It’s tough to deal with the passing of a loved one, and in a difficult time like that, finance is often the last thing on anyone’s mind. But it’s important to make sure the will of the deceased and their estate are attended to with care and precision. Depending on the circumstances, securing a grant of probate can be a key part of this process.
Image: The Balance
After obtaining a probate, the executor of a will can access the finances of the deceased and distribute them as needed. Basically, a probate makes a will a binding legal document and authorises the executor to carry out its instructions.
The executor’s most important duties are to notify relevant financial institutions of the death, locate the will’s beneficiaries to resolve their entitlements, and take care of any debts or other financial liabilities (such as mortgages) the deceased may have.
Probates and letters of administration.
It’s important to note the difference between a probate and a letter of administration. If there’s a legal will, the executor applies for a probate.
If there’s no formal will, or if the person appointed as executor in the will is unable or unwilling to do the job, another potential executor can apply for a ‘letter of administration’ to carry out their duties instead. In the former case it’s called a ‘letter of administration without a will’, and in the latter case it’s known as ‘letter of administration with the will annexed’.
Collectively, probates and letters of administration are called ‘grants of representation.’
When is a grant of probate necessary?
A probate is sometimes needed in order to obtain assets from financial institutions that require legal proof of the executor’s status.
It’s possible to have a solicitor file for a grant on your behalf, but if you’d rather handle the estate yourself, it’s important to understand what documents you need and why.
Not all companies require a grant to recognise someone as an executor – it’s best to check with each relevant financial institution to see if any of them require a probate before making an application for one, as the process takes time and can quickly become expensive. As a general rule, it’s only required if the asset’s value exceeds a certain amount determined by the institution holding it. $50,000 is a commonly cited cutoff amount, but it’s recommended you consult the organisations in question for their specific figures and any other conditions they might have that require an executor to possess a grant.
Minimising probate costs
If you’re managing an estate, it’s unlikely that you’ll be able to totally avoid dealing with a probate. However, there are some ways to reduce the number of assets that need it, and thus the amount it may cost.
Placing assets in a revocable trust
Under a revocable trust, an individual (referred to as a trustmaker) grants a trustee ownership over their assets with the expectation that a beneficiary will receive those assets when the trustmaker dies. This avoids probate because the assets held in trust are possessed by the trustee, making them separate from the estate, even after the trustmaker’s death. However, a revocable trust incurs costs of its own – it’s recommended you consult a financial advisor to check whether it’s worth it in your case.
Typically, jointly-owned assets are automatically transferred to the surviving joint owner, no probate needed. Probate is generally only used for assets solely owned by the deceased.
This law could let you easily avoid having to pay probate costs for real estate. If the deceased owned their property as a joint tenant, full ownership automatically goes to the surviving owner.
However, if they owned shares in a property, as a ‘tenant in common’, their share becomes part of the estate and is then managed by the executor. A probate is usually required for any real estate management apart from the transfer of joint ownership, although this may vary depending on context – it’s best to consult a solicitor to determine whether a grant is necessary or not.
The third method to avoid probates is by claiming life insurance.
Probates and life insurance
Life insurance companies usually don’t require probate because an insurance payout ordinarily isn’t part of the estate, and therefore isn’t managed by the executor. The specific beneficiary nominated in the life insurance policy is required to apply for the payout themselves, but they also manage to avoid the sometimes significant cost of obtaining a grant of probate.
However, there are two cases where the executor may be required to lodge a claim:
- If the beneficiaries weren’t explicitly named in the life insurance policy. In this case, the insurance is paid to the estate, and thus becomes the executor’s responsibility.
- If the claim is especially large or unusually complicated. You may want to consult the insurance company for specific details regarding your situation and their policies in this case.
The first step, regardless of whether the insurance is to be paid to the estate or the beneficiaries, is generally to notify the insurance company of the death and provide the death certificate as proof, before determining who can lodge the insurance claim. If this duty falls on the executor, they’ll still only need to provide a probate if the claim exceeds a certain amount, which varies according to the specific company’s policy.
Death benefits and probates
The same general probate rules apply to death benefits as for life insurance outside of a super fund – the beneficiary will need to be specifically named, otherwise the money will become part of the estate. However, super funds don’t necessarily allow a direct beneficiary to be named without a ‘binding nomination’ – a statement confirming the beneficiary, which itself may expire after a period of time. Additionally, death benefits are subject to different rules regarding tax than independent life insurance policies.
Applying for a probate
If you find you need a probate to carry out the will, you’ll need to make an application to the Supreme Court of the state where the assets are held.
Rules across all states
Each state’s court has a slightly different application process, but some general rules hold across all of them:
- You must advertise your intention to apply for the grant beforehand (usually 14 days before the application’s made). This allows anyone interested to contest your appointment as executor. Advertisement usually incurs a fee.
- You have to prepare an inventory of assets and a sworn affidavit – sometimes multiple affidavits depending on other factors such as a damaged will, although the details differ across states.
- Death certificates are required as well as the will.
If the deceased held assets in multiple states, you may need to ‘reseal’ the original grant, which allows a different state court to recognise it as valid.
Individual state rules
Each of the courts outlines a slightly different process for getting or resealing a grant, but the major details can be found on their websites here:
- New South Wales
- Western Australia
- South Australia
- Northern Territory
Possible issues with obtaining a grant
You could have trouble securing a probate if the deceased person lacked the ability to write their will, or wrote it under undue influence.
It’s also worth noting that getting a grant may take longer if the will is damaged, improperly witnessed, if a copy is used where the original can’t be found, or if the will isn’t a formal document.
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