Interim distributions from an estate

There are rules and laws that apply to when and how a deceased estate may be distributed by an executor. For example, part of section 92 of the Probate and Administration Act (NSW) 1898 (which applies to all estates in NSW) provides that the executor may distribute assets from the estate with protection as long as 6 months from the date of death has elapsed, they have advertised the prescribed form of notice of their intention to distribute the estate and 30 days from the date of the notice being advertised has expired. If the executor is on notice of any claims against the estate, including any debts or liabilities, the executor may become personally liable for those claims if the estate is distributed without satisfying them first.

Sometimes, however, the circumstances of a beneficiary of the estate will necessitate the executor considering whether or not there is an immediate need for maintenance payments to be made to a beneficiary from their share of the estate before the above formal requirements can be addressed.

An executor is empowered under section 92A of the Probate and Administration Act (NSW) 1898 to make payments to beneficiaries on an interim basis if a number of conditions are met. This can even be done within 30 days of the date of death.

As personal liabilities can arise for an executor who seeks to make an interim distribution, it is important experienced legal advice is sought before any distributions are made.

If an executor is on notice of a family provision claim against the estate, it is still possible to make a maintenance distribution, but it can become complicated.

In a recent decision of the Supreme Court of NSW, Steiner v Strang [2017] NSWSC 132 a beneficiary of the estate sought an award of interim provision from the estate, or in the alternative, an interim distribution from the estate. The application was made on an interlocutory basis which means it was made before a final hearing of the matter. The beneficiary was also making a family provision claim on the estate which is why the option of pursuing provision or distribution was available to him. Unfortunately, the estate has been embroiled in litigation that is not yet resolved despite the deceased’s death occurring in October 2011. Given the estate had liabilities and the litigation involving the estate remains unresolved, the Court did not grant the beneficiary any further funds by way of provision or distribution.

Whilst the Court did consider the beneficiary’s financial circumstances and agreed that he was ill, unable to work, in debt and facing foreclosure on his home, the judge was not persuaded the applicant would be successful in his family provision claim for further provision. The judge also determined that the executors, acting conservatively and prudently, could not part with the sum of money being sought by the beneficiary as to do so would be unsafe for the estate. The beneficiary was also unable to provide sufficient security to the estate in the event any sums were required to be paid back at a later date.

The role of an executor is not always an easy one. It is important to remember that in certain situations the desire to help a family member or beneficiary should always be considered carefully in light of all of the facts and circumstances that affect the estate. In some situations an interim distribution can be made, but the process should be handled carefully and with the benefit of legal advice. Sometimes, tough decisions need to be made in order to avoid further problems and liabilities arising.

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