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Risks to executors in distributing estates

Risks to executors in distributing estates

By LIV Professional Development

Wills 

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Distribution of an estate is a time-sensitive and often stressful endeavour. For lawyers practising in succession law, this part of the job presents several unique risks and considerations. Ahead of his presentation on this topic at the upcoming Succession Law Conference on Friday 13 October, wills and estates specialist Mark Maier, the Director of McNAB McNAB & Starke Lawyers, spoke to the LIV about what lawyers can expect from attending his session.

To hear the full presentation, as well as other critical topics for wills and estates lawyers, register for the conference today.

Five risks for executors:

  • Bankrupt beneficiaries
    According to the latest figures available, it appears that in the main age groups for beneficiaries, the ratio is about one bankruptcy in every 320 beneficiaries. This is a number that will shock many lawyers in this area of practice. An inheritance that comes to a person while bankrupt vests in the trustee in bankruptcy. If an executor pays out to such a beneficiary, it's the equivalent of handing the money to a stranger in the street – and the executor can be personally liable to the legally entitled recipient, namely the trustee in bankruptcy. If a claim is made against the executor, the executor will look to the lawyer for not making appropriate inquiries. That can lead to a law claim, and the standard $2 million LPLC cover may not be enough. If the lawyer also happens to be the executor, the LPLC coverage may not apply at all. 
  • The obligation to distribute promptly 
    This is particularly important once the Part IV limitation period has expired. A failure to oversee prompt distribution might lead to a claim against the lawyer if an out of time Part IV claim arises. 
  • Life interests and safeguarding against Part IV claims 
    Life interests can last for decades and there is the potential for an out of time Part IV claim to be brought while the title remains registered in the name of the executors. Consideration needs to be given to creating life interest and remainderman titles so that a distribution can be said to have taken place. Examples of the documents to create the interest titles and to move back to a full fee title upon the death of the life tenant will be provided at the Succession Law Conference. 
  • Managing beneficiary expectations
    Mistakes are made when beneficiaries are pressing for funds to be released, so it is important to take your time. Managing the beneficiary expectations at the outset reduces the risk of error. The conference presentation will cover ways of doing this in more detail. 
  • Properly documenting payment instructions
    It is important for lawyers distributing an estate to understand the mechanics of documenting payment instructions, as well as extracting from the beneficiaries the necessary information to later run bankruptcy searches. 

More information will be included in this session at the Succession Law Conference. Make sure you get the chance to hear more from Mark Maier and other exceptional speakers by registering today.


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