Estate Administration

Even when death is imminent and anticipated, it can cause shock waves of grief.  If you are an executor or a close family member or a partner of the deceased and you have no experience of what happens next nor of the practicalities of how to move forward, it can be a very stressful and worrying time. 

What process is involved to administer an estate depends upon the individual circumstances.  For instance, if a person held all of his or her assets as joint tenants (such as bank accounts and property), then these will pass via survivorship to the remaining joint tenant or tenants.  Likewise, if a person's assets were all held by a trust, then the work involved in administering the person's estate may be minimal. 

However, if the deceased had assets in his or her own name, including property owned via a tenancy in common, more needs to be done.  The terminology and the procedures involved again change with the circumstances.  What is explained below is only a brief overview of what is involved.  Basically, there are two stages to estate administration: 

1.  where necessary, applying for a Grant of Probate of a Will or, alternatively, Letters of Administration; and
2. once the grant issues, then administering the estate. This involves collecting in and distributing assets, paying liabilities and other such matters.  

Where a person has a Will, then there will generally be an executor of that Will, who is a person appointed by the deceased to administer the deceased person's estate, and who will stand in the deceased person's shoes to deal with his or her assets and liabilities.  Ultimately, the authority to act as an executor derives from the Will.  However, the executor may need to apply for a Grant of Probate of the Will in a number of circumstances, which would include where a person's estate held real property, where there is some uncertainty as to the validity of the Will and also where the overall value or kind of assets in the estate are such that the estate cannot be administered without a grant.  Whether or not the deceased made any Codicils should also be investigated, because if so these will need to form part of the application for a Grant of Probate, as a Codicil amends a Will. 

If a person died intestate (that is, without having made a valid Will), then the Administration Act 1903 will apply.  The Administration Act not only specifies what relative proportions of an estate certain next of kin will receive, but also determines who will be entitled to apply to apply to be the administrator.  

To become an administrator, the relevant next of kin must apply to the Supreme Court for Letters of Administration.  Those eligible to apply to become an administrator will include one or more persons entitled to share in the distribution of the estate.  Each person entitled to a share of the estate usually stands in equal degree as to his or her eligibility to apply for Letters of Administration.  The person who applies will need signed consents from the other persons entitled to a share or, alternatively, will need to arrange for two guarantors, resident in WA, who are willing to guarantee their own assets to the same extent as the net value of the non-consenting person's share of the estate.  Often because of the additional complications of seeking the consent of other next of kin, and sometimes the ill feeling between those persons, an application for Letters of Administration is generally more costly and time consuming than a straightforward application to prove a Will. 

In both cases, (that is, a Grant of Probate of a Will and Letters of Administration), an application must be made to the Supreme Court.  An executor or administrator can choose to make the application personally or to instruct a solicitor to act on his or her behalf prepare the person's application.  Often solicitors are appointed as it allows individuals to remain in control of the application without having to worry about the accompanying paperwork. 

An application to the Supreme Court is primarily an affidavit made by the executor or administrator.  The affidavit includes a statement of the deceased's assets and liabilities as at the date of his or her death.  As the affidavit is evidence which is submitted to the Court, the statement of assets and liabilities requires accurate figures.  As such, each organisation managing the deceased's assets and liabilities should be contacted to ascertain the value of the deceased's assets and liabilities as at the date of his or her death.  This also allows the administrator or executor the opportunity to notify the organisation about the deceased's death.  A solicitor is able to act on behalf of their client and will write to each organisation requesting the required information. 

A general rule is that all bank accounts and assets will then be "frozen" until the relevant organisations receive the appropriate documentation.  (For instance, this may include a certified copy of the Grant of Probate of the Will, account closure forms or transmission forms).  The payment of the deceased person's funeral account is the one exception to this general rule. 

When lodging the application for a Grant of Probate or Letters of Administration, the original Will and death certificate (plus a photocopy of the death certificate) should also be presented to the Supreme Court, together with the appropriate filling fee.  Providing no requisitions issue, a Grant of Probate of the Will or Letters of Administration usually issues within approximately 3-4 weeks.  The Court will examine the condition of the Will so it is important not to remove and staples or to damage the Will. 

Once the grant is received, the administrator or executor will be in a position to administer the estate. 

First, all of the deceased's assets and liabilities should be transmitted into the executor's name and, where appropriate, the assets can be liquidated. 

Second, any liabilities of the deceased, including estate expenses, should be paid before distribution of the balance of the estate to the beneficiaries.  Liabilities include income tax, and, the executor or administrator is responsible for lodging any outstanding tax returns.  It is important to be aware that where a deceased estate earns more income than the tax free threshold, the deceased estate is liable to pay income tax.  Deceased estates are issued with their own tax file numbers and are considered by the ATO as a separate entity to the individual who is acting as executor or administrator. 

Third, legacies and specific gifts should be paid to the beneficiaries. 

Fourth, residuary beneficiaries may elect to take assets "in specie" (that is, in their current form), so before liquidating the assets, an executor or administrator should check with beneficiaries as to what form they would prefer to receive their inheritance.  Whatever is left from an estate, after all liabilities, bequests and legacies have been paid is known as the residuary estate.  The residuary estate should be distributed to the beneficiaries in accordance with the terms of the deceased's Will or of the relevant section of the Administration Act. 

However, because the tax side of an estate can take a long time, interim distributions to beneficiaries might be required, rather than only one big distribution. A prudent executor or administrator should retain funds sufficient to meet any potential tax liability, including capital gains tax where applicable, and once all liabilities have been met, distribute the remainder of the estate.