What are the Obligations of an Executor in a Family Provision Claim?
Executors and administrators of estates, also known as legal personal representatives (LPRs), are frequently frustrated when an eligible person makes a family provision claim. These claims seek to overturn the deceased’s will and may be viewed as frivolous by LPRs. Many LPRs are also unsure of what action needs to be taken when a family provision claim is made. This article outlines the obligations of an executor when a family provision claim is made against the estate.
Obligations of an executor to the Estate
Prudent LPRs do not distribute the deceased estate until six months have elapsed since the date of death, or if a notice of claim has been received, within nine months of the date of death. If the estate is distributed before that time has elapsed, the LPR may be personally liable to pay any provision awarded.
Some LPRs choose to obtain an indemnity from the beneficiaries of the estate to repay the funds into the estate pool. This is due to pressure from the beneficiaries to distribute early. However, this does not negate the liability of LPRs if a family provision order is made. An indemnity only serves to recover the funds to which the LPR has incurred from the beneficiary. If the beneficiary has then distributed the funds, it will not be possible to recover and the LPR will still be liable for distributed funds.
An exception to this rule is the situation where support has been provided by the personal representative to a spouse or child of the deceased person who is dependent on the deceased for their proper maintenance and support. The consent of the claimant can also be obtained.
While distributions to beneficiaries cannot be made, it remains an obligation of the deceased person to make payment of any debts of the deceased. However, caution is advised in payment to persons who are not at arms-length, such as children and grandchildren of the deceased.
Obligations of an executor to beneficiaries and to the court
When a notice of claim has been obtained, the LPR should immediately inform all the beneficiaries seeking provision. If the notice comes together with an offer, it is also prudent to obtain the view of the beneficiaries on the offer, where possible. An LPR is appointed as the independent person acting for all the beneficiaries of an estate and is spending the money of those beneficiaries when administrating the estate. A failure to involve the beneficiaries can lead to action against the LPR.
Upon a claim being made, it is then necessary to engage in the court process. First, there is an obligation to follow the Queensland Practice Direction in relation to the estate. Initially, you will need to file a notice of Address for Service as the executor under the will. Following this, the service of the documents will need to be effected on all the interested persons named under the affidavit of the claimant. Those claimants will then have an opportunity to file their own notice of address for service.
The next stage is to prepare responding materials for the claim. The material of the claimant will need to be considered carefully and material in response will need to be filed. Importantly, the financial circumstances of the beneficiaries of the estate should be filed, as any failure to set out the financial circumstances of the beneficiaries will lead to a proposition that they have no competing financial need.
The matter will then proceed to alternative dispute resolution (including mediation). If the alternative dispute resolution fails, the matter will then be listed for trial.
Obligation of an executor to settle
It is incumbent on an LPR to act in the best interests of the beneficiaries of an estate.
While a testator may make any will they wish, it is unusual for a claim to be dismissed outright. Usually, significant legal fees are incurred by both parties. If even a small amount of provision is awarded from the estate, it is usual for the costs to be paid out of the estate. A proceeding in the District Court of Queensland will usually cost around $90,000 per side to the conclusion of trial or for two parties could cost a total of $180,000.
It is also important to consider that most family provision cases are determined in terms of quantum, rather than an amount of provision to receive. Unless some provision has been made for a person under a will, it is normal for at least a nominal ‘win’ to be made by the claimant. As a result, it is ordinarily in the best interests of the beneficiary to settle the proceeding early.
Caution should be taken to settle the proceedings without the consent of the beneficiaries. If an adult cannot consent to the decision, they can seek to have the decision overturned. A decision to make a family provision order can be overturned at any stage until a final order is obtained from the court. It is our recommendation that consent should be obtained from all beneficiaries in all cases where possible. Nonetheless, it is always vital that a final order is then obtained from the court to confirm the acceptance of the orders.
There are, of course, cases where the parties will be unable to reach a settlement of the matter. In those cases, it will be necessary to proceed to a final hearing of the matter for determination.
Legal advice on the obligations of an executor
The obligations of LPRs under family provision proceedings are technical and the assistance of a lawyer working in the area should be sought. Armstrong Legal has experienced contested will solicitors. Telephone our hotline today to make an appointment with one of our Queensland Contested Will lawyers.
If you require legal advice or representation in any legal matter, please contact Armstrong Legal.