What Is A Deceased Estate Sydney?
When a Sydney resident dies, their deceased estate is comprised of real estate, financial securities, cash and possessions, as well as outstanding debt. It can be confusing for a personal representative to fully identify which assets and liabilities are actually included in a deceased estate in Sydney. This article expands further on the definition of a deceased estate in Sydney, and the rules that apply to asset and debt exclusion from a deceased estate.
Who takes care of a deceased estate in Sydney?
A testator who has left legally valid and comprehensive testamentary instructions will have appointed an executor to take care of their deceased estate. The executor (from the Latin execut, “carried out”) is responsible for gathering the assets of the estate, paying debts as appropriate, and distributing the residual estate according to the instructions in the will.
In certain circumstances, the Supreme Court of New South Wales will appoint an administrator in the absence of an executor. An administrator manages the deceased estate exactly like an executor if there is a valid will. Alternatively, if the deceased failed to make a valid will and died intestate, then the administrator takes care of the deceased estate according to the rules outlined in the Succession Act 2006 (NSW).
What assets are excluded from a deceased estate in Sydney?
It is not unusual for a deceased to own property with someone else, such as a spouse or family member. Jointly owned property and bank accounts are not included in a deceased estate as the assets pass directly to the surviving owner when the other owner dies. Other assets that are typically not eligible for inclusion are company-held and trust-held assets. In addition, when the deceased has made arrangements for a specific person to benefit from a superannuation or life insurance policy, these assets will usually be excluded from the deceased estate.
It is important to note that in New South Wales, the Supreme Court can override these rules through a notional estate order. If the testator has organised their assets so that significant assets are diverted from their deceased estate, the Court can order that these assets are recouped for inclusion in the deceased estate.
What debts are paid from a deceased estate in Sydney?
As part of estate planning, a testator should arrange for the payment of administrative costs, funeral expenses and immediate household bills. To assist the executor, the testator may wish to make a note of their outstanding debts, as one of the duties of the executor will be to pay these debts. The executor or administrator must also prepare a final tax return on behalf of the deceased and complete any other taxation requirements.
The personal representative is legally required to discharge the liabilities of the deceased estate before transferring assets to beneficiaries, even if that means selling assets that have been designated for certain recipients. Assets like superannuation death benefits and life insurance payouts are meant to be exempt from use to discharge debt, but this may not apply in Sydney if these assets are folded into the deceased estate through a notional estate order.
In the event that the deceased estate has insufficient equity to pay all of the outstanding debts, then the personal representative must pay the debts in a specified order. This order is based on either the rules of bankruptcy legislation or insolvency provisions. The debts of the deceased cannot be transferred to the family of the deceased unless the family member acted as a joint borrower, guarantor or co-owner of the debt.
After the payment of immediate costs, the deceased estate must pay taxation debt and secured debts including home and car loans. Another important priority is the payment from the deceased estate of any unpaid child support for a minor child of the deceased. If the deceased still has a HECS-HELP education loan, the personal representative will have to make a final repayment for the year, but the balance of the loan will be forgiven upon the death of the debtor.
Unsecured debt is the last type of debt that is paid, even if this is contrary to the testator’s wishes. A testator may leave instruction in his or her will to repay an unsecured loan to a family member, but their personal representative cannot legally prioritise this debt over other liabilities. When there is limited capital in the deceased estate, this it the type of debt that will remain unpaid. The deceased’s family has no legal responsibility to discharge these debts. It can be difficult for an executor or administrator to understand the exact nature of inclusions within a deceased estate in Sydney. If you would like assistance with understanding your responsibilities, please message or call the experienced wills and estates solicitors at Go To Court Lawyers.