When can you distribute assets?
One of the most common questions asked in relation to deceased estates concerns when an executor can distribute the estate assets to beneficiaries.
Beneficiaries are, understandably, always eager to receive their interest in the estate and executors are eager to finalise their duties as quickly and efficiently as possible. Despite this often mutual desire to distribute the estate quickly, there are several requirements that must be met prior to any distribution.
- Probate must be granted – probate is an order from the court establishing the validity of the deceased’s will. This order allows the executor to legally administer the estate pursuant to the terms of the will.
- Notice of the distribution must be published – notice must be posted on the Supreme Court website of the intent to distribute the estate. This notice alerts possible creditors or other interested parties that the executor intends to distribute the estate.
- All assets of the estate must be collected – it is the responsibility of the executor to ensure that all known assets of the deceased are found, collected/sold and prepared for distribution.
- All known debts of the deceased must be paid – sometimes a deceased dies with debts. These debts (including funeral expenses and tax debt) must be paid prior to distribution.
Once all of these requirements have been met, the executor is technically free to distribute the estate.
Distribution has occurred; Now money is owed to a creditor…
But what happens if the executor distributes everything, leaving no money in the estate, and a creditor or beneficiary or other interested person comes forward claiming that the estate owes them money?
If the Executor has complied with certain requirements for distribution of the estate, he/she will not face personal liability for any claims made against the estate subsequent to distribution. Those requirements are:
- That the estate assets are distributed at least 6 months after the deceased’s date of death;
- That the executor has published a 30 day notice of his/her intent to distribute the estate; and
- That the time specified in the notice has expired.
An additional issue to be taken into account by an executor when considering when to distribute, concerns claims against the estate by a relative or a dependent of the deceased, for provision. An executor should be aware that potential claims for family provision must be filed within 12 months of the date of death of the deceased. An executor who distributes the estate prior to the expiration of that 12 month period may be held personally liable if he/she has distributed the estate knowing of a potential claim for provision and there are no funds remaining to satisfy any successful claim made within that period.
The timing of distribution by the executor in each case depends on the facts of the case and an assessment of the particular risks of a claim against the estate in each case.
An executor who distributes the estate early can be held personally liable for shortfalls that result from early distribution. As a general rule, if an executor wants to avoid potential personal liability to a creditor, beneficiary or other person, (other than in relation to a family provision claim) they should delay distribution until the expiry of the later of the expiry of the 30 day notice and the passage of six months from the date of death. If an executor wants to avoid potential personal liability to a claimant for family provision, then they should delay distribution till the expiry of 12 months from the date of death.
Careful consideration of the possible risks and rewards of early distribution of the estate must be made by the executor prior to any distribution.
For more information regarding distribution of estates or your matter, please contact the Estates & Probate Team at Watkins Tapsell.