When a person dies, their property and assets are that person’s estate. In most cases, the deceased person has left instructions, called a will, which says what they want to happen to their estate after their death. The people who will inherit the deceased person’s property and assets are beneficiaries. The property and assets that a beneficiary receives is a bequest, a legacy, or an inheritance.
Wills generally name someone as the executor, whose job is to administer the estate. Administering an estate involves, among other things:
a) Looking after the assets of the estate, e.g. making sure the home or car of the person who died is maintained, or managing the deceased’s bank accounts until they are realised (i.e. turned into money) or transferred to the beneficiaries
b) Paying the estate’s debts, e.g. using the money in the estate to pay the deceased person’s last phone bill, funeral expenses, taxes, and mortgage payments
c) Distributing the assets of the estate in accordance with the will, e.g. organising to transfer ownership of the person’s house to the appropriate beneficiary
It is also the executor’s job in most estate matters to obtain a grant of probate from the court. Probate is a court order saying that the will is valid and that the executor has the right to administer the estate. The whole process of administering an estate commonly takes at least a year.
Sometimes wills provide people to receive a continuing benefit from the estate. For example, the deceased might have wanted one beneficiary to receive regular payments over a long period, or might have wanted money kept for a beneficiary until a certain age. In such cases, the will appoints a trustee. The trustee’s job is to manage money, investments, or assets for the benefit of a beneficiary, in accordance with the wishes expressed in the will.
Usually one person is both executor and trustee, but the functions of each are different. A trustee’s duties do not normally commence until the executor’s duties (e.g. identification and/or realisation of assets and payment of debts, funeral and testamentary expenses) are complete.
Sometimes the executor of a will is also a beneficiary under the will. Beneficiaries who are not executors have no power to make decisions about the estate.
WHAT IS A LAWYER'S ROLE IN RELATION TO AN ESTATE?
Often an executor will need a lawyer’s help to administer the estate. For example, a lawyer might:
1 Prepare and apply for probate
2 Identify and collect the deceased’s assets
3 Give advice to the executor about the deceased person’s tax liability
4 Give advice about the legal order in which debts are payable and the remaining assets distributed.
If the deceased has not left a will, one of the people entitled to a share in the estate applies for Letters of Administration. The estate is administered under the law relating to intestacy (i.e. dying intestate, dying without a will). When this happens, a lawyer explains the legal order for distributing the estate and the proportions of the estate of the beneficiaries' entitlement. A lawyer can prepare a report and statement about the realisation of the assets of the estate and the distribution to the beneficiaries.
When dealing with estates, the lawyer’s client is the executor. The lawyer’s professional duty is to help the executor to carry out his or her duties to the estate in accordance with the law and the will.
Some wills appoint a lawyer as executor of the estate. The lawyer in such cases has the same duties as any other executor. Executors are entitled to reimburse themselves for expenses they incur as part of administering an estate. This applies to lawyer executors as well as ordinary executors. If the will does not include a charging clause, which provides payment to the executor, and if the beneficiaries do not agree to pay the executor, the executor can apply to the Supreme Court to recover fees.
Beneficiaries are entitled to full details of the distribution of the estate.
The costs for legal work done up to and including the grant of probate are according to a scale of fees. When receiving instructions from an executor, the lawyer must disclose these fees to the executor. The lawyer must also tell the executor about fees that the lawyer will charge for legal work done in the administration of the estate after the grant of probate.
If the lawyer is the executor, the lawyer still charges only the regulated scale of fees for work up to and including the grant of probate. Costs for work done after probate must be disclosed to, and agreed by, the beneficiaries – or at least the major beneficiaries.
WHAT DUTIES DOES THE LAWYER OWE TO THE BENEFICIARIES?
Lawyers act on their clients’ instructions. The lawyer has no particular duty to the beneficiaries because the lawyer’s client is the executor – not the beneficiaries. However, a lawyer who is also the executor, or one of the executors, owes a duty of care to the beneficiaries both as a lawyer and as an executor.
Beneficiaries who are unhappy with the way the estate is being administered sometimes turn to the executor’s lawyer, who is generally unable to assist them. They should instead discuss their concerns with the executor of the estate. It is appropriate for beneficiaries to raise their concerns with the lawyer only if the lawyer is the executor. The Supreme Court that has the power to remove executors.
Lawyers are generally act ethically and in accordance with professional standards at all times.
NEED MORE INFORMATION
Behan Legal assists and advises on these important issues. For an appointment, call 03 9646 0344