WHAT IS PROBATE? FREE BOOKLET

Transcription

1 FREE BOOKLET ACN: ABN: OFFICE LOCATIONS: 5/45 William Street Melbourne, Vic, 3000 AND 8 Station Road Cheltenham, Vic WHAT IS PROBATE? TELEPHONE (03) FACSIMILE (03) admin@kingstonlawyers.com.au This booklet will help you to understand what Probate is, how it works and how Kingston Lawyers can give you the peace of mind, by handling the entire process for you. WEBSITE DC

2 TABLE OF CONTENTS 1. WHAT IS PROBATE? APPLICATION FOR A GRANT OF PROBATE DYING WITHOUT A WILL IS PROBATE OF A WILL ALWAYS REQUIRED? SMALL ESTATES DUTIES OF EXECUTORS LIFE ASSURANCE AND SUPERANNUATION THE ROLE OF THE SOLICITOR DEATH DUTIES ADVERTISING NOTICES TO CREDITORS AND OTHERS EXECUTOR S COMMISSION CLAIMS AGAINST THE ESTATE CAPITAL GAINS TAX INCOME TAX LEGAL COSTS AND EXECUTOR COMMISSION QUESTIONAIRE PROBATE DATA INFORMATION

3 We would like to offer our deepest condolences on the recent loss of your loved one. We can appreciate that at a time like this, matters to do with their estate can be very confusing, frustrating, confronting and the very last thing you want to discuss. This booklet has been created for you, to help you understand the process and the different facets of Probate that need to be coordinated over the coming months. Now reading this information will come as a bit of a whirlwind, and we completely understand this. Our firm are able to handle your Probate with the utmost sensitivity and professionalism, managing the entire processes on your behalf, swiftly; so you don t have to worry. Should you wish to move forward with Probate through Kingston Lawyers, all you have to do is complete the information at the back of this booklet and send it back to us. We would be more than happy to sit with you and discuss the information in this booklet and your personal situation further, should you choose. We trust we can be of assistance in helping you with this very difficult transition Yours faithfully, Stephen Lucas LLB(Hons) M.A.I.C.D. Principal Director 3

4 1. WHAT IS PROBATE? 1.1 Probate is derived from Latin words meaning a thing proved or the verb prove In particular the word Probate is used to describe the official verifying of a will or the document which certifies to that official verifying process. You will appreciate that when a person dies leaving a will which seeks to dispose of that deceased person s assets, in general there needs to be an official procedure to confirm that the particular will is a properly made and acceptable will of that deceased person and that the executors named in the will as the persons having the rights and obligations to deal with the assets of the deceased have been properly appointed and are willing to act as executors. 1.4 The actual process of formally verifying the will is a function of the Supreme Court of Victoria but generally speaking the process is dealt with in an administrative manner by the official known as the Registrar of Probates and that person s staff. It is only on the rare occasions when there is a serious difficulty about the will encountered during the consideration of the will that the question of its validity may be referred by the Registrar to the Supreme Court for adjudication or if there is a claim made on the Will. 2. APPLICATION FOR A GRANT OF PROBATE 2.1 The executors named in the will of a deceased person are required to complete a formal application to the Supreme Court for a Grant of Probate of the will of the deceased as soon as possible. 2.2 The executors will normally engage a solicitor to prepare the documents involved in the application for Probate. In addition, the estate solicitor will assist the executors in realising the assets of the deceased in such ways as closing bank accounts, arranging for the sale of shares, 4

5 transferring real estate to beneficiaries or attending to the sale of real estate. 2.3 The first step in the process of applying for Probate is the insertion of an advertisement with the Supreme Court indicating an intention by the executors to apply for Probate of that Will. 2.4 After details of all assets and liabilities of the deceased are clearly established, the solicitor will prepare all documents and lodge them with the Registrar of Probates accompanied by payment of the amount of a Government charge. * 2.5 At the time of lodging the application the solicitor will effect various required searches of Government Registers (among other things to ensure that an earlier application has not been made in relation to the same deceased person in relation to another will not known about by the executors in the present application). 2.7 The formal granting of Probate and the issue of the document of certification normally takes only a matter of some days after the documents of application are lodged. The actual document of certification (with a copy of the will attached) is issued on old style parchment paper and is known as the Probate Parchment. 2.6 In dealing with assets of the deceased the executors will be required to provide certified copies of the Probate Parchment certified as copies by the estate solicitors. * At July 2016, the charge was $ which is payable to the Supreme Court. 3. DYING WITHOUT A WILL 3.1 If a person dies leaving assets but a valid will made by that person cannot be found, the relevant procedure to be followed is called an Application for Letters of Administration. 5

6 3.2 A similar procedure is required where there is a will but no executor has been properly appointed in the will or all of the named executors have died before the deceased person whose will it is sought to prove (verify). The process is then called an Application for Letters of Administration with the Will Annexed. 3.3 The procedure involved in an application for Letters of Administration is more complex and more costly than an Application for Probate of a Will. 3.4 If a person dies without leaving a will the assets of the deceased person will be dealt with in accordance with provisions as to disposal set out in legislation of which the more noteworthy aspects are as follows: If a person dies without leaving a will, the assets of that person will pass as follows: If the person leaves relatives as follows: 1 Spouse and no children All to spouse The assets will be distributed as follows: 2 Spouse and children (a) Personal chattels to spouse (b) If estate worth less than $100,000 all to spouse (c) If estate worth more than $100,000 spouse receives: (i) $100,000 plus (ii) Interest plus (iii) One-third of balance and (d) Two-thirds of balance to children 3 No spouse, no children (and no children deceased at an earlier time) but father and mother Equally between father and mother 4 No spouse, no children, no mother but father or mother only To the father or mother as the case may be 6

7 5 Next of kin in equal degree (e.g brothers and sisters) To brothers and sisters 6 No next of kin beyond brothers and sisters children To The Government 3.5 In the case of an Application for Letters of Administration it may be necessary to provide a guarantee or an insurance bond to guarantee the due administration of the estate by the executors. If an insurance bond is required, a fee must be paid to obtain it. 3.6 Domestic Partners Legislation was introduced during 2001 to alter the entitlements of a person to participate in the estates of deceased persons who die without leaving a will with particular effect in the case of same sex relationships and de facto relationships. The legislation speaks now of persons who were domestic partners of the deceased and provides that where a domestic partner of the deceased had lived with the deceased for two years or more, or is the parent of a child of the deceased, then the domestic partner will take the spouse s share. Additional provisions cover the situations where the deceased had both a domestic partner and a spouse. These provisions are complex and at the very least provide another compelling reason for people in such relationships to be sure to leave a valid will. 4. IS PROBATE OF A WILL ALWAYS REQUIRED? 4.1 Obviously if a person leaves a will but leaves no assets then no Application for Probate will be required. 4.2 If a deceased person owned title to real estate such as a principal residence jointly with that person s spouse (or jointly with some other 7

8 person), then the interest in the title of the deceased person passes upon death to the surviving joint proprietor by operation of law. This is called Survivorship. In relation to real estate the title must be transferred into the name of the surviving proprietor by the use of a form known as a Survivorship Application. This should sensibly be attended to by a solicitor but if the deceased did not leave other assets, it will not be necessary to make an application for Probate of the will of the deceased. This is because that joint asset is not an asset of the estate of the deceased and does not pass under the deceased s will. It will of course form part of the estate of the survivor upon that person s death. Similar considerations apply in relation to a jointly owned bank account. 4.3 Ownership which is joint must be distinguished from other forms of ownership of property by more than one person. If a title is held by two or more persons as tenants in common (generally but not always in equal shares) then the share of the ownership by the deceased passes under the will of the deceased and application for Probate of the will is likely to be required in relation to the deceased person s share. 4.4 Sometimes a deceased person may die owning very few assets such as a small bank account balance or a handful of small investments. In such cases, it may be possible to avoid the necessity for making formal application for Probate of the will of the deceased. This will depend firstly upon whether the institution (bank or company) with which the investment is held is agreeable to releasing the asset in the name of the deceased to the deceased s family or beneficiaries without the necessity of applying for a Grant of Probate. In some cases this can be done. The second requirement will be that the executor appointed by the will feels comfortable with arranging informal disposition of the small amount of assets held without the official authority of the Supreme Court. This procedure will never be available for dealing with title to real estate or other substantial assets. 8

9 5. SMALL ESTATES 5.1 There are special legislative provisions applicable to Probates of wills of estates which are classified by the legislation as being small. 5.2 A small estate is one where the value of the property left by the deceased is less than $25,000 or, if the people to benefit under the will are the deceased person s spouse or children or a widowed mother of the deceased, then less than $50, A small estate can be attended to by the Registrar of the Magistrates Court or the Registrar of Probates for a fixed small fee which can eliminate the need to engage a solicitor to assist with making the application for Probate. 6. DUTIES OF EXECUTORS An executor is the person to whom the execution of a Will, that is, the duty of carrying its provisions into effect, is confided by the testator or (Will maker). The duties of an executor are: 1. To arrange for the funeral. 2. To prove the Will (generally through a solicitor) and to locate the next of kin. 3. To administer the estate personally. 4. To collect and preserve the assets of the estate and to arrange any insurance of those assets as required. 5. To ascertain and pay any debts of the estate. 6. To be responsible for income tax returns of the deceased to the date of death, and of the estate to the date of distribution. 7. To keep proper accounts and records of estate assets and liabilities, and of their distribution and payments. 9

10 8. To distribute the net assets of the estate among the beneficiaries. 9. The executor also carries a general duty to act honestly, impartially and without enrichment. Being an executor is very often a time consuming and difficult task. It also carries very serious legal responsibilities. It is possible in some cases for an executor named in a will who does not wish to accept the position to renounce Probate and decline to act. 7. LIFE ASSURANCE AND SUPERANNUATION 7.1 Quite frequently the person whose life is assured under a life policy is not actually the owner of the policy. The policy and the proceeds of the policy payable on the death of the life assured may be owned by a spouse or other relative and on some occasions by a business partner or a private company in which the deceased held an interest. If the policy is not owned by the deceased then the proceeds will not form part of the estate of the deceased and do not pass under the will of the deceased. 7.2 Of course quite often the deceased will own the policy as well as being the person whose life is assured under it so the proceeds will form part of the estate and pass to the beneficiaries named in the will. 7.3 In general, the name of the owner will be set out in the policy document. 7.4 Sometimes a life policy may be part of the security for a loan and the proceeds must be paid to the lending institution to discharge the loan. 7.5 Sometimes a deceased person may own a life policy upon the life of another, again such as the spouse of the deceased. In such a case the value of the unrealised policy (generally the surrender value) will form part of the estate of the deceased person and pass under the will to the beneficiaries mentioned in the will. This will happen if the policy 10

11 document does not make some alternative provision for transferring the ownership of the policy. Upon the death of the life assured, the proceeds of the policy will then pass to the new owner if that person is not the life assured. 7.6 Where a deceased person is a member of a superannuation fund at the time of death, the death benefits entitlement of the member will normally pass to persons who have been nominated by the deceased in writing to the trustees of the superannuation fund during the lifetime of the deceased. Where no appropriate nomination has been made, the death benefits entitlement of the member of the fund will in general be disposed of by the trustees of the fund to the next of kin of the deceased or to the beneficiaries named in the will of the deceased. 8. ROLE OF THE SOLICITOR 8.1 The primary role of the solicitor is to complete the preparation of all documents necessary for the application for Probate of the Will, to advertise the proposed application and to attend to any queries relating to the will. 8.2 The Solicitor may also be engaged to assist with compiling details of assets and in some cases in obtaining valuations of assets forming part of the estate. 8.3 After Probate has been granted the solicitor will generally be engaged to attend to getting in the assets of the deceased or transferring title to assets to beneficiaries, and paying out liabilities of the estate. 8.4 It should be appreciated by executors and beneficiaries that the solicitor will carry out much if not all of the work of the executors but in some cases if an executor is willing to take on more of the detailed work personally, some legal fees are likely to be saved. Of course, the executors will carry the legal responsibility for due administration of the estate which of itself is a very good reason for the executors to engage a competent solicitor to assist with the work. 11

12 8.5 Executors can engage any solicitors they choose for the work involved in a Probate application and there is no necessity to engage a firm simply because it holds the will of the deceased in safe-keeping. 9. DEATH DUTIES 9.1 There are no death duties payable on or in connection with the estates of deceased person in Australia of any kind. 9.2 However, the capital gains tax component of income tax is affected by the death of a taxpayer. The impact of CGT is considered under another heading. 10. ADVERTISING NOTICES TO CREDITORS AND OTHERS 10.1 A statutory procedure is available to assist trustees (and executors of deceased estates) to provide some protection from claims made against them after an estate has been administered and the assets of the deceased have been transferred to the beneficiaries The procedure involves the insertion of an advertisement in the prescribed form in both a daily newspaper and the State Government Gazette which is called a Creditors Notice and is directed at Creditors, next of kin and others having claims against the estate of the deceased person. It is to state that the executors will distribute the estate of the deceased at the expiration of 2 months from the date of the advertisement if they do not receive notice of any other claims If the executors receive no notice of a claim during the two month period, they will have no liability to persons making claims against the estate after the two month period has expired The object of the procedure is to protect executors against late claims. However, in many cases it will not protect beneficiaries against claims made after the two month period (if there is a legal right in some third party to trace or follow the assets distributed). 12

13 10.5 This statutory procedure is particularly appropriate for executors who have no significant interest as a beneficiary under the will of the deceased. 11. EXECUTOR S COMMISSION 11.1 Commission is payable to an executor if that executor is one of the small number of recognised trustee companies entitled to act as a professional trustee under wills by operation of legislation known as the Trustee Companies Act. In addition the Government body known as State Trustees charges commission for acting as an executor Fees are charged by trustee companies in accordance with a scale. It is possible for you to negotiate the fees during your lifetime. The maximum they can charge is 5.5% of the gross value of your estate plus 6.6% of any income received by your estate Other than as above, an executor may only charge commission (or fees) for acting as an executor if the Will states that this is the case up to the amount stated in the Will but not exceeding 5% of the gross estate. 12. CLAIMS AGAINST THE ESTATE 12.1 Until recently only persons who had some level of dependency or very close family relationship with a deceased person could apply for their inclusion as a beneficiary in that estate where they were not named as beneficiaries in the will or alternatively for an increase in their entitlement if they were named Now, under the Administration and Probate Act (S.91) the Supreme Court has power to make an order to vary the dispositions set out in the will of a deceased person if the Court considers that the will does not make sufficient provision for the proper maintenance and support of any person for whom the deceased had responsibility to make provision. 13

14 12.3 In making an order to disturb the distribution set out in the deceased s will the Court must take into account various factors including the following: (a) (b) (c) (d) (e) the nature and length of a relationship between the deceased and the applicant; the size and nature of the estate; any contribution by the applicant towards building up the estate of the deceased or the welfare of the family; the liability of any other to maintain the applicant; and any other matters the Court considers relevant An application must be made in the ordinary course within six months of the date of the Grant of Probate but the court can in some cases consider an application which is made after that period In many cases involving applications to disturb the distribution of assets of a deceased person set out in that person s will, the Court will order that the legal costs of all parties to the application be paid out of the assets of the estate As applications to the Supreme Court can be very costly it is rarely appropriate that they should be made where the size of the estate is small. 13. CAPITAL GAINS TAX 13.1 The rules concerning CGT are complex. These notes are not designed as a substitute for specific advice but to set out a few general principles to aid understanding. Where there is a possible exposure to CGT, sensibly, professional advice must be sought. 14

15 13.2 There are different CGT considerations applicable for an asset which consists of a dwelling and other assets owned by the deceased In the broad sense the principal residence of any person is an asset which is exempt from all CGT liability when it is sold. Not surprisingly then, if a principal residence of a deceased person becomes on that person s death the principal residence of the beneficiary entitled to the residence under the deceased person s will, then the same exemption will ordinarily apply to the position of that beneficiary For the purpose of this exemption, a person who was a joint proprietor of the title to the residence with a deceased person and acquires the interest of the deceased by survivorship is treated for CGT purposes as if the survivor had become entitled as a beneficiary under the will of the deceased. * Thus if the survivor also uses the principal residence of the deceased as the survivor s principal residence the exemption will, not unexpectedly, be preserved. * 13.5 In general an exemption from CGT will apply for the benefit of a beneficiary who acquires a dwelling under a will if that dwelling was a pre-cgt asset (i.e acquired before 20 September 1985) and the dwelling is sold within 2 years of the death of the deceased. This exemption is not dependent upon the use of the dwelling as a principal residence by the deceased or by the beneficiary In the case of a dwelling which is a post CGT asset (i.e. acquired by the deceased after 20 September 1985), the exemption will only be available if the dwelling was the principal residence of the deceased 15

16 at the time of death and not used for income producing purposes at that time and is sold within two years If a property had been used by the deceased during part only of the period of ownership by the deceased, an apportionment will be applicable based upon the periods during which the property was the principal residence of the deceased and the period during which it was not so used. *(See Par 4.2 of this booklet for explanation of joint proprietorship) 13.8 Other Assets There is no CGT applicable in general for assets owned by a deceased person simply because of the death or at the point that legal ownership passes to the executors of the deceased (i.e. at the time of the Grant of Probate of the will) For a pre-cgt asset of the deceased which passes to a beneficiary under the will of the deceased, the beneficiary will be treated as if that person had acquired the asset at its market value at the date of death of the deceased. When the asset is transferred to the beneficiary, no CGT liability arises but if and when the beneficiary sells the asset CGT will apply to the extent that the sale price of the asset exceeds the market value of that asset at the date of death of the deceased Similarly if the pre-cgt asset is sold by the executors in the course of administration of the estate, the executors will be liable for CGT on the difference between the market value of the asset at the date of death and the net sale proceeds For a post CGT asset of the deceased, the cost base for a realisation of the asset by the executors or by the beneficiary to whom the asset has been transferred by the executors is not the value of the asset at the date of death but the CGT cost base of the asset in the hands of the deceased person at the date of death. (i.e. the actual cost to the deceased reduced by application of the rate of inflation). 16

17 13.12 Where an executor expends money on an asset and then transfers the asset to a beneficiary at the close of administration of the estate, the beneficiary is deemed to have made that expenditure and may add the cost to the cost base for the purpose of calculating the CGT. An example would be where the deceased owned non income producing vacant land and the executor paid rates and land clearing costs Assets of the deceased consisting of collectables (antiques etc.) and personal use items retain that character for CGT purposes in the hands of the executors or the beneficiaries The rules provide that collectables which cost less than $500 are CGT exempt while those costing more than $500 must be brought to account for CGT. In the case of personal use assets which are not within the definition of collectables, the cut off point for exposure to CGT is a cost price for such an asset above $10,000. For the views of the Australian Taxation Office on these issues reference should be made to Taxation Ruling IT INCOME TAX 14.1 If a person has been lodging income tax returns during his or her lifetime, it will fall to the executor to lodge a tax return for the deceased person in relation to income derived during the period commencing on the previous July 1 and ending on the date of the death of the deceased If the deceased had not lodged a tax return in respect of a completed financial year before the date of death then an additional tax return will need to be lodged by the executor for that financial year As a quite separate duty, the executor must lodge a tax return for the estate of the deceased person for the period commencing on the date of death and concluding on the next occurring June

18 14.4 If an estate is not fully administered and derives income in a second or later financial year after the date of death then estate returns must be lodged It will be necessary where income is derived by the estate, for a separate tax file number to be obtained for the estate which will be used in connection with the estate s tax return and any later returns. For income tax purposes, the return lodged in respect of the period up to the date of death will cause an assessment to be raised as if that period were a full taxation year. (There are obvious rebate advantages in this treatment). Executors must ensure that sufficient funds are available from the assets of the deceased to meet any taxation liabilities in relation to the return for the deceased person and returns made on behalf of the estate. 15. LEGAL COSTS AND EXECUTOR COMMISSION At Kingston Lawyers we charge what we are permitted to charge under the charging scale published annually by the Supreme Court of Victoria and under the probate Rules of the Court. An indicative guide of fees is as follows: For estates under $50, Up to $1, For estates under $1 million Up to $6, For estates over $1 million Up to $10, In addition, there are out of pocket expenses of $1, These include advertisement charges, Court charges, Titles Office charges and miscellaneous expenses. Please note that no amount is required to be paid in advance and accounts can be settled from the estate monies. 18

19 16. QUESTIONNAIRE PROBATE DATA INFORMATION SHEET Deceased Full Name: Other names also known as: Occupation: Date of Marriage: Date and place of death: Date and place of birth: Name of Spouse/Partner: Name of Children: Details of any person in a dependent relationship with deceased: Will Date of Will: Location of Will: Will witness (1) full name, address, occupation: Will witness (2) full name, address, occupation: 19

20 Assets - Real Estate Address (1): Title Particulars: Location of certificate of title: Insurance details: Value: Mortgage details: Address (2): Title Particulars: Location of certificate of title: Insurance details: Value: Mortgage details: Personal Estate - Money in Bank: Name of Institution (1): Address: Account no: Name of Institution (2): Address: 20

21 Account no: Name of Institution (3): Address: Account no: Personal Estate Shares/units: Name of Company (1): Registry Address: Number of shares/units: SRN Number: State of Incorporation: Register: Name of Company (2): Registry Address: Number of shares/units: SRN Number: State of Incorporation: Register: Name of Company (3): 21

22 Registry Address: Number of shares/units: SRN Number: State of Incorporation: Register: Personal Estate Inscribed stock/bonds/debentures: Name of Company (1): Address: Holding details: Location of certificates: Name of Company (2): Address: Holding details: Location of certificates: Personal Estate Life Policies Name of Company (1): Address: Policy Number: 22

23 Name of Company (2): Address: Policy Number: Debts Due: Name of debtor: Amount: Interest: Motor Vehicle: Make/model: Registration no: Insurance details: Interest in deceased estate: Name of Estate: Name & address of Executor / Trustee: Type of interest: Value of interest: Interest in Business: Name of partnership: Name of business: 23

24 Names of partners: Name of Company: Number of shares held: Value of interest in business: Superannuation: Fund name: Address of Fund: Membership no: Amount: Liabilities: Mortgage: Funeral: Creditor: Jointly owned assets: Name/address of joint owner: Nature of asset: INFORMATION/DOCUMENTATION WE REQUIRE FROM EXECUTOR/S: 1. Death certificate (original) 2. Details of assets and liabilities - as above 24