Why do you need a Grant of Probate or Letters of Administration?

First off, what’s the difference between Probate and LOA?

Probate is where a person, named as an executor in a Will, ‘proves’ that Will to the Supreme Court (brings the Will into Court).  Once the Will is proved, the Court grants the executor the ‘legal right’ to administer the estate of the deceased in accordance with the terms of that Will (‘the Grant of Probate’).  That person then becomes the executor/trustee of the estate of the deceased.

Letters of Administration (‘LOA’) is the administration of a deceased estate, where a person has died without a Will, or situations where there is a problem with the formalities of the Will (usually an invalidly signed Will: i.e – one witness (two are required in Victoria), or no witness).  Where there is no Will, a person who has the right to apply for LOA is usually the person with the greatest interest in the estate of the Deceased, under the rules of intestacy (dying without a Will).  This is usually a spouse / domestic partner in the first instance.  A person applying for LOA is known as an ‘administrator’, but performs the same functions, and has the same responsibilities, as an executor/trustee.

Under Section 19 of the Administration and Probate Act 1958 (VIC), the right to file a LOA application initially rests with State Trustees, unless and until the spouse/domestic partner notifies State Trustees.  In most cases, the application for LOA will be undertaken by the deceased’s spouse and there is generally no involvement by State Trustees at all.  If there is no spouse, the next eligible person to lodge a LOA application (in order of priority) will be:

• Adult children of the Deceased (excluding step-children, but including adopted children);
• Grandchildren of the deceased (18 years of age or older);
• Parents of the deceased;
• Siblings of the deceased;
• Remoter next of kin (i.e – aunties/uncles/first cousins)

In some cases, an application for LOA may be made where a Will exists, but the named executor has died before the deceased.  Usually, in this instance, the person with the greatest interest in the Will (the primary beneficiary) has the right to lodge a LOA application ‘with the Will annexed’.  If there are two or more equally interested beneficiaries, they may each apply to the Probate Court for LOA and be appointed co-administrators.  Sometimes, such applications do not come without problems, particularly if those ‘interested beneficiaries’ do not get along.

Why do you need the grant?

The grant is the Court legally acknowledging your right to act as the executor/trustee of the deceased’s estate.  The Court issues a formal grant, which is then used to deal with the sale of real estate, shares, superannuation, accountants and any financial institutions (banks/investment brokers), by the executor/trustee.  In other words, the executor/trustee steps into the ‘legal shoes’ of the deceased.  This allows the executor to legally deal with the assets of the deceased’s estate as directed by a Will, or under the laws of intestacy.  Without a grant, these organisations will not, and do not have to, deal with anyone purporting to claim that they are acting on behalf of the deceased’s estate.

If the Deceased has any outstanding debts or liabilities (loans/mortgages) as at the date of their death, these will need to be dealt with as soon as possible by the executor/trustee.  If no one applies for a grant and the debts continue to accrue, the creditor may be entitled to apply for a specific and limited grant to recover what it is owed under a loan/mortgage by the deceased.  If this is not managed properly, beneficiaries may miss out on receiving their gift under the deceased’s Will.  In some cases, a gift or real property may require an existing loan on that property to be transferred to a beneficiary.  This can only be done if the executor/trustee has obtained a formal grant from the Court.

What if assets are ‘jointly owned’?

The most common examples of this is where spouses are listed on the title of a property as ‘Joint Proprietors’, or where they hold a bank account in joint names.  Under the principles of Survivorship, the asset automatically passes to the surviving spouse (or joint owner) upon the death of the other owner.  They do not form part of the assets of the estate of the deceased joint owner.

There will be some administration work and fees to formally register the change in ownership.  This may simply require a certified copy of the death certificate for the deceased owner and a Statutory Declaration confirming the same by the surviving owner.  However, some institutions have still been known to request a grant of Probate / LOA be obtained in any event.

How hard is it to administer an estate?

This depends on the complexity of the deceased’s estate.  An estate may be as simple as dealing with one property, a couple of bank accounts, a credit card and a super fund, or one involving multiple family trusts, a business, or businesses and significant share and property holdings.  Not many people are up to, or capable of, the task and usually seek the assistance of a lawyer.

As for all estates, a final tax return must be prepared.  Subject to the size and complexity of the estate, this could be done within a couple of weeks, to over a year.  An executor/trustee should obtain estate administration advice from a lawyer and an accountant as soon as possible after death, to work out what needs to be done and when.  A failure to deal with these issues promptly could result in significant tax consequences, subject to the size of the estate.  As a trustee, there are significant responsibilities imposed on a person managing a deceased estate.  It is important to know what those responsibilities are and how to deal with them.

If you’re named as an executor/trustee of an estate and require assistance, call our Wills and Estates team at Tisher Liner FC Law to guide you through the process.