Dealing with the deceased’s bank
- Powers of Attorney to access bank accounts or conduct any other transactions cease to have any effect immediately on the deceased’s death.
- Most banks will release funds from the deceased’s account for the funeral, prior to probate of the will. You will need the original funeral tax invoice or receipt. If there isn’t enough money in the account the bank may make a partial payment. If the bank requires a grant of probate prior to releasing funds, there are some funeral directors who will wait until probate has been issued before being paid. They may charge a fee for waiting, though.
- Any joint accounts can continue to be operated by the surviving account holder or closed so that the survivor receives the entire proceeds.
- Term deposits should normally be left to run the course of their investment to maximise interest return. However if the bank will permit it, they may be terminated early to provide cash if the deceased’s surviving family is in urgent need.
- Accounts in the deceased’s sole name are strictly only able to be released to an executor on production of a copy of the Supreme Court probate. Banks make exceptions for balances below about $20,000 and will release the funds to a beneficiary upon receipt of a written indemnity from the beneficiary to re-pay the sum if required.
- So ask the deceased’s bank what its policy is as regards releasing small balances.
- If cash is urgently required prior to probate eg for the essential support of a spouse and children, the bank may require a Probate Bond that can be purchased through an insurance company. The insurer guarantees to re-pay the bank in the event a payment from the account requested by the executor is later proved to have been unauthorised, eg if a later will is subsequently discovered.
- To ensure there is no unauthorised access, also ask the bank to confirm there is a hold on all relevant accounts.
- Business accounts will continue to operate, if in a company name.
- Debit balances of unsecured personal loans are paid from the estate’s cash. If a loan is secured over an asset that is gifted to a particular beneficiary, double check the will to determine whether the gift is made subject to the beneficiary taking responsibility for repayment of the loan attaching to it.
- Property loans can usually be extended until a sale of the particular asset is realised. Interest will continue to accrue and if possible payment should be made when due. If not, notify the bank of any anticipated delay or steps being taken to sell the property.
Cancelling direct debits
- Most people have numerous monthly debits such as Foxtel, movie streaming (Netflix), music streaming, cloud services, gyms, telephone, internet, insurance, or gym memberships. Ask the bank for a list of direct debits attached to a deceased’s account and request a hold be placed on the account to prevent further debits.
- Direct debits on a credit card can only be cancelled by contacting each creditor directly or cancelling the credit card.
- Credit cards should be cancelled. Enquire whether the card issuer provided insurance for debit balances, in which event the estate is relieved of the obligation to pay the balance that would have been due to the issuer.
- Identify whether the deceased held insurance policies such as vehicle or home and contents, and notify the provider of your appointment and who is in occupation of any insured properties.
- If their value is agreed, they may be taken by beneficiaries in part satisfaction of their estate entitlement. Otherwise a sale to a second-hand dealer or via gumtree is a common practice. If the beneficiaries agree, they may be given to charity or dumped. Money collected should be recorded and banked as estate funds.
Nursing home deposit
- Contact the institution to enquire about the procedure required to be followed. If dissatisfied with its response, examine the contractual provisions that apply.
- If a property is required to be sold, the initial step is to have the property transmitted into the name of the executor “as personal representative”.
- Once a buyer is found at a satisfactory price, the executor signs a contract of sale in that capacity to the third party buyer.
- Because the sale to the buyer may trigger Capital Gains Tax, distribution of the proceeds should not occur until an estimate of the tax payable is obtained from an accountant.
- An executor may elect to obtain a professional valuation to be satisfied of the price at which the property should be marketed for sale. It the property is to be transferred to a beneficiary “in specie”, a valuation may be necessary for CGT purposes or if the transfer is made pursuant to, for example, an equal division of the entire estate among several beneficiaries.
- For property held as joint tenants, registration of the interest of the surviving co-owner as sole proprietor is a relatively simple procedure than can be performed by a solicitor.
- The deceased’s shares can be sold through a stockbroker and the proceeds paid to the estate. Publicly listed companies each have their own paperwork for transmission of the shares into the name of the executor, if, for example, it is desired to maintain the investment.
- The estate can sue for debts due to the deceased, and can be sued.
Debt due by beneficiary
- The death of the testator does not relieve a beneficiary’s liability to repay a loan that was due to the deceased at the time of the debt. This may include sums paid to third parties by the deceased on the beneficiary’s behalf and loans taken out or guaranteed by the deceased for the benefit of the beneficiary.
- Such debts may of course be “forgiven” by a provision in the testator’s will to that effect or co-beneficiaries may all agree that forgiveness of the debt is to apply.
- Before paying any legacy to a beneficiary, each should be given a statutory declaration to sign that, among other things, confirms no such debt exists.
Estate bank account
- If probate has been obtained, the executor may open a deposit account or an investment account in the estate’s name with a bank. Alternatively this can be accomplished by way of a solicitor’s trust account.
Gifts to charities
- The organisation’s name as well as the particular branch intend to benefit from the gift should be clear from the will. Sometimes a particular fund – like in relation to a hospital or university – may also be specified. The executor should ensure the payment is directed precisely according to the testator’s wishes and a receipt is obtained for payment.
- Most wills specify who on behalf of the organisation may issue a receipt for the bequest that will discharge the executor from his obligation to ensure it has been paid correctly. Likewise, there is commonly a provision to the effect that the executor need not monitor the use of the funds to ensure they are put to the use the testator specified.
- If the particular will does not so specify, legal advice should be obtained.
- When the estate is in a position to make them, cash gifts can be made.
- If a life estate in any asset (most often a residence) is granted in a will, the beneficiary is free to use the asset but is not able to dispose of them. Terms are usually imposed in the will such as the beneficiary being liable for the insurance, maintenance and outgoings in respect of the home; whether the home can be sold and the funds used to acquire another one; and whether the beneficiary is entitled to rent out the home and receive the income from that arrangement.
- The executor is responsible for monitoring the arrangement and eventually transferring the asset to the residuary beneficiary.
Varying the distributions specified in the will
- A beneficiary may for one reason or another disclaim a benefit under a will or request it be paid to another person. If it is disclaimed, the will needs to be examined to determine if the benefit is to be received by another beneficiary or other beneficiaries.
- If circumstances arise where there is no viable beneficiary to receive a particular legacy or bequest, it will usually form part of the residue of the estate.
- Superannuation has a fund membership component and often an insurance component payable in relation to the testator’s death.
- If a valid ‘nomination’ has been completed by the testator, the fund will pay the benefits to the person specified in the nomination, not to the estate. If there is no nomination or it is a “non-binding nomination” the deceased’s spouse and children can make application for the benefits to be paid to them.
- There is no role for an executor in relation to this process unless the testator has requested the executor to make submissions to the trustee of a fund to pay the benefits in a particular manner; or if there is no valid nomination and no persons who would qualify as recipients from the superannuation fund.
- Contact the Trustee and/or Administrator of the superannuation fund for details about their death benefit notification requirements.
- An executor is responsible for realising the proceeds of life and other insurance policies. Contact the insurer for their requirements for notification of claims. The proceeds of whole of life and other insurance benefits arising under life policies are payable to the estate unless a specific beneficiary has been nominated.
- Income received by the estate including mere bank interest is taxable. Capital gains tax is payable on assets of the deceased (other than the family home) that are sold. Annual tax returns are required to be lodged and the estate is responsible for payment of the tax.
Payment to residuary beneficiaries
- When all legacies and bequests have been distributed and all estate debts have ben paid or provisioned for, the remainder of the estate can be distributed.
- In preparation for making a final distribution of the estate, each residuary beneficiary should be provided with an itemised detailed financial statement recording the assets, income, payments, intended payments and provisioned sums.
- The statement should make it clear how the amount to be paid to the beneficiary has been arrived at.
Receipt and discharge
- All beneficiaries should be requested to provide a receipt for amounts received that among other things, acknowledges they owe no debts to the deceased and they indemnify the executor for making the payments (including to the beneficiary) referred to in the discharge.
Closing the estate
- When all debts, expenses, taxes and distributions are paid the estate is fully administered. An adequate receipt and discharge signed by the beneficiaries is a sufficient acknowledgment to the executor.