What happens during estate administration?

13 March, 2022 | Alex Dunne

When faced with the prospect of dealing with the administration of an estate, often while grieving for the recent loss of a loved one, people generally do not know where to start.

It may seem that administering an estate is an easy process consisting of simply dividing the assets according to the instructions in the person’s last will, but there are legal processes that need to be undertaken in order to administer an estate. An experienced Estate Administrator can thoughtfully and compassionately guide you through this process to ensure that you do not run into any legal problems.

The process of estate administration is basically to bring in the assets, pay the debts of the estate, and hold the estate funds on trust until they are ready to be distributed to the beneficiaries of the estate. The assets are distributed in accordance with the person’s last will, or if there is not a will in accordance with the Administration Act.

Our first step when administering an estate is to discuss the estate with the person instructing us to find out how the assets are held, who the executor or executors are, obtain details of the person’s relationship status and identify family members of the person who has died. If there is a will we review it to see how the assets are to be distributed. We also advise executors / administrators regarding the three types of claims that can be made on an estate: Family Protection Claims, Relationship Property Claims & Testamentary Promises Claims.

When we have all of the information regarding the assets of the estate and how they are held, it usually becomes clear whether or not we will need to apply for formal administration for the estate. If we do, we prepare the documents for applying for Probate or Letters of Administration together with some general authorities that will assist us in administering the estate, we attend on the executors or administrators to sign the documents and then we file the application with the High Court registry nearest to where the person resided at the date of their death.

The manner in which an individual’s assets are owned affects how the estate will be administered. If the person held significant assets in his or her own name worth more than $15,000.00, such as land, bank or investment accounts, shares or life insurance, then it will be necessary to obtain Probate or Letters of Administration in order to administer the estate.

Funeral Expenses:

In the early stages of administering an estate we often contact the funeral home to advise that we are applying for Probate or Letters of Administration, and tell them that we expect to be able to pay the funeral account once it has been granted. Most funeral homes offer a substantial discount if their account is paid in full by a certain date, so we usually request an extension of time for paying the account. We can also contact the person’s bank to ask if payment of the funeral account can be made directly from the bank accounts prior to obtaining Probate or Letters of Administration (most banks will do this).

Banks, shares, life insurance and other investments:

Once we have obtained a grant of Probate or Letters of Administration we can liaise with banks and investment companies to close the accounts, and with insurance companies to claim on any life insurance. We do this by sending a certified copy of the Probate document or Letters of Administration document along with the authorities that have already been signed, meaning that in most cases the executors or administrators will not need to be involved in this process. We can also contact the share registries to ask that any shares are put into the name of the estate, after which they can be transferred to the beneficiaries of the estate or sold.

Assets:

If all of the assets are owned jointly with another person or persons they can be transferred to the survivor or survivors upon death and do not form part of the estate. Assets are often held in this manner by married couples or when properties or investments are held in the name of a family trust.

In the case of jointly held bank and investment accounts, these can usually be put into the names of the survivors by providing a copy of the Death Certificate and it may not be necessary to have lawyers involved.

In the case of a property that is held in joint names, however, it will be necessary to instruct your solicitors to transmit the property to the survivor or survivors. It is important to do this at the time that the person dies because a jointly held property goes to the survivor using only the Death Certificate, a relatively simple procedure. However, if the property is not transmitted to the survivor at that time, then when the survivor dies it will be necessary to obtain Probate or Letters of Administration for both of their estates. This is a more expensive process and after a numbers of years can be quite complicated.

If there is a property that is held as an individual holding, or as “tenants in common” or “as to a ½ share”, it will be necessary to put that share of the property into the name of the estate. In this instance we would prepare the transmission documents and attend on the executor or administrator to sign them. This is a necessary first step that must be done before the property can be sold or transferred to a beneficiary of the estate.

Estate claims:

Once we have brought in all of the assets of the estate and paid the debts we usually hold the funds in our trust account for a minimum of six months from the grant of Probate or Letters of Administration before distributing the estate funds to the beneficiaries. We do this as a protection for the executors or administrators, who could potentially be held personally liable to settle any estate claims that are made within six months if the estate had been distributed prior to that.

Tax returns:

In most cases final tax returns will need to be filed for the person who has died using that person’s individual IRD number. Tax returns will also need to be filed for the estate from the date of death until the date of final distribution. The estate is considered to be a different entity from the person who has died and requires a new IRD number. We can obtain an estate IRD number and liaise with our accountant, or with the person’s own accountant, to prepare and file the tax returns.

Distribution of Estate:

During the process of administering an estate we will provide statements to the executors or administrators showing all of the transactions that come in and go out of our trust account on behalf of the estate. When an estate is ready to be distributed we will send out a distribution statement to all of the beneficiaries of the estate showing how much is available for each of them, and ask each person to agree to the distribution of the estate in accordance with the statement. Once we have agreement from all of the beneficiaries we attend to the distribution.

If you need assistance administering a deceased estate, please contact personal assistant, Suzanne Sumner by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840 to schedule an appointment with estates expert, Alex Dunne.