Once probate or administration has been granted (or if it was not needed), and a notice of intended distribution has been published, the executor or administrator (or next of kin) can distribute the estate after paying the deceased’s debts. Care must be taken before distributing estates to ensure there are no potential claims against the estate.
Who can claim?
The class of persons who can claim against estates is very wide and includes the following:
a) Spouse, de facto partner or person in a close personal relationship with the deceased;
b) children of the deceased;
c) former spouses;
d) persons at any time wholly or partly dependent on the deceased and who are grandchildren or a member of the deceased’s household.
It is important to notify your solicitor of any persons who may be eligible or likely to bring a claim against the estate. It is current law in the State of New South Wales that if an eligible claimant brings a claim against an estate within 12 months of the date of death of the deceased and after the estate has been distributed, then the executor may be personally liable to meet that claim notwithstanding that he had no personal knowledge that the claim would be brought.
An executor is not entitled to distribute an estate if he has knowledge that there is a claim pending against the estate. If an executor distributes in those circumstances the executor may remain personally liable to the claimant.
Some protection is provided to executors if, prior to distributing the estate, a notice is published in a newspaper distributed in the area in which the deceased resided, providing one month’s notice of intention to distribute the estate and calling upon claims to be made against the estate within that period. This notice is generally effective to protect an executor from being personally liable with the exception that the executor will remain liable for any claims of which he had notice or in respect of which there is deemed notice. For example, the executor will remain liable for claims by both legitimate and ex-nuptial children of the deceased made within the 12-month period and will remain liable in respect of the circumstances referred to in paragraph 2.
How do I protect myself as an executor?
The best protection for the executor is to ensure that he has fully and properly instructed the lawyer acting on his behalf of the identities of all persons who could potentially bring a claim, being those persons within the classes of persons listed above. This will enable the lawyer to take steps to ensure that steps are taken for the protection of the executor before the distribution of assets takes place.
Another way to protect yourself as an executor is to not distribute the estate until after the date which is 6 months after the date of death as required by the Probate and Administration Act. Further, you will be better protected if you do not distribute the estate if you have knowledge of a claim or potential claim or if you believe there is a person whom you are aware may be entitled to claim and who has not ruled out the possibility of lodging a claim.
What happens if there is a claim?
Claims against estates may be settled without a contested court case in 2 ways:
a) by formal orders made in the Supreme Court. When such orders are made the executor is entitled to receive a personal release from all future claims and if the Court makes such an order no further claims can be brought against the executor;
b) claims may be settled informally by deed of family arrangement. This informal means of settling claims is cost effective in that it saves the fees associated with Court proceedings, but it is less effective in terms protecting the estate and the executor from subsequent claims even if all relevant persons consent to the deed.
Please don’t hesitate to contact us at O’Brien, Connors & Kennett for your legal services
