Dealing with Beneficiaries
An executor appointed by Will or an administrator (where there has been a Grant of Letters of Administration because there is no Will) have a legal obligation to administer the estate competently and in a timely way. During the course of the administration they will need to liaise with the beneficiaries to ensure they are the right people to receive their inheritance and are legally capable of doing so (including to ensure they are not bankrupt).
Make sure you’re covered before distributing the estate
An executor /administrator should make sure that they do not distribute the estate into the hands of the beneficiaries too early. They must ensure that all estate debts are paid and that the time limits for bringing an estate claim in their particular State have passed.
It is advisable for an executor/administrator to arrange for a Deed of Release and Indemnity to be prepared and signed by themselves and the residuary beneficiaries of an estate, before significant distributions are made, in order to protect themselves from any future unforeseen contingencies and also to record the agreement to any appropriations (specific allocations) of assets to particular beneficiaries.
Watch out for tax implications
Distributions will include the transfer of assets (such as real property/land, shares and personal items) and distribution of cash from bank accounts, life insurance or arising from the sale of estate assets. The timing of distributions and transfers can have important ramifications for tax purposes, so it is important to seek advice before arranging distributions to beneficiaries.
Talk to us before you distribute
Estate First Lawyers can assist with all aspects of liaising with beneficiaries and keeping them informed. Importantly we can provide you with the legal advice to keep you as an executor or administrator off risk, including documenting agreements between executors/administrators and beneficiaries to ensure all legal and tax aspects of the estate are dealt with before final distribution of the estate. At our first consultation we will go through the various issues with you and provide you with tailored recommendations and a fixed fee quote.
Frequently Asked Questions
What is the ‘Distribution of an Estate’?
The distribution of an estate is the transfer of the net assets of an estate to the beneficiaries (that is, the people the deceased person named to receive their estate/assets in their Will, or those people entitled to receive the assets where there is no Will). It can occur by way of cash transfer (cheque or electronically) or by physical transfer of ownership (e.g. of a property/land title, shares or personal item such as a motor vehicle). Such transfers may have different tax implications depending on the asset, so advice is recommended before assets are transferred.
What is a Deed of Release and Indemnity, and why is it important?
A ‘Deed of Release and Indemnity’ is a written agreement that documents the major steps taken in the estate administration and the beneficiaries’ approval of the executor’s management of the estate, which provides protection for the executor and an indemnity to the executor for any future contingencies where the estate may be required to make payment.
I am an executor – do I have to deal with the beneficiaries?
You are legally obligated as an executor to administer the estate for the beneficiaries. However, you are usually entitled to engage others to assist you in the necessary steps of administration, including the legal, financial and accounting aspects at the estate’s expense. Your lawyer can assist with liaising with beneficiaries, which can be particularly helpful where family relationships are strained or the estate is complex.
I am a beneficiary of an estate – how long will it take before I receive my inheritance?
The time it takes to administer an estate depends on certain legal timeframes, as well as any potential complexity associated with the estate (due to assets, liabilities or beneficiaries, for example). Even in a straightforward estate administration it is not uncommon for an estate to take 6-12 months to administer.
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