What is a deceased estate?
A “deceased estate” refers to all the assets and liabilities left behind by a person when they pass away.
Assets of the estate can include real estate or bank accounts not held jointly, vehicles, shares, personal belongings, pets, unpaid employment entitlements, life insurance policy rights, contractual rights, intellectual property and rights to royalties. Superannuation death benefits won’t form part of a person’s estate unless they are paid into the estate rather than directly to a beneficiary.
The liabilities that a person holds during their life often continue and must be paid from the estate. Liabilities of an estate can include bank accounts with a negative balance (such as credit cards or mortgages), tax liabilities, debts, and lease or rental obligations.
Who is responsible for administering the estate?
When a person dies, their executor is responsible for managing and distributed the estate according to the Will. If there is no Will, the person responsible for administering the estate is the person who is entitled to most of the estate as determined by the rules of intestacy. In order, these people are:
- A spouse or partner
- Biological or adopted children
- Other relatives: parents, followed by siblings, grandparents, uncles, aunts, and cousins
- If there are no relatives, the State
What is required to administer an estate?
When an estate is relatively small or doesn’t contain any real estate, you might only need the Death Certificate and Will to administer the estate. However, for larger estates or those with significant assets or property not held jointly, you will likely need to obtain a Grant of Representation.
A Grant of Representation is necessary when the deceased owned real estate in their sole name or as a tenant in common. It is also required if financial institutions holding the deceased’s assets demand it before releasing them. Each institution has its own criteria for when a Grant is necessary, and this will generally be based on the asset’s value.
For jointly owned assets, a Grant may not be needed; instead, you might only need to present the Death Certificate to the relevant institution to transfer accounts to the surviving joint holder. For jointly owned real estate, the surviving owner must lodge an Application by Surviving Proprietor to remove the deceased’s name from the title.
What are the basic steps?
Initial notifications and information gathering: in the first instance, you are required to locate the Will (if any) and identify the deceased’s assets, which typically involves finding documentation such as property titles, policy or bank statements, bills, and more. Once the assets are identified, you can then determine whether a Grant of Probate or Letters of Administration (collectively a “Grant of Representation”) is required to deal with the estate.
Lodge the Application: obtaining a Grant of Representation involves preparing and submitting documents to the Supreme Court, including the Will (if there is one), death certificate, and an inventory of assets. The Court will review these to ensure they meet strict legal requirements before granting authority to the Executor or Administrator (collectively called the ‘Legal Personal Representative’) to administer the estate.
If you would like to read more about the process of obtaining a grant, please read our article ‘Grants of Representation: What They Are and How To Get One‘. To learn about the different types of Grants that are available, please read our article ‘Grants of Representation: Probate, Letters of Administration and Others‘.
Gather in assets and pay debts: Once the Grant of Representation is received, the LPR can start dealing with all the deceased’s assets. The LPR is also responsible for paying any outstanding debts and liabilities, such as mortgages, loans, and taxes, from the estate’s assets. Some assets, like property, may take time to convert to cash or transfer. For example, if you need to sell a property within the estate, settlement may only occur 30-60 days after the date of sale. Term deposits may also need to mature before they can be accessed, which could further extend the timeframe for gathering in assets.
Finalising the estate: When all tax obligations and liabilities have been addressed, the estate may be ready to be finalised, meaning the assets or cash are transferred to the beneficiaries. Each estate is unique, but the LPR should always consider the following before finalising the estate:
- Creditors Notice period: has the notice period elapsed, if applicable?
- Risk of claims: is there a risk of any claims against the estate? There is a 6-month period from the Grant of Representation during which eligible individuals can make a claim against the estate.
If an LPR distributes the estate before these timeframes expire, they may need to meet these claims from their personal funds. In some cases, they may decide to distribute the estate before these periods have passed, but due to the potential personal liability and complexity, it is always best to seek legal advice before making this decision. LPRs should generally aim to finalise and distribute the estate within 12 months from the date of death, known as the ‘executor’s year.’
Additional considerations
Taxation
The LPR is responsible for finalising all tax obligations of the deceased and the estate. In addition to notifying the ATO of the deceased’s passing, they may also need to attend to:
- Date of Death Tax Return: if the deceased still lodged tax returns, a final return will be required for the portion of the tax year from 1 July to the date of death.
- Estate Tax Return: an estate tax file number and additional returns may be required where any earnings generated by the estate’s assets during the administration period exceed the tax-free threshold. Most deceased estates receive the benefit of concessional tax rates for three years, after which the standard tax rates will apply.
- Capital Gains Tax: if the deceased’s assets are sold.
- Business activity statements (BAS): where the deceased was registered for an Australian Business Number (ABN) or Goods and Services Tax (GST), a final BAS will need to be lodged. If the LPR intends to continue operating a business, they would need a new ABN and register for GST if necessary.
Creditors Notices
Where the deceased had complex financial affairs or when the LPR is uncertain if any creditors exist, it is recommended that they post a Creditors Notice to protect themselves. A Creditors Notice is a formal announcement that informs potential creditors of the deceased’s death and invites them to submit their claims within a specified period, usually two months. A creditor must respond within that period, otherwise they won’t be able to enforce their debt against the estate if it has already been distributed. There are some exceptions, including the ATO and other government authorities, who can still seek payment. Without the Creditors Notice, a creditor is entitled to recover the debt from the LPR personally if the estate has been distributed.
Burial and body rights
The Legal Personal Representative of the deceased has the first right to make decisions about the funeral and body of the deceased. The LPR can make decisions about what happens with the body, for example whether it is buried or cremated and if so, what happens to the ashes. Usually, families are able to work together to make these decisions, but if there are any disputes the Supreme Court can make orders around who has the final say. If the deceased had rights to a funeral plot, also known as rights of interment, these rights typically pass to the beneficiaries of the estate in general, or to any person specifically named by the deceased.
Social media and digital assets
When someone passes away, the LPR may also need to identify and manage any social media accounts and digital assets the deceased had. This might include email accounts, media, or social media accounts like Facebook or Instagram. Many platforms have a process for deactivating or memorialising the account, while others may allow accounts to be closed when the Death Certificate is produced.
Estate disputes
There are a variety of disputes that might arise before and during estate administration. These could include challenges to the Will, claims against the estate, and new or existing claims against the deceased person for matters arising before their death, like family law claims or civil claims. Disputes may also arise between co-LPRs, or between the LPRs and the beneficiaries.
Trusts in Estates
When administering a deceased estate, various types of trusts may need to be established to manage and protect assets for different beneficiaries. The LPR is typically responsible for setting up these trusts correctly and may also need to oversee their administration over time.
How can Novum Law Group assist you?
Given the complexity of estate administration, it is highly recommended to seek legal advice if you want guidance about your rights and responsibilities. A lawyer with experience in estate administration can provide crucial guidance on the Grant application process, assist with resolving disputes, and help you ensure that you meet all of your legal obligations.
If you would like more information or require advice on an estate, our Wills & Estates Team would be glad to assist you. Please call us on 9063 0300 or send us an email to discuss with one of our lawyers, or click here to make an appointment.
Author
Sheredyn Legg
The information provided in this article is for general informational purposes only and is not intended to serve as legal advice. For specific legal concerns, please speak directly with one of our qualified lawyers.
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