Navigating the laws and efficiencies around administration of a deceased estate can be very tricky. Outlined below are some key points you need to consider when presented with this situation.
Who administers the estate where the deceased has died intestate?
It is not simple to determine who is the most eligible to apply for administration. The court has wide discretion as to who it will grant administration, but in most cases, whoever is entitled to the largest share in the estate is considered the most suitable.
Why is it important?
Administration is an important role because administrators are in charge of splitting and distributing assets. This can be done in many different ways, for example: distribution is done in the administrator’s own interests rather than the interests of all beneficiaries. While this situation can be disputed by contesting the estate, it can cause greater administration costs and will also increase the time required to distribute the estate.
Efficient and timely administration of the estate is important. This is because until an administrator is appointed, the beneficiaries of the estate will not have access to any estate assets, including cash in the deceased’s name. This may be a problem for single income households where members of that household have to wait until Letters of Administration are granted before they can access the deceased’s assets.
Taxation and other expenses
Tax is a major consideration in the estate planning process to ensure that the potential taxation impact of distributing particular assets is reduced to a minimum. Where a person dies intestate, it is much more difficult to plan for distributions in a tax-effective way.
Depending on the marginal tax rates of different beneficiaries, an intestacy could potentially lead to an overall imbalance in the distribution of an estate due to higher rates of tax payable by some beneficiaries.
In contrast, when preparing a will, the will-maker and their advisers can assess opportunities to manage and reduce tax implications of assets passing to the deceased’s beneficiaries.
Conclusion – make a will and make sure it is valid
Among the many benefits of making a valid will, a will-maker can:
- Elect to transfer assets to relatives in greater or lesser proportions that would result from the default rules.
- Elect to transfer assets to a close friend or a remote relative (or an organisation which is important to the will-maker) who would otherwise be excluded from any benefit under the default rules.
- Limit the risk of access by third parties to the will-maker’s estate.
- Save the beneficiaries a great deal of administrative word and expense and minimise the likelihood of disputes.
- Better manage how the will-maker’s estate is distributed and taxed.