Closing the accounts of a deceased individual is commonly called estate settlement or settling an estate, or administering an estate.
When a person passes away, their estate has to be managed – any assets must be accumulated and dispersed as stipulated in the Will or as indicated by the relevant regulations of intestacy and any unpaid debts must be located and paid off. Avoiding the consideration of subsequent practical and legal steps is not advisable. While some measures to administer an estate can be straightforward, others can be time-consuming and it remains essential to take these steps as they hold significance, and being informed about them can only be advantageous.
When someone passes away, their estate typically goes through a process of administration to settle their financial affairs, distribute assets, and fulfil any outstanding obligations. However, in some cases, an estate may remain unadministered, meaning that the necessary steps to handle the estate have not been taken. Dealing with an unadministered estate can present various challenges and complexities, and it’s important to address the situation properly.
To properly administer an unadministered estate, several tasks need to be addressed. These may include filing necessary legal documents, paying off outstanding debts and taxes, liquidating assets if needed, distributing assets to beneficiaries according to the will or intestacy laws, and closing the estate once all matters are resolved. It’s essential to comply with applicable laws and regulations throughout the process to ensure a proper and lawful administration.
Handling An Unadministered Estate
The first step in handling an unadministered estate is to identify the assets and liabilities of the deceased. This involves gathering information about their bank accounts, investments, properties, debts, and any other financial matters. It may require reviewing their documents, such as Wills, trusts, and financial statements, as well as contacting relevant institutions to obtain necessary information.
Once you have a clear understanding of the estate’s assets and liabilities, it’s crucial to determine who has the legal authority to administer the estate. This depends on whether the deceased left a valid Will or not. If there is a valid Will, the executor named in the Will is responsible for administering the estate. If there is no Will or no executor appointed, the court may appoint an administrator, often a close family member, to handle the estate.
Be aware that dealing with an unadministered estate can be time-consuming and complex, especially if there are multiple assets, beneficiaries, or if there are disputes involved. Seeking professional assistance from a qualified estate administrator can be beneficial in navigating the legal requirements and handling the estate efficiently. They can provide guidance, handle the necessary paperwork, and ensure that the estate is administered in accordance with the law and the wishes of the deceased.
What to Do?
It is essential to establish whether there is a Will in existence or one that formerly existed with regards to an estate that has been left unattended to. Do you think there was a Will? If so, where do you think it was stored – with a legal professional, at a bank, or in someone’s home? Are there any relatives or other people who could give helpful advice? If you cannot find the Will in an obvious place, you may have to use a commercial Will registration company to look for it. They sometimes possess the information about final testaments and for a fee may be able to know the location of a Will, but do remember it may not be the most recent one, so services like this are often seen by many within the Will writing industry as flawed. One location to check for a Will is with your local Probate Registry, and they do not charge you to check.
Identifying Assets
In some cases, even if records of the deceased’s assets are found, it may have been so long since their passing that the organisations holding the assets no longer possess definitive information about what the deceased owned. While determining the ownership of assets like land and shares, which cannot be managed until a grant is obtained, is generally straightforward, certain banks may require proof of insurance contracts before releasing ownership of the assets as part of any inheritance. There is a possibility that some assets may never be discovered. It is important to discuss the deceased’s financial circumstances with close family members and anyone who may have knowledge of their bank accounts. However, in today’s digital age, it can be more challenging to locate online share accounts that only the deceased had access to.
Liabilities
Typically, any unpaid debts at the time of a person’s death, including those owed to funeral directors, should be addressed. If someone else incurred the costs, such as a governmental departments, reimbursement may be necessary.
In most cases, if a person passed away more than six years ago, creditors cannot enforce outstanding debts unless assets were used as collateral. It is crucial to ask family members and individuals familiar with the deceased’s estate for any evidence of outstanding debt if the death occurred within the past six years.
Next Steps
Once the assets and debts of the estate have been determined to the best extent possible, the executor should consider applying for an official grant. However, if the intended executor has also passed away, it is unlikely that they had the opportunity to be formally granted authority by the court, thus preventing the creation of a “chain of trust.”
The process for obtaining the grant will depend on the specific type of grant being requested. In cases where it is known that the deceased left a valid Last Will and Testament but the original or a copy of the document cannot be found, it may be appropriate to initiate a probate court proceeding to validate an unsigned copy if there is sufficient supporting evidence.
Distribution of the Estate
Once the job of recognising and accumulating the estate assets is finished or very far along, the Executor needs to consider how the estate should be divided. It may be more complicated than it seems – the worth of valuable possessions could have drastically changed since the person’s demise, and assets that had previously been given away as gifts could have vanished or been disposed of.
Some of the assets could have been taken from banks by individuals who acknowledged responsibility for them, or people may just have kept hold of their property, like money from their home, jewellery, or other possessions. If the individual has a legitimate right to some portion of the inheritance or the items it holds, the amount they are given must be altered to reflect what they possess. If someone is not entitled to what they have taken, they will have to explain it to the Executor so that the rightful owner can get what is theirs.
This applies no matter if the deceased had a Will or not. Issues come up in relation to some of the concepts governing the division of assets when a Will is written or when there is no Will present.
Intestacy
If a surviving spouse or civil partner is legally entitled to inherit under the intestacy rules, their entitlement may be forfeited if a specific number of years have elapsed since the deceased’s death.
The right of any individual entitled to a portion of the estate’s residue will not be subject to legal time limits until a certain number of years have passed following the completion of the estate administration process. Therefore, the surviving spouse or civil partner retains the right to receive a share of the remaining assets if no action has been taken to administer the estate. This principle also applies to any other person entitled to a portion of the intestate’s remaining assets.
Testate Succession
Testate succession refers to the distribution of a deceased person’s assets according to their valid Last Will and Testament. When a person passes away and leaves behind a legally recognised Will, it provides clear instructions on how their estate should be divided among beneficiaries. Testate succession ensures that the wishes and intentions of the deceased regarding the distribution of their assets are followed.
The process of testate succession begins with the identification and validation of the deceased’s Will. This involves confirming that the Will is authentic and legally binding. Once the validity of the Will is established, the next step is to appoint an executor, who is responsible for overseeing the administration of the estate and carrying out the instructions outlined in the Will.
Under testate succession, the deceased’s assets are distributed to the beneficiaries named in the Will. The beneficiaries may include family members, friends, charities, or any other individuals or organisations chosen by the deceased. The distribution of assets can include various types of property, such as property, financial accounts, investments and personal belongings.
It is important to note that testate succession operates within the legal framework and regulations governing wills and estates. The process may involve fulfilling any outstanding debts, paying taxes, and addressing any legal challenges or disputes that may arise during the administration of the estate. The executor plays a crucial role in ensuring that the testate succession process is carried out accurately and in accordance with the law.
Overall, testate succession provides a structured and legally binding framework for the distribution of assets based on the deceased’s expressed wishes. It offers a level of certainty and clarity in estate planning, allowing individuals to have control over how their assets will be distributed after their passing.
The principle established in the case of Green v. Gaul applies equally to both intestate and testamentary estates, not only with respect to residual interests but also to any rightful bequest in a Will. The countdown for a beneficiary’s entitlement does not commence until the estate has been fully administered. This includes not only the right to receive the principal amount but also the right to receive regular income.
There are two specific types of testamentary gifts:
- If the gifts remain unchanged from the time of the testator’s death, there are typically no issues, except for determining any earnings generated by the gifts since the death.
- The value of a Nil Rate Band Gift is determined based on the instructions outlined in the will, regardless of the overall estate value at the time of death.
Matters To Consider
Resolving an inheritance can be intricate, drawn-out, and pricey, even when there aren’t any difficulties. The more assets that a person has in their estate, the more complex the situation becomes, leading to further issues and disputes, and thus requiring more assistance.
Abatement
Upon gathering comprehensive information about the assets and debts of the estate, it may become apparent that there are insufficient resources to fulfil all the bequests made prior to the deceased’s death. This leads to a depletion of the residue and necessitates the process of abatement.
It is crucial to recognise that the value of the estate’s assets may have undergone significant changes between the time of the individual’s passing and the moment of estate distribution. When the distribution occurs, the available funds are likely to be inadequate to cover all the bequests, including any accrued income or interest. In such cases, the remaining gifts will be proportionately reduced, ensuring that the entitled recipients receive a share of the available funds.
What if a Grant was Obtained?
In situations where a grant has been obtained but no effort has been made to distribute the estate, it is not significantly different from a scenario where no grant was obtained, as mentioned earlier. The key distinction lies in determining who has the authority to administer the estate.
If the grant obtained was probate and the grant holder has passed away, the Executor handling their assets will also be responsible for managing the assets of the deceased through a representation process. This may be a surpise for them. If they become aware of this prior to applying for their own grant, they may consider refusing it. By doing so, they would forfeit their entitlement to accept probate and instead seek a grant of letters of administration, which would be attached to their beneficial interest in the estate. This would break the “chain.”
If a grant other than probate was issued for the deceased’s estate, there would be no “succession of representation,” which means that those with a beneficial interest in the estate would need to obtain a grant of letters of administration de bonis non administratis to finalise the collection and distribution of the estate.
Other Issues to Consider
Most probate cases are relatively straightforward, following specific steps and procedures, without involving legal disputes or trials. However, in certain situations, probate may not be necessary, resulting in either a simpler or more complex process, depending on the circumstances.
Trusts
A trust fund can be best understood as a small business established with a specific purpose: to hold and manage someone else’s funds or assets.
There are various types of trusts and multiple ways to create them. Often, a Will includes instructions to establish a trust, particularly for the purpose of safeguarding assets on behalf of minors who are legally unable to own property.
Trusts exist independently from their creators and can continue to operate even after their creators’ passing. Assets held in a trust typically bypass probate proceedings, and if the trust specifies different beneficiaries to receive assets upon the founder’s death, these inheritances are not subject to probate either.
It’s important to note that probate has minimal involvement in the functioning of a trust left by a deceased relative. Unless there are legal restrictions, complications with trust assets, or unresolved issues that cannot be addressed in any other way, probate courts are not involved. The responsibility for managing and utilising the trust’s assets lies with the trust’s members.
Trusts typically hold assets for the benefit of another person, known as the beneficiary. The trustee is responsible for managing and utilising the trust’s assets solely for the beneficiary’s advantage.
Young Children
In the event of a parent or guardian’s death, where no other surviving parent or guardian exists, there will be a need to address the welfare and financial needs of minor children.
For example, if a person passes away, leaving behind a child under the age of eighteen, the surviving parent (if applicable) will assume responsibility for the minor. Even if the deceased did not specify a guardian for their child in their Will, the court will appoint a suitable guardian if the surviving parent is absent.
As minors are not legally capable of owning assets, any inheritance they receive will be held and managed by a trustee until they reach an appropriate age to assume ownership.
Estate & Inheritance Taxes
Generally individuals do not typically have to cover any estate expenses. That includes any estate taxes the estate owes. But inheritance taxes are different. If you have been given an inheritance, it falls to you to decide if any taxes should be paid, as well as what amount is owed.
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