Often, as professional advisors, we're asked to take on the role of Executor for clients who may not have close family or friends to act or, for some particular reason, it's preferable for someone independent to handle the administration of an estate.
In some situations, it may not be necessary to obtain a Grant of Probate or Letters of Administration, for example:
- where the nature of the assets are such that a Grant is unnecessary (for example, the estate consists solely of personal property and real estate which are held as joint tenants and will pass by survivorship); or,
- where the estate is a small estate and the asset holder is prepared to transmit the asset without a Grant (for example, small bank accounts usually not exceeding $50,000 or small share parcels not exceeding $15,000). It's important to note that asset holders have different internal policies regarding this.
While there is a cost saving in not applying for a Grant of a small estate, there are reasons why it may be wise for a legal personal representative (LPR) to obtain a Grant even though administration could be effected without one. This is particularly important when a LPR is not a beneficiary in an estate and has more at stake if he or she breaches one of their many duties and incurs a liability, such as a liability for debts.
It is therefore extremely important for a LPR to be fully informed before deciding whether to dispense with an application for a Grant and to carefully consider the nature and extent of the deceased's assets and liabilities, as well as whether there may be a claim against the estate or a question of testamentary capacity. If there is a claim against the estate, it's possible that even property owned as joint tenants can be included in the estate because of the 'notional' estate provisions in the NSW Succession Act. The fact that the majority of assets are held jointly is not in itself a reason to dispense with obtaining a Grant of Probate.
In NSW there are statutory provisions conferring protection from liability for acts done in the administration of the estate where a Grant is obtained that aren't available to someone administering an estate without a Grant. These provisions mostly revolve around publishing a notice of intention to distribute estate assets which allows distribution only for claims of which the LPR has notice.
The relevant legislation preserves the rights of a beneficiary, creditor or other person with a claim against the assets of an estate (including a spouse or de facto spouse on intestacy) to pursue distributed assets. To be successful, the claimant must establish that the LPR wrongly distributed assets of the estate and exhaust any primary remedy against the LPR.
If there's any doubt as to testamentary capacity, whether a will is the last will or whether there are any potential claims against the estate, then an LPR should definitely apply for a Grant in order to obtain the statutory protection from liability.
Regardless of the size of the estate, the best way of ensuring that an LPR is protected from personal liability is to take a Grant and comply with the notice requirements of the legislation before distributing assets, provided that at the time of distribution the LPR has no notice of any claims.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.