they owned a share in a property), it is necessary to apply for Probate or Letters of Administration. However, if the deceased was a joint tenant, the surviving joint tenant automatically gets the whole property and the deceased is not considered to have ‘owned’ or left real estate. A Transmission Application must be registered where real estate is held in sole name of the deceased or as tenant-in-common. A Notice of Death must be registered if the real estate is held as joint tenants. To find out how to do that contact NSW Land Registry Services.
Other personal property
There are no special requirements for distributing personal goods. However, disputes may arise over the ownership of particular goods and the executor or administrator may become involved in protracted negotiations or even litigation to settle conflicting claims.
The transfer of a car to a beneficiary only requires changing the name of the owner for registration purposes. Probate or Letters of Administration are not needed if a car is the major item in the estate. The Roads and Maritime Services and relevant insurance companies should be contacted to change details of ownership.
Legal actions and the deceased
Legal actions taken by or against a person may (with some exceptions) continue after their death (Law Reform (Miscellaneous Provisions) Act 1944 (NSW), section 2). Unresolved legal actions will pass to the estate. If the estate is sued and loses the case, the beneficiaries could be left with nothing. If the value of the estate is not sufficient to pay off debts, the debts will die with the person, unless they were held jointly with someone (for example a mortgage on a property) or guaranteed by someone else. In these situations, the debts will automatically pass to the surviving co-owner or guarantor.
Funeral expenses must be paid before any assets of the deceased’s estate can be distributed to beneficiaries. The person who orders the funeral is responsible for paying the account but is entitled to reimbursement from the estate ahead of other creditors.
Death duties were abolished in NSW from 31 December 1981, and death duties on the estates of people who died on or before that date are no longer payable. However, stamp duty may apply to gifts of property under a will where a transfer document or instrument (for example, a share or land transfer form) has been drawn up. The document or instrument must be stamped by the Chief Commissioner of State Revenue in Revenue NSW and a maximum amount of $50 is charged. Share transfer forms in respect of companies listed on the stock exchange are no longer liable to duty and do not have to be marked as exempt from duty by Revenue NSW. Stamp duty is still payable on transfers of shares in unlisted companies.
Commonwealth estate duty has not been imposed since 1 July 1979.
If the deceased was receiving a taxable income at the time of death, the estimated tax debt or credit should be included in their list of assets and liabilities, and a tax return should be lodged with the Australian Taxation Office. If the administration of an estate continues over a long period, the estate may itself become a tax-paying entity, with a tax file number and responsibility for submitting annual tax returns. If the deceased was registered for goods and services tax (GST) a final GST return must be lodged and GST paid to the date of death. If a business is continued after the death of an owner or partner, accounting advice should be sought.
Capital gains tax
Capital gains tax is not payable when an asset passes to an executor, administrator or beneficiary, unless the beneficiary is a tax-exempt body such as a charity or, in certain circumstances, a non-resident beneficiary.
For the purposes of capital gains tax, the asset is deemed to have been acquired by the executor or administrator at the deceased’s date of death. The value of the asset at the deeming date is:
- if the deceased acquired the asset before 20 September 1985 — market value
- if the deceased acquired the asset on or after 20 September 1985 — the deceased’s cost base (a formulation which includes incidental costs involved in acquiring and disposing of assets).
Capital gains tax may be payable:
- when an executor or administrator sells an asset
- where the beneficiary is a tax-exempt body or is not a resident of Australia
- where a beneficiary sells an asset after acquiring it from an estate.
The information provided here is only a basic summary of capital gains tax issues, which are very complicated. If you have any doubts about its implications for an estate, you should consult the legislation (which is very complex) or seek professional advice.
Capital gains tax and the deceased's main residence
A person’s main residence is usually not subject to capital gains tax. However, implications arise on the death of the owner.
In these circumstances, a dwelling is exempt from capital gains tax if:
- the beneficiary or trustee disposes of the residence within two years of the death of the deceased, or
- before the disposal, the dwelling was the main residence of:
- the beneficiary (if it is the beneficiary who disposes of the residence)
- the deceased’s spouse (if living with the deceased on a permanent basis)
- a person who has a right of occupancy under the will.
If the dwelling was acquired by the deceased on or after 20 September 1985, then for the exemption to apply, the dwelling must also have been the deceased’s main residence immediately before their death and not have been used to produce income at that time.
The situation is complicated if a beneficiary is given a life interest in the main residence in a will. Professional advice should be sought in that situation.
If a dwelling is likely to attract capital gains tax, it is most important to keep all records relating to the acquisition. Records should be kept for at least five years after the disposal of an asset. Because of the complexity of this issue, it is also very advisable to seek professional advice.
People often leave all or part of their estate to a tax-exempt body. These are organisations that do not have to pay income tax, including:
- public hospitals
- religious or charitable institutions
- superannuation funds
- approved deposit funds.
Capital gains tax may be payable on assets left to tax-exempt bodies where the assets were acquired by the deceased on or after 20 September 1985. The deceased is considered to have disposed of the assets to the tax-exempt body for current market value immediately before death. Any capital gain or loss is taken into account in the tax return, which declares income up to the date of death. The deceased’s estate bears tax on any capital gain on assets. This is a qualification on the general rule that there is no deemed disposal of an asset on the death of a person. Professional advice should be sought if you are an executor of an estate where a beneficiary is a tax-exempt body.
The legislation regarding superannuation is quite complex. Superannuation funds are generally established by way of a trust deed. The deed will usually provide that on the death of a member, a death benefit will be payable to the member’s dependants. Each fund’s definition of dependants may be slightly different. Superannuation is generally covered by Commonwealth legislation, the Superannuation Industry (Supervision) Act 1993 (SIS Act) (except for some state and Commonwealth public servants).
The Act provides that the trustee of a superannuation fund must pay death benefits to:
- a dependant, or
- the deceased’s estate.
The Act’s definition of a dependant includes same-sex partners. The definition of a dependant was expanded in 2004 to include any person with whom the member has an interdependency relationship. Such a relationship is defined in section 10A of the Commonwealth Act and can include same-sex couples. Briefly, people, whether or not they are related, are in such an interdependency relationship if:
- they have a close personal relationship
- they live together
- one or both of them provides financial support to the other
- one or both of them provides domestic support and personal care to the other.
A person may still be considered to be in an interdependency relationship with someone if they have a close personal relationship but, because of a disability, do not satisfy other requirements of the Act. The Same-Sex Relationships (Equal Treatment in Commonwealth Laws – Superannuation) Act 2008 amended the SIS Act, making it easier for regulated superannuation funds to recognise same-sex relationships from 1 July 2008.
Most funds allow a member to nominate who they wish to receive the benefit upon their death. That person or persons must, however, qualify as a dependant under the rules of the fund and the trustee is not bound by law to pay the benefit to the nominated person.
Since 1999, the trustee of a fund has been able to amend its trust deed to allow members to make a binding nomination. If a member does so, the trustee’s discretion is removed and the benefit must be paid in accordance with the nomination.
There are strict requirements involved in making a binding nomination. The nomination must be witnessed by at least two adults and may need to be updated at least every three years.
If your superannuation fund does not allow binding nominations, it is important to keep your death benefit nomination form up-to-date. It is also a good idea to deal with the benefit in your will in case your fund pays it into your estate.
If you are employed by the government, specific legislation deals with your superannuation. If you are employed by the Commonwealth Government, the Superannuation Act 1976 (Cth) applies. If you are employed by the NSW Government, and were employed before 1 July 1985, the Superannuation Act 1916 applies. The NSW Act was amended so that after 19 January 2001 same-sex partners could receive the death benefit.
If the deceased had more debts than assets, the estate is dealt with in a different way. This particularly applies where the deceased has considerable debts but also has property out of which some debts could be paid. In these circumstances the estate may be made bankrupt (in the same way as a living debtor is made bankrupt) and is administered by a trustee in bankruptcy (for example, a liquidator). Alternatively, the executor could administer the estate by following the provisions of the Probate and Administration Act 1898.
If the estate is made bankrupt, this may improve the position of an unsecured creditor against the estate because the recovery of any preferential payments may increase the size of the estate. If the estate is administered by a trustee in bankruptcy, the executor or administrator does not generally play any part in the administration of the estate.
Some assets are preserved from the payment of outstanding debts. Unless a contrary intention is expressed in the deceased’s will, the proceeds of any life insurance policy are not to be used for payment of estate debts except for funeral or testamentary expenses and may be distributed by the executor in accordance with a will or the intestacy rules (Life Insurance Act 1995 (Cth), section 205). Superannuation benefits under some government funds are protected by legislation and the protection cannot be revoked by a will.
Legal fees involved in the administration of an estate vary depending on the size and complexity of the estate. There are two separate components to the legal fees involved and then there are disbursements.
First, there are the solicitor’s professional fees for the work done in obtaining the Grant of Probate or Letters of Administration and second, collecting assets, paying debts and distributing the assets of the estate to the beneficiaries. A lawyer will usually issue two accounts. One will be for the regulated fee for obtaining Probate or Administration; the other will be for the work involved in collecting and distributing the estate (post-Probate charges).
Then there are the disbursements, paid to third parties. Examples are fees for filing documents at the court (see Filing fee in the Estates chapter) for death certificates, and for publishing the online notice.
For work carried out up to the Grant of Probate or Letters of Administration, a solicitor cannot charge fees higher than the scales set by Legal Profession Uniform Law Application Regulation 2015 (NSW), Schedule 3. A solicitor can charge less than the scale fee. Here are some costs calculated for specific estate values according to the scale fees:
|Estate value||Legal costs|
All these fees will be increased by GST. The fees are for a standard application and more can be charged for work outside the ‘scale fees’. The Law Society of NSW recommends that you shop around when choosing a solicitor. However, cheapest does not mean best, and you would be wise to check the level of experience a solicitor has in estate work. You should make sure you thoroughly understand what you will be charged by checking the costs disclosure information provided to you. See Estimating costs below.
In addition to the fees discussed above, a solicitor administering the estate is also entitled to charge an amount for post-Probate or Administration services such as collecting assets or transferring the assets into the names of the beneficiaries once Probate or Administration has been obtained. This amount will depend on the work involved. For example, with some estates all that is required is the transfer of the home into the name of the surviving spouse, while in other cases, property may need to be sold and the proceeds divided among a number of beneficiaries or held in trust for beneficiaries who are minors. These fees have been deregulated, but the court will only allow reasonable legal fees to be paid out of the estate.
Lawyers in NSW must provide an estimate of their likely costs in writing before providing legal services to their clients, if the cost including GST and disbursements will exceed the threshold amount (currently $750). A lawyer who does not do so cannot sue the client for unpaid fees. The Legal Profession Uniform Law, section 174, requires this statement (known as ‘disclosure of cost’) to be in ‘clear plain language’. Ask your lawyer to explain anything that you don’t understand. Even though costs before Probate or Administration have not been deregulated, the disclosure of costs is required. Usually, pre- and post-Probate costs are disclosed at the same time.
Legal transactions can be unpredictable and your lawyer may explain that the costs could increase during the transaction if more work is involved. You should ask questions if you do not understand how you will be charged.
Finding a solicitor
If you need the name of a solicitor who can help you administer an estate, contact the Law Society of NSW who can refer you to solicitors in your area who deal with wills and estates, or to solicitors who have been nominated as accredited specialists in wills and estates law.
NSW Trustee & Guardian
From 1 July 2016, NSW Trustee & Guardian will charge for a will and other documents unless the client is on a full Centrelink pension. Private executors and attorneys can now be appointed. The costs are set by legislation, currently NSW Trustee and Guardian Regulation 2017. Visit the website of the NSW Trustee & Guardian for more information.
Private trustee companies
Private trustee companies have their own fee structures but they typically charge a commission of around 4 per cent of the value of the estate.