Covid-19 has no doubt added financial pressure and financial uncertainty to many people who have been stood down, lost their jobs or businesses.

An inheritance from a deceased estate during this time may be just the relief a beneficiary desperately needs.

This can lead to beneficiaries pressuring Executors or Administrators (collectively known as Legal Personal Representatives “LPRs”) to distribute the assets of a deceased estate. LPRs may also feel the need and obligation to distribute the estate as soon as possible to help out the beneficiary. However, LPRs must be aware of the waiting times and the risk and liabilities involved in distributing an estate too soon.

Administration of deceased estates are governed by the laws of each State and Territory, all of which have similar provisions about waiting periods and limits to the LPRs liabilities before they can distribute a deceased estate.

All estate debts and liabilities are paid from the assets of the deceased estate, but LPRs may be personally liable to creditors if they have distributed the estate too soon or without legal and financial advice.  Section 64 of the Administration and Probate Act (ACT),  s99A of the Administration and Probate Act 1958 (Vic) and the Succession Act (NSW) are examples of legislation setting out the waiting time LPRs should take into account when administering and distributing the assets of the deceased estate.


Bankrupted Beneficiary

When making a distribution to a beneficiary it is important for LPRs to confirm that the beneficiary is not bankrupt. Section 58 of the Bankruptcy Act 1966 provides that “after acquired property of the bankrupt vests … the trustee in bankruptcy”.  This means that the beneficiary’s inheritance may need to be paid to the Trustee in Bankruptcy and not to the beneficiary him/herself.

A beneficiary has a ‘chose in action’ after a person dies and before they receive their inheritance. The chose is action is the right to the proper administration of the estate by the LPRs and the expected receipt of the their inheritance after payment of all estate liabilities, claims and costs. It was made clear in the decision of Official Trustee in Bankruptcy v Schultz [1990] 170 CLR 306 that this right or ‘chose in action’ also passes to the Trustee in Bankruptcy of a bankrupted beneficiary.

Sometimes a beneficiary may ask that the LPRs hold on to their inheritance until ‘after’ they are discharged from bankruptcy.  This should not be considered by the LPRs as such action is an attempt to defraud creditors and the interest in the expected inheritance remains vested in the Trustee in Bankruptcy even after the discharge of bankruptcy date.  LPRs have an obligation to properly administer the deceased estate and if not properly administered, any persons suffering loss or damage as a result may have a claim against the LPRs.

Administering a deceased estate is more than just collecting assets and distributing the estate to the beneficiaries, it requires a consideration of various legislation.  This can be difficult if the LPRs and/or beneficiaries do not understand the process or the law.

At Chamberlains Law Firm we can advise LPRs as to the process and their rights and obligations to properly administer a deceased estate including making applications to the Supreme Court for a Grant of Probate or Letters of Administration.