The Risks of Administering a Deceased Estate Without Legal Advice in Victoria

We are seeing a rise in Executors wanting to administer a deceased estate without legal assistance. This may save on legal fees, but what does it really cost you?

Being appointed as the executor of a deceased estate is a significant responsibility. While many executors assume the role simply involves distributing assets to beneficiaries, the reality is more complex.

Administering a deceased estate in Victoria involves strict legal obligations, financial responsibilities, and court procedures. Executors who attempt to manage the process without legal advice may unknowingly expose themselves to serious risks, one of the biggest being personal liability.

For this reason, seeking professional legal assistance when handling probate and estate administration is crucial.

What Does an Executor Do in Victoria?

An executor is responsible for firstly securing the deceased’s assets and then managing them and finalising the estate of a deceased person according to the terms of their Will. In most cases, executors must obtain a Grant of Probate from the Supreme Court of Victoria before they can access or distribute certain assets.

Although this sounds straightforward, the process involves complex legal and procedural requirements. One small error in the process means you must start over and can put you at risk of claims against you.

What is the Risk of Personal Liability for Executors

One of the most significant risks of administering a deceased estate without legal advice is personal liability.

Executors have a legal duty to act in the best interests of the estate and its beneficiaries. If an executor makes mistakes during the administration process, they may be held personally responsible.

Examples of situations where an executor may face liability are:

·         Distributing assets before paying creditors;

·         Failing to identify all debts owed by the estate or creditors of the estate;

·         Misinterpreting or incorrectly applying the terms of the Will;

·         Making errors when managing estate funds;

·         Distributing assets to the wrong beneficiaries;

·         Distributing assets too early during the administration of the Estate.

If these issues arise, beneficiaries or creditors may pursue legal action personally against the executor. In some cases, the executor may be required to personally repay funds to correct the mistake. This may mean you could be liable for the costs of legal proceedings in addition to the original sum.

Whilst you may think you know the financial affairs of a deceased person, nobody can be certain. There is no right of indemnity from the Estate. You could be personally liable if the correct legal steps in the Estate administration are not followed. Are you prepared to risk this?

Estate Disputes Can Put Executors at Risk

Disputes between beneficiaries are one of the most common challenges in estate administration.

These disputes may involve:

·         Challenges to the validity of the Will;

·         Disagreements about asset distribution;

·         Allegations that the executor has acted improperly;

·         Claims that the executor has delayed the administration process.

Without legal guidance, executors may unintentionally take steps that escalate conflict or expose themselves to accusations of misconduct. Legal advice can help executors manage disputes appropriately and ensure they comply with their legal duties to minimise these risks. When an Executor is also a Beneficiary, this can amplify the risk of disputes from other beneficiaries.

Mistakes in the Probate Process

Many estates require a Grant of Probate before assets can be transferred or distributed.

The Probate process involves detailed documentation and strict court requirements. Errors in Probate applications can result in delays or rejection of the application.

Without a Grant of Probate, executors will not have the authority to deal with certain assets such as:

·         Real estate;

·         Bank accounts;

·         Investment portfolios;

·         Superannuation;

·         Personal items.

Legal professionals experienced in Probate matters can ensure applications are prepared correctly and submitted efficiently so you are not at risk of claims for delaying the administration.

Tax and Financial Risks for Executors

Estate administration can also involve complex tax obligations. Executors may be responsible for ensuring the following are completed correctly:

·         The deceased person's final tax return;

·         Estate tax returns during administration and during the lifetime of the deceased if they have not been attended to;

·         Capital gains tax considerations for certain assets; and

·         Obtaining taxation advice on the distribution of the Estate to maximise the entitlement received by the beneficiaries.

If tax obligations are overlooked or handled incorrectly, the executor may face penalties or complications when distributing the estate. Legal advisors often work with accountants to ensure these issues are addressed properly to protect you as Executor. Not understanding the legal requirements for tax returns could put you at risk of liability, even after the Estate has been administered.

Delays and Administrative Errors

Executors often underestimate the time and complexity involved in administering an estate.

Common administrative challenges include:

·         Locating and valuing estate assets accurately;

·         Communicating with banks and financial institutions;

·         Ascertaining any creditors;

·         Managing property transfers;

·         Preparing estate accounts for beneficiaries;

·         Taxation consequences.

Mistakes or delays may lead to frustration among beneficiaries and, in some cases, legal complaints about the executor’s performance. Without legal assistance, how can you undertake property transfers in accordance with a Will?

How a Probate Lawyer Can Protect Executors

Seeking legal assistance does not mean the executor cannot perform their role. Instead, it provides professional guidance to the Executor to ensure the estate is administered correctly and in accordance with their legal obligations in order to minimise the risk of personal liability.

Wollerman Shacklock Lawyers assists with all aspects of Estate Administration including:

·         Identifying estate assets and liabilities;

·         Preparing and lodging probate applications;

·         Advising executors on their legal duties;

·         Managing creditor claims;

·         Providing legal advice on the best way to administer the Estate in accordance with laws and timelines to minimise potential claims against the Estate;

·         Preparing estate accounts;

·         Ensuring lawful distribution of assets;

·         Publishing appropriate notices to protect the Executor/s.

Most importantly, professional legal advice helps reduce the risk of personal liability for executors.

Case Studies

Case Study 1 - Not Waiting the 6-month Statutory Period

Client A came to Wollerman Shacklock Lawyers to get assistance with administration of their deceased mother’s estate. Client A was an only child and sole beneficiary of the Estate. Client A wanted to distribute the Estate as soon as the Estate funds were called in. We provided legal advice to Client A on the risks of administering the Estate without waiting the 6-month statutory period.

Client A was reluctant to wait as they were certain there was nobody who would make a claim against the Estate. However, after understanding the risk to them for not waiting, they agreed to wait out the statutory period before distributing.

One day before the 6-month statutory period was to lapse, a claim was made against the Estate by an estranged adult child of the deceased that Client A had no knowledge about. The estranged adult child had disabilities and was therefore eligible to make a Part IV claim against the Estate under the Administration and Probate Act 1958 (Vic) for inadequate financial provision for them in the deceased’s Will.

Luckily, Wollerman Shacklock were able to avoid costly court proceedings and Client A and their estranged sibling were able to come to an agreement for provision for the estranged child from the Estate.

Risk to Executor: Had Client A not obtained legal advice on the administration of the Estate and administered the Estate once all the assets were called in, Client A could have been held personally liable for the claim against the Estate. This would have then included costly legal fees and the risk that an amicable resolution would not be reached.

Case Study 2 - Not Advertising for Creditors

Clients A and B came to Wollerman Shacklock Lawyers to assist with obtaining a Grant of Probate for their late father’s estate. They did not want to incur any more legal fees than necessary.

A Grant of Probate was obtained, and advice was given to the Clients to advertise for Creditors in case the Estate has any liabilities. The clients did not want to incur legal fees for this and were adamant that their father had no liabilities.

After receiving our advice on the risks to them of not identifying any and all liabilities of the Estate, the Executors reluctantly instructed our office to advertise for creditors. To the surprise of the Executors, numerous creditors wrote to the Estate requesting payment of monies owed to them. Luckily Clients A and B had followed our legal advice and had not distributed the Estate, and the creditors were paid from the Estate funds.

Risk to Executor: Had the Executors remained adamant there was no need to advertise for creditors and distributed the Estate, they could have been held personally liable for the debts owing from the Estate. This could have amounted to a lot more than just the initial amounts owing.

Final Thoughts

You may think you are aware of the deceased’s affairs but it not uncommon for unknown creditors or situations to pop up after someone passes away!

Administering a deceased estate in Victoria carries significant legal and financial responsibilities. Executors who attempt to manage the process without professional guidance may face unnecessary risks, including personal liability, disputes, and costly mistakes.

Obtaining legal advice early in the estate administration process can help executors navigate probate requirements, fulfil their legal obligations, and protect themselves from potential liability. Saving a little bit now, could cost you more later on.

If you need assistance with an administering a Deceased Estate, contact our experienced and friendly staff today.