Deceased Estate Debts

Deceased Estates Estate Litigation Lawyer Brisbane Sunshine Coast Gold Coast QueenslandI am often asked by clients acting as Executors or Administrators of a deceased Estate how to manage and pay the debts of a deceased Estate.

Before paying the debt of an Estate, an Executor or Administrator should consider the following:

  1. Whether the deceased’s Estate is liable to pay the debt;
  2. Whether the Executor/Administrator is authorised to deal with the debts of the Estate;
  3. Whether payment of the debt can be deferred;
  4. Whether the assets of the Estate are sufficient to allow for the debts to be paid; and
  5. Whether the Estate is insolvent.

It is important to obtain advice on the above when considering some of the issues below which are faced by an Executor/Administrator.

Should the Executor or Administrator of an Estate repay any debts of the deceased?

It is important for an Executor/Administrator to determine the assets and liabilities of the Estate when making a determination to repay an Estate debt. In some instances, parties to whom debts are owed may enter into special arrangements regarding debts owed by the deceased’s Estate.

Should the Executor or Administrator of an Estate personally pay funeral expenses?

In most instances, an Executor or Administrator will personally pay funeral expenses after the death of a deceased as there is insufficient time to access the deceased’s funds and funeral insurance plans. If an Executor or Administrator is satisfied that there are sufficient funds in the Estate to reimburse them for the payment of the funeral expenses, then they should proceed with the payment. Further, any party who has paid for reasonable funeral expenses, is entitled to be reimbursed by the Estate for such expenses.

Can an Executor or Administrator access the deceased’s bank account to pay debts?

Only an authorised Executor or Administrator who has obtained a Grant of Probate or Letters of Administration should operate an account which is solely in the name of a deceased. The proper course is to close the deceased accounts, and to open an account in the name of the executor as trustee of the deceased estate.

There may be circumstances where a bank will enter into special arrangements with a potential Executor or Administrator to facilitate the payment of the deceased’s bills/accounts, however, this will depend on each bank.

Prior to making any payments, you should consider whether there will be sufficient funds in the account to cover direct debits such as home insurance.

How does an Executor or Administrator know if the deceased has sufficient funds in the bank to pay debts?

Financial institutions may provide a potential Executor or Administrator with this information. However, any superannuation accounts, life insurance policies, funeral insurance plans and other assets of the Deceased will need to be investigated to form a determination as to whether the deceased will have sufficient funds to pay all of their debts.

What if the deceased Estate is Insolvent and can’t pay any of its debts?

If an Executor or Administrator considers that the Estate is insolvent (that is, it has insufficient funds to pay its debts), they should obtain legal advice prior to attending to any payments on behalf of the deceased Estate.

There may be serious implications for an Executor or Administrator if one type of debt is paid in priority to another. This could include the executor being personally responsible for a debt.

If you have been appointed as an Executor or Administrator of an Estate, it is important that you obtain advice in relation to payment of a deceased Estate’s debts. Should you have any questions in relation to the above matters, please do not hesitate to contact me.

What changes can be made to distributions in a Will after the Will maker has passed away?

Estate Administration Will Beneficiaries Litigation Lawyer Brisbane Queensland Sunshine CoastI often have Executors asking me what changes can be made to the distributions to beneficiaries in a Will when they are completing the administration of the Will maker’s Estate. While it is the Executor’s duty to uphold the Will maker’s testamentary intentions as much as possible, there is some flexibility for carrying out those wishes.

What changes can be made to distributions in a Will?


There are limits as to what changes can be made to distributions in a Will, and the consequences of these changes. Some changes I have been asked about are:

Changing a beneficiary’s distribution from ownership or part ownership of a property to a cash sum.

If you would like to change a beneficiary’s distribution from the Estate from ownership or part ownership of a property to a cash sum, there are requirements which must be followed to minimise the amount of stamp duty that may be collected by the Office of State Revenue.

The wording of the Will is very important in this situation as the Office of State Revenue will look to the Will to ensure that the change in the beneficiary’s distribution is still upholding the Will maker’s testamentary intentions.

Increasing the distribution to a beneficiary who was distributed less under the Will than other beneficiaries, in order to mitigate the risk that the beneficiary will contest the Will for further provision.

If you are the Executor of an Estate faced with the possibility of a Family Provision Application (ie. someone contesting the Will for further provision), it is very important that you seek legal advice from an experienced Estate litigation solicitor as soon as possible.

If the Executors and beneficiaries have agreed to increase the distribution to a beneficiary in order to mitigate the risk of the beneficiary making a Family Provision Application, I strongly recommend you retain an experienced Estate litigation solicitor to prepare a Deed of Family Arrangement formalising the agreement.

However, a Deed of Family Arrangement is not an iron-clad protection against a Family Provision Application. I have previously written about Family Provision Applications here.

Distributing more of the deceased Will maker’s chattels (household items and possessions etc) to one beneficiary than the others, even though the Will states that the entire Estate is to be distributed to the beneficiaries in equal shares.

If the Executors and beneficiaries agree to distribute more of the Will maker’s chattels to one beneficiary than the others, they may do so, provided the chattels in question have not been specifically gifted to a beneficiary in the Will.

I don’t know what the Will maker wanted to distribute because there is uncertainty in the wording of the Will – what should I do? 


If there are more significant changes that need to be made to the distributions in a Will because the Will was improperly drafted or there is uncertainty about what is being bequeathed, you may need to apply to the Supreme Court for a declaration as to how to distribute the Estate, or some assistance in the interpretation of the Will.

What should I do from here?


If there is uncertainty in the Will about what distributions are to be made to whom, or if you would like to alter the distributions to beneficiaries in a Will, you should consult an experienced Estate litigation and administration solicitor. Please contact me should you require any assistance or advice.

Philip Seymour Hoffman’s Will - What conditions can be placed on bequests?

philip seymour hoffman Estate Litigation Lawyer Brisbane Queensland Wills LawyerI have been reading about the administration of the Estate of Philip Seymour Hoffman, who tragically passed away recently. His Will made a number of bequests, but included rules for the circumstances in which those bequests could be accepted by the beneficiaries.

As an example, he set up a trust for his son, but stipulated that his son must either be raised in New York, Chicago or San Francisco, or visit these cities at least twice a year. Although I am not sure how enforceable these rules would be in the United States, I have had many clients attempt to include rules in their Wills for bequests and distributions from their Estate.

What can I bequest in my Will?

You can bequest most items that belong solely to you, for example:

  1. Your car (if it’s only registered in your name);
  2. Your family heirlooms;
  3. Your jewellery;
  4. Your house or whatever share of it you own as tenants in common.

However, you cannot bequeath possessions owned jointly in your name or in a company/trust name, and you may be surprised to find that certain items you thought were yours to give are not in fact owned by you.

A recent example of this situation was in 2012 when Bruce Willis tried to bequeath his iTunes library in his Will and found that he does not own the songs – he is instead “borrowing” them under licence.

What conditions can I place on people receiving their bequests in my Will?

I sometimes have clients instructing me to leave their Estate to their child, but only on the condition that the child takes care of the Will maker’s pet. Although you can bequeath your pet to someone with a sum of money as compensation for caring for your pet, there is no way to stop them from giving your pet to the RSPCA and pocketing the cash for themselves.

Similarly, it is not enforceable to bequeath your Estate to someone on the condition that they live in a certain area, or take care of your pet. These are merely “wishes” that you can express, but they are not binding on the beneficiary and do not bind your Executor to ensure your directions take place.

My dad has placed restrictions on me receiving my inheritance – what can I do?

It is legally acceptable for a Will maker to state that a beneficiary has to be a certain age to receive their inheritance, although that beneficiary can apply to the Executor or the Court to receive their distribution before attaining that age.

If you feel that you are being unnecessarily restricted by the provisions in someone’s Will, you can contest the deceased’s Estate but you will need the assistance of an experienced Estate litigation lawyer. Please contact me if you would like advice or assistance.

Darveniza v Darveniza & Drakos as Executors of the Estate of Bojan Darveniza & Ors - A landmark case for Family Provision Applications

Family Provision Applications Estate Administration Deceased Estates Lawyer Brisbane Gold Coast QueenslandI read with interest a decision recently handed down in the Supreme Court in the matter of Darveniza v Darveniza & Drakos as Executors of the Estate of Bojan Darveniza & Ors [2014] QSC 37. The case concerned a man’s application for further and better provision out of the Estate of his deceased father, for which he was awarded $3 million. This is the largest sum ever awarded to an applicant in a Family Provision Application in Queensland.

The background of the case

 

The background of the case is as follows:

  1. Mr D was a successful business man and property investor;
  2. His Estate was worth at least $26 million to $28 million;
  3. Mr D had two children with his first wife, Mr S and a daughter;
  4. Mr D then had three more children from a de facto relationship, and an additional three children from his second marriage;
  5. Mr D was survived by his second wife, J;
  6. Mr D made no provision for Mr S in his Will. The reasons for this included the fact that he had during his lifetime purchased properties for Mr S and had recently transferred management of the properties to Mr S. Mr S was also a potential beneficiary under trusts Mr D had established during his lifetime, and Mr S was also a stakeholder in properties owned by Mr D’s company;
  7. Mr D had also left some of his other children out of his Will, however their applications for further provision were settled prior to trial.

What did the Judge consider?

 

The Judge considered the two stage test from Singer v Berghouse, being:

  1. Was the provision made inadequate in all the circumstances?
  2. If yes to 1, then what provision ought to be made?

In applying this test, the Judge considered:

  1. Mr D had made substantial provision for Mr S during Mr D’s life;
  2. The properties which had been purchased by Mr D in Mr S’s name came with a debt of approximately $300,000.00 when Mr S took over their management;
  3. At the time of the trial, the evidence demonstrated that Mr S’s net worth at the time of Mr D’s death was $3.885 million, although Mr S submitted this net worth had decreased to $2.58 million at the time of trial; and
  4. Some years prior to Mr D’s death, Mr S had suffered a serious injury which significantly decreased his capacity to work.

What did the Judge decide?

 

In making his decision, the Judge accepted that:

  1. Mr S had performed a substantial amount of work over the years in Mr D’s business and contributed significantly to Mr D’s accumulation of assets;
  2. Mr D had made promises to Mr S over the years regarding the content of his Will, and many of those promises were not fulfilled;
  3. Some of the reasons Mr D listed in his Will for leaving Mr S out were mistaken and there was no real prospect that Mr S would receive any distributions from the trusts Mr D mentioned.
  4. Mr D’s Estate was very large;
  5. At the time of Mr D’s death, Mr S had substantial assets but also substantial liabilities;
  6. The provision Mr D had made for Mr S did not represent a gift but a discounted sale because of the effect of the lending Mr S had to secure to receive the gifts; and
  7. Mr S was significantly limited in his earning capacity.

The Judge assessed Mr S’s further provision to be $3 million. However, the Judge is yet to decide whose costs will be paid from the Estate.

I’ve been left out of my parent’s Will – what should I do?

 

This case sets an important precedent for matters the Court will take into account when assessing Family Provision Applications and claims against a will. If you feel that you have been left out of a Will unfairly, you should contact an experienced Estate litigation lawyer. Please contact me should you require advice or assistance.

What happens to my HELP education debt if I pass away before paying it off?

HECS Debt Estate Administration Lawyers Brisbane Queensland SUnshine Coast Gold CoastI often receive enquiries as to what debts a person’s Estate must pay, and what debts do not form part of the Estate. The debts that don’t form part of your Estate include debts incurred by a company or trust. Any debts which are incurred in your name alone, either personally or by way of guarantee, will be due to be paid by your Estate.

How are my debts paid by my Estate?

It is important to note that these debts are not paid by your Executors personally, they are paid through the cashing in or selling of your Estate assets, including your bank accounts, proceeds from sale of your property which forms part of your Estate, and possibly your superannuation if the Trustee of the super fund elects to pay your super into your Estate.

Is my HELP debt treated like any other debt of my Estate?

Your HELP debt is not treated like other debts of your Estate. Section 137-20 of the Higher Education Support Act 2003 states that upon the death of a person who owes a HELP debt to the Commonwealth, the debt is taken to have been paid. This means that your Estate will not have to pay the remainder of your HELP debt.

Do some debts have greater priority to be paid than others?

Yes. The expenses for your funeral and for the administration of your Estate (including legal fees) must be paid first. Depending on the debts owing, some will have greater priority than others.

If you are the Executor or administrator of an Estate where the deceased had debts when they passed away, I recommend you contact an experienced Estate administration lawyer to assist you with the Estate administration to ensure any debts are paid in the right order of priority. Please contact me if you would like advice or assistance.

Questions of capacity - when there are suspicions about a Will maker’s capacity at the time of making their Will

Question of Capacity Estate Litigation Lawyers Brisbane Gold Coast Sunshine Coast QueenslandI recently read an article from the UK about an elderly lady who committed suicide, leaving her £250,000 bungalow to her doctor’s daughter, and the residue of her Estate to her financial advisor. Mrs R’s previous Will had left her entire Estate to her sisters in equal shares, and one of them is now demanding an investigation into the circumstances in which Mrs R made her most recent Will, as she believes Mrs R did not have the necessary capacity to make it.

What evidence will the Court look at when deciding whether or not the Will maker had capacity?

As no two capacity cases are the same, the Court will look to the circumstances in which the Will maker gave their instructions, and signed their Will. A few case examples of these circumstances are:

1.       Re: Crowson (2001) QSC 393.

In this case, the Will maker, Mr C, had an illness which affected his ability to write and communicate. However, he could use a machine to type messages which would then be transmitted using a computer-generated voice.

When meeting Mr C to execute his Will, Mr C’s solicitor videotaped the meeting. In the video, Mr C can be seen and heard replying to questions directly and with the use of his machine. The Court held that Mr C did have capacity to make his Will.

2.       Fradgley v Pocklington [2011] QSC 227.

The Will maker in this case, Miss D, had suffered from a stroke just a few months before providing instructions for and executing her Will. In the new Will, Miss D gave instructions to her solicitor that she wished to reduce her daughter’s share of her Estate by gifting $200,000.00 to a friend of hers.

The Court found that Miss D was either affected by delusion or paranoia about her daughter, or she did not understand or comprehend the fact that in reducing her daughter’s share of her Estate, her daughter could contest her Will. Consequently, Miss D’s new Will was set aside and Probate of her previous Will was granted.

3.       Re Clare [2009] QSC 403.

In this case, the Will maker, Ms C, left a document headed “This is the Last Will and Testament of me” dated approximately two years before she committed suicide. Her brothers, Mr PG and Mr MG applied for Letters of Administration on the basis that Ms C did not have capacity to make her Will. At the time she made her Will, Ms C was subject to an Involuntary Treatment Order under the Mental Health Act 2000 (Qld) as she had been diagnosed as suffering from schizophrenia, which included delusions and paranoia. The Court found that Ms C did not have capacity to make her Will.

If you are concerned that your loved one did not have capacity to make their Will, you should contact an experienced Estate litigation lawyer. Please contact me should you require assistance or advice.

The top four reasons why you should not use a DIY Estate administration kit - Part 4

DIY Estate Administration Kit Estate Lawyers Brisbane Queensland Sunshine Coast Gold CoastIn this series, I have addressed the first three reasons why I believe you should not use a DIY Probate or DIY Letters of Administration Kit. In my final instalment, I would like to address what can happen if your application for Grant of Probate or Grant of Letters of Administration is requisitioned by the Court.

What does it mean if my application is “requisitioned”?

 

If your application is requisitioned by the Supreme Court, it means that there is a problem in your application and it needs to be rectified. This may mean that you need to complete a further affidavit, or you may have to re-file all your application documents.

How can my application be requisitioned?

 

There are numerous ways that an application for Grant of Probate or Grant of Letters of Administration can be requisitioned, including:

  1. Not “clearing off” those who have a prior right to the Grant;
  2. Not being entitled to apply for the Grant yourself;
  3. Problems with execution of the Affidavits;
  4. Neglecting to include details of the deceased’s marital status, or providing incorrect details;
  5. Not adequately explaining marks on or damage to the Will.

How can I make sure my application isn’t requisitioned?

 

The best way to safeguard against your application being requisitioned is to use an experienced Estate administration lawyer to assist you with your application. Although a DIY Probate Kit or DIY Letters of Administration Kit can give you a basic outline of the steps involved in preparing your application, they are not able to assist you with requisitions that may be unique to your situation.

If you would like assistance with preparing your application for Grant of Probate or Grant of Letters of Administration, please contact me.

Rights of Adopted Children in Estate Litigation

Adopted Children Estate Litigation Lawyer Brisbane Queensland Sunshine Coast Gold Coast

Recently I received an enquiry from a woman whose son’s biological father had passed away. The woman’s second husband (then the boy’s stepfather) had adopted the boy some years ago and she was wondering if her son could claim on his birth father’s Estate.

Who is a “child” under succession law?

 

The concept of a “child” differs across areas of law, however under the Queensland Succession Act, a “child” includes a step-child, a legally adopted child and, since last year, a child according to Aboriginal tradition, which I have previously blogged about here.

Am I still someone’s child if I have been adopted by someone else?

 

The enquirer’s son is still her child because he has been adopted by the enquirer’s spouse, but under section 214(3) of the Adoption Act 2009 (Qld), he is no longer legally the child of his birth father. This means that the new parent (in this case, the boy’s stepfather) takes on all parental responsibility for the adopted child.

Whose Will can I contest if I am adopted?

 

If you are adopted and you have not been adequately provided for under your birth parent’s Will, you cannot contest it on the grounds that you are their child. However, you may still be able to make a claim if you can show that you were financially dependent on your birth parent.

As you are now considered your adopted parent’s child under succession law, you are eligible to contest their Will if they pass away and adequate provision has not been made for you.

What should I do if I want to contest a Will?

 

If you would like to contest your birth or adopted parent’s Will, you should contact an experienced Estate litigation lawyer. Please contact me should you require assistance or advice.