Interim Distributions (NT)
Sometimes it can take years to wrap up a deceased estate and finalise distributions to the rightful beneficiaries. Complex estates, lengthy litigation proceedings and even the removal of an incompetent executor can delay the process and leave beneficiaries waiting for their inheritances. In such cases, a beneficiary might consider requesting an interim distribution from the deceased estate. This article explains the nature of interim distributions in the Northern Territory.
Delay in Distribution of the Deceased Estate
As a general rule, an executor is expected to wrap up an estate within a year, known as the executor’s year, so that beneficiaries do not have to wait forever for their bequests. At a minimum, the executor must delay distribution for a statutory waiting period in case the validity of the will is questioned, or there are claims against the estate.
During this delay, the executor must complete a host of duties. Depending on the complexity of the estate, the executor’s duties can be varied and extensive, including:
• locating and gathering the deceased’s assets;
• listing and discharging the estate’s liabilities (including taxation liabilities);
• keeping accounts and records of all estate dealings;
• defending the estate from litigation such as challenges and claims made under the Family Provision Act 1970; and
• tracking down beneficiaries and distributing the estate as appropriate.
Delays in estate administration can be a real source of frustration for beneficiaries, as they may not receive their inheritance for years. The beneficiaries can request that the executor make an interim disbursement from the estate at an earlier date. While an executor is not required to make dispersals before the final distribution of the estate, there is scope to make small payments to beneficiaries before the estate is fully administered. Obviously, such an interim distribution payment cannot exceed the beneficiary’s total entitlement under the will. The executor will usually only be willing to make an interim distribution when the part-payment does not reduce the estate significantly, as the executor needs to be sure that they can cover all debts and costs of the estate. The executor must only make an interim distribution when there is no realistic prospect of there being a shortfall in funds for the estate administration.
The executor typically accedes to a request for an interim distribution because the beneficiary urgently needs financial assistance, such as for housing or everyday expenses. It may be a practical necessity to make an interim distribution to someone who was financially dependent on the deceased.
Under the Wills Act 2000, an executor may need to make maintenance distributions within 30 days to the deceased’s dependents. A sum distributed under this allowance is deducted from the beneficiary’s final share of the estate. If the beneficiary dies within 30 days of the deceased, the interim distribution is taken from the estate as an administration expense. The executor is not personally liable for unrecoverable distributions if they make such a payment in good faith.
Risks Of Interim Distributions
The executor needs to be wary of the risks when making an interim distribution from the estate in the Northern Territory. Delaying distribution for the statutory period protects the executor from personal liability if they give away property or cash that ends up belonging to another beneficiary. Executors must weigh the risks of providing early access to inheritances, given the likelihood of future claims against the estate. For instance, interim distributions are less risky if the estate is uncomplicated and there is little prospect of Family Provision Claims. Specifically, the executor should determine the total value of the estate less the interim distribution, and whether the estate has sufficient funds available to discharge all outstanding debts and tax liabilities as well as all monetary bequests in the will.
In order to avoid acrimony from other beneficiaries, the executor should formally communicate any proposed interim distribution to the other beneficiaries and obtain their written consent. The executor might even elect to match the interim distribution between all beneficiaries, so as to avoid any perceptive of unfair advantage.
Court Ordered Interim Distribution
If an executor is unwilling to make an interim distribution, a beneficiary can apply to the Supreme Court of the Northern Territory to force this to occur. Under the Administration and Probate Act 1969, the court can make an order for an interim distribution as it thinks fit. However, the court cannot make a final distribution of the estate without first giving notice to all entitled parties. Forcing the matter to a court hearing is undesirable as it incurs additional costs to the estate. However, having judicial permission may offer the executor peace of mind when beneficiaries are pressing for interim distribution in a complex estate.
Beneficiaries are sometimes understandably impatient to receive their inheritance. However, an executor needs to take care before making an interim distribution, as they could jeopardise the proper administration of the estate. The executor should act with the greatest conservation and prudence in the circumstances to safely make an interim distribution. An executor who is unsure of how to proceed should certainly seek legal advice. Contact the team at Go To Court Lawyers on 1300 636 846 to discuss the options or any other probate matter.