Henry Stokes, General Counsel and Theresa Donnelly, Legal Services Manager at Perpetual Guardian, highlight the importance of effective estate administration by sharing key tips and issues to look out for. They will provide further guidance at the upcoming Probate and Estate Administration on Wednesday 10 March 2021.
Introduction
The death of a loved one or a friend is a very difficult time for anyone. It comes with grief, loss and sometimes uncertainty. For most lay people they have no idea what estate administration entails and certainly no level of understanding of the legal technicalities that can affect it.
Ensuring the estate administration is smooth, effective and transparent as possible will ensure the best experience for the beneficiaries. Ensuring they understand what is required and involved, and more importantly why will ensure that they are happy with the processes undertaken.
Appointing the right person to be an Executor is a very important decision. They must be someone the will maker can place trust and confidence in and be sure they will administer their estate in accordance with the terms of the Will.
We can’t overstate the importance of picking the right person. It is something the will maker really needs to think about. Questions for will makers to think about when appointing an Executor are: are they up for it? Do they have the necessary attributes and skills? Are they organised? Good with money? Do they have a similar mind set to you? Would you trust them to do the right thing by your cat or dog? Are they likely to die before you? Do you need a substitute? Should you be thinking about having a Statutory Trustee to have a fully independent executor who won’t be effected by grief and loss and will be evenhanded with all beneficiaries. If the value of the estate on death is at $120,000.00 or below a Statutory Trustee can utilise an election as a cheaper option than Probate.
Even though it a big decision about who should undertake this role, Executors don’t have to be told they have been chosen in advance (and often aren’t). Sometimes it is a case of surprise; you are an Executor! Then you simply need to get on with it (or renounce). This article is about getting on with it, quickly and efficiently. It is an opportunity to share our knowledge of practice in the industry and provide practical hints and tips. In order to do this, it is useful to step through the various stages in the process.
Finding out about it
The first step is finding out about the death of the will maker. Usually this will occur by notification by family and friends, and they will call or email you. Sometimes someone in your company may have the job of checking death notices, and find out through the local paper. An appropriate first step is to establish there is an estate to administer and send a condolence letter. Is the estate what you (and the family) think it is? It is a sound practice if there is (or may be) real property to request a title search to confirm the ownership structure at this early stage of play.
Some early things to think about – the size of the estate:
- If it is held in a joint tenancy, then there may not be an estate to administer if the remaining assets held in the deceased’s sole name are less than $15,000 in any one type of asset at the date of death; so it could be an informal administration
- However, if the property is held as tenants in common, then the deceased’s share forms part of their estate and a formal administration will be required
- if the estate is less than $120,000 and the Executor is a Statutory Trustee, then an election may be a cheaper option; if the substitute Executor is a Statutory Trustee, should the instituted Executor consider renouncing?
Beware – loose lips sink ships
Between death and obtaining Probate or Letters of Administration, a number of people can come out of the woodwork, saying they intend to make claim(s) and seeking a copy of the will, any acknowledgements and prior wills. There are privacy obligations that apply. Don’t get caught out. You ought not to disclose information to anyone other than the beneficiaries of the Estate or is clearly an eligible claimant and have advised they require the information to consider bringing a claim. Others can find out when the grant is made as it becomes a matter of public record then. This can sometimes be contentious. The unacknowledged illegitimate son can be genuine in wanting information just after the funeral, but may not be entitled to it. You would need to be satisfied that the person is definitely an eligible claimant or alternatively the executors and beneficiaries all agree that the information can be released.
The importance of being clear on family relationships
You need to know what is really meant by what is being said.
For example, what does separated really mean? The interview notes reveal mum and dad separated in 1981. But they did not divorce. That means mum is still his spouse at date of death. Rights kick in, whether the family like it or not. The family want early distribution. Mum now has dementia, and her Enduring Power of Attorney (in regard to Property) is one of the kids, who can’t act as EPA in their own benefit to either make an election or consent in writing to a distribution. The Executor still has to deal with the reality of s71 of the Property (Relationships) Act 1976. That means the administrator must not distribute before 6 months unless there has been an election or formal consent in writing by the spouse.
Who are the kids? Often families talk about relationships which may not be formal. Whangai or feeding children may simply be called children, along with biological children. And it is only biological children who have the right to make a Family Protection Act claim. Children who are only the child of one partner may be referred to by both partners as “our children”. This may mean that that child (or children) may have a strong FPA claim when the surviving partner is the sole beneficiary of the Estate but has no moral duty to provide for a step child. Conversely, family can forget about relationships where family ties have been well and truly severed – to the point that the family member will sign a Declaration of Family History without mention of a sibling because they “are dead to us”.
Declaration of Family History
That takes us to the importance of a Declaration of Family History. It is part of effective estate administration to make sure the administrator is protected (as far as they can be) in their role. You are only protected in terms of section 6A the Status of Children Act 1969 if you have obtained the declaration from someone in the family who is in a position to know the facts. This is often why it is a good idea to obtain a declaration for maternal and paternal lines separately. Sometimes you may even need more than two to cover off full lines of succession.
Certainty of the estate
It is important to be sure you have picked up on all the assets. It is often useful to run through a checklist to jog the memory of the beneficiaries in terms of forgotten assets held. It can be interesting with some digital assets (such as bitcoin) where you may know they hold them, but because you do not have the password the overseas company will not pass on the asset.
Getting the basics right
Things will go more smoothly if you have fact checked. First, you need to be sure the Will you hold is the last valid testamentary document. Confirm the last Will held is in fact the last Will; consider whether you need to advertise to be sure. Are there other testamentary documents that ought to be validated? It is also important to confirm the correct full name of the deceased and check they weren’t known by other names and that they held no assets under different names.
You will need to confirm the date and place of death so you are ready to draft the affidavit of death.
Determine whether there was there a funeral, and is there someone who attended who can swear an affidavit of death? Covid-19 has created some interesting situations here, as the Probates Division will not accept attendance at a virtual or digital funeral or memorial regardless of the type of AV-link used. This is where you need to resort to the option of last resort; the death certificate.
Proof of death
A death certificate may not be required in order to prepare an affidavit of death. But it is estate administration best practice to obtain one. First, it allows you to be satisfied there are no impediments, for example, obvious capacity issues. Is dementia (or a description of other disorders of the mind) noted on the death certificate? Make sure you understand the medical details, if in doubt as to what something means, check it out so that you can be satisfied as to capacity. If dementia (or something else) is noted, does it give a time frame? Does the time frame overlap with the date of the latest Will? The rule of thumb is a useful indicator of whether you may need to obtain medical notes or an indication from the deceased’s medical practitioner. By this we mean that if there is a clear 10 years between the date of the Will and the notation of dementia; that is considered “safe”. If there is less than 5 years’ gap, best practice is to check medical notes or with the medical practitioner. Between 5-10 years is the “grey zone” where you have to think carefully about double checking. If in doubt, check it out is a good barometer. While beneficiaries may be impatient, it is our experience that time spent doing this properly can prevent issues later. For example, a worst case scenario is if capacity issues arise after grant, which then has to be withdrawn and Probate in Solemn Form substituted, so you have to start again (and on the back foot).
The death certificate can also provide useful flags for whether or not the deceased was in a relationship at the time of death that we were unaware of, perhaps marriage has revoked the Will, or perhaps the number of children doesn’t correlate with what we have been advised. For these reasons it is always useful to sight the death certificate, even if you do not require it for the affidavit of death.
At this stage you will also need to obtain information for affidavit/affirmation of death. Someone will need to provide proof of death and grounds. The only circumstances permitted are that the person:
- attended the deceased’s funeral,
- saw the deceased’s dead body,
- were present when the deceased died, or
- in limited circumstances, they can rely on the death certificate, but this is regarded as a last option by the Probates Division, rather than a “go-to”.
Was there a funeral, and is there someone who attended who can swear an affidavit of death, and if so, what is their full name, address and occupation? Will it be an affidavit (sworn) or affirmed? Making sure you have these details right at the start prevents a lot of lost time in back and forth exercises.
Executor Obligations
For a role that you don’t have to be told in advance you have been given, there are a lot of obligations! When accepting the role, the Executor and Trustee must comply with all relevant legislation.
It is the Executor’s role to apply for and obtain Probate from the High Court –approval to administer the Estate in terms of the last Will of the Deceased and in addition they must:
- Identify and deal with all the assets in the Estate
- Ensure all Estate assets are secure and insured if necessary
- Identify and pay all expenses and debts;
- Consult with and keep the beneficiaries named in the Will updated;
- Meet all personal tax and Estate tax obligations; and
- Account for all financial transactions
The importance of the mundane
An Executor should go through the assets and liabilities of estate and collect whatever documents and reference or account numbers they can and address matters like funeral accounts, notification of Work and Income regarding New Zealand Superannuation, cancellation of services and advising providers.
The Executor should also collect contact details for all the beneficiaries, and explain to them the provisions of the relevant legislation:
- The Property (Relationships) Act 1976 regarding a qualifying relationship and the election. Is there a partner that was living with the deceased when they died? Sometimes things go sour immediately and the family may have already chased the partner off, so they are no longer on the scene, but that doesn’t mean they aren’t in the picture in terms of a claim.
- The Family Protection Act 1955 (moral duty, eligible claimants and the time period within which they may make a claim). Was any close family left out of the Will?
- The Law Reform (Testamentary Promises) Act 1949 (where anyone who the deceased may have promised something to in exchange for services may claim, and they have 12 months from grant to do so). Does the family know about great nephew Robert who always did all the gardening and to whom great uncle said would have the house when he was gone?
The importance of the 6 month hold
People often expect there will be a reading of the will and that they will get their inheritance immediately after the funeral. It is crucial to manage their expectations if you don’t want a real mess on your hands. The Executor should explain to the beneficiaries the reason we usually withhold distribution of an Estate for 6 months after the grant of probate is because of the provisions of the above Acts. Here’s what to think about:
- the Executor is liable if the estate is distributed prior and a successful claim is made
- an Executor may consider distributing early in certain circumstances, but it is important not to set this expectation up front;
- even if (once the circumstances have been reviewed) the Executor is of the view there is little risk if they distribute sooner than the 6 month period, the Executor should require all the beneficiaries to sign a Deed of Indemnity.
If there are minors there is a longer period to lodge a claim; 12 months. That may need to be taken into account, especially if the parent beneficiary’s interests do not align with the children.
Charges
If you are a professional Executor you should manage client expectations by setting out the basis for your charges to the beneficiaries at the outset. This can help manage an obvious pain point.
Understanding the Will & obligations
The Executor’s obligation is to administer the estate in accordance with the provisions of the Will. That means having a really good understanding of what the Will means. For example, a specific gift of shares in a particular company where the shares (or indeed, the company) no longer exist means the gift fails, not that any other shares can simply be substituted. This sort of “well that’s what the Auntie intended” interpretation goes no-where without formal consent of all the beneficiaries. It is important that Executors obtain professional advice if they need it (for example as to Will interpretation) so they don’t fall into this trap.
All’s fair in love and war
Administering a will is not about fairness. The administrator’s duties are to collect in the assets and distribute in accordance with the terms of the Will, regardless of what is “fair” or otherwise. This can come as a surprise to Executors who are family members. However, there is a duty of even handedness among beneficiaries which can catch out beneficiary Executors. It is all too easy for an Executor who is a family member to be caught up in the wake of one or another “side”. They may inadvertently disclose information to one set of beneficiaries and not to another, or quite frankly think one side is in the right, and act on that view. This is where an independent administrator can come into their own and help protect the intended Executor from expensive claims, see renunciation.
Renunciation
An Executor doesn’t have to take the job. If a beneficiary Executor knows they will struggle to fulfil their obligations to be even handed (they can’t stand the rest of the family) or just don’t think they have the skills to do the job (or for any other reason they don’t want to do it) they can renounce. If provided for, a co-Executor can step up alone or a substitute can step in. Alternatively a statutory trustee can step in as of right if no-one else steps up within a certain time.
Enjoyed reading? Henry and Theresa will be taking a deep dive into effective estate administration depth at the upcoming Probate and Estate Administration Symposium on 10 March 2021. Register now to secure your place!
Henry Stokes has been in private practice and acted as in-house counsel for a combined period of over 20 years. He is currently General Counsel, for Perpetual Guardian. Henry specialises in the areas of wills, estates, trusts (both family and charitable) and protection of personal and property rights matters, including appearing in the Family Court, High Court and Court of Appeal. Henry advises on all areas from the preparation and implementation stages through to the disputes, claims and proceedings stages. Henry is an advocate for the trustee industry working together to provide world class trustee services to New Zealanders and is focused on the industry being fully prepared for the new Trusts Act 2019 implementation date of January 2021. Connect with Henry via LinkedIn 
Theresa Donnelly graduated from Auckland University in 1992 and has over 27 years’ experience in private practice, government and in-house Legal. Theresa is currently the Legal Services Manager at Perpetual Guardian, and is a recognised Elder Law expert. Theresa is formerly from Public Trust (Team Leader) and the Ministry of Social Development, where she was lead Senior in their Public Law Team responsible for advice in relation to Older People’s Policy and the Office of Senior Citizens. She is a regular presenter and speaker for professional groups such as Legalwise, NZLS/CLE, ADLS, STEPS, CCH and other professional organisations. Connect with Theresa via LinkedIn
