What Happens If There Is No Will? Dealing With An Intestate Deceased Estate

14 November, 2014 | Alex Dunne

When a person dies without a Will, administering the estate is more complicated than if the person had left one. Dying without a Will is called “dying intestate”.

When you have made a valid Will, you decide who will administer your estate and how your assets will be distributed. When someone dies intestate, the Administration Act determines who is entitled to apply to be the administrator of the person’s estate and how the assets are to be distributed.

With an intestate estate, the Court appoints the administrator(s). The administrator, once appointed by the Court, has the same role as an executor named in a Will.

Due to the complex nature of dealing with an intestate estate, additional information will need to be submitted to the Court before an administrator can be appointed. This can cause significant delays in sorting out the estate, which in many cases will delay the eventual distribution of the estate assets.

STEPS INVOLVED:

1. Establish that there is no Will

The first step you should take is to determine that there is no Will. You will need to search through the papers of the person who has died, and if you know the person’s background you should contact any previous lawyers to see if any of them are holding a Will.

2. Gather information on the size of the estate

You will need to assess the size of the estate. This needs to be done at the outset because if there is any one asset in the deceased person’s own name worth $15,000 or more (ie property, bank or investment accounts, shares or life insurance) you will need to apply for Letters of Administration on Intestacy in order to administer the estate.

3. Gather information on the family members

This needs to be done to decide who can apply to be the administrator(s). It is also important to know who all of the family members are in order to know who is entitled to inherit the estate property, in other words, how the estate is to be distributed.

4. Establish who is going to apply to be administrator

The Administration Act specifies the order of priority as to who can apply to be the administrator(s). Once it has been decided who is going to apply, you will need to obtain consents of anyone with an equal or greater right to apply. For example, if the person did not have a partner but did have children, if one or more of them want to apply to be administrator(s) of the estate then all of the other children would first need to consent to the application.

If a spouse or de-facto partner is planning to apply to be the administrator you will need to establish first whether or not he or she intends to put in a relationship property claim. This is because any spouse or partner that is putting in a relationship property claim can not also be the administrator.

5. Advertise for a will search

An advertisement will need to be placed in a Law Society publication asking if any law firm or trustee company holds a Will for the person who has died. You will need to get the results of this search (which takes approximately one month from the date the ad is published) before anyone can apply to the Court for a grant of administration. This search should be done as soon as it becomes clear that no Will has been found.

6. Request a “Status of Children” search

This is a search that is carried out by Births Deaths & Marriages – the certificate showing the results of this search will need to be attached to the affidavit of whoever is applying for a grant of administration.

7. Prepare Court documentation

A lawyer will need to prepare the Court documents, including the “Affidavit for Obtaining Letters of Administration”. All of the consents (if applicable) and the certificate from Births Deaths & Marriages will need to be attached to the affidavit.  The lawyer can then attend on the person(s) to sign the documents and file the application with the High Court.

8. Bring in estate assets and pay debts of estate

Once you have a grant of Letters of Administration the administrator(s), together with their lawyers can liaise with banks, investment companies, life insurance companies and share registries to close bank accounts, claim on insurance, transmit any properties and bring in any other investments. Then, as soon as funds are available any debts of the estate can be paid.

9. Wait for six month before distributing estate

We advise the administrator(s) to wait until after six months from the date of the grant of Letters of Administration before distributing any estate assets. The reason for this is that if a successful estate claim was made within six months the administrators would be held personally liable to pay the claimant if they had already distributed the assets. After six months the administrator is no longer personally liable, except in his or her capacity as a beneficiary of the estate.

During the six month waiting period the assets can be brought in and any debts of the estate can be paid. It is usual to then keep all estate funds on investment in a solicitor’s trust account.

Any property that was held by the person who has died can be transmitted to the estate. Once the transmission is registered the property can be sold.

During this time we advise administrators to place an ad in the Public Notices of the local newspaper asking for any creditors to come forward.

In most cases it will also be necessary to apply for an IRD number for the estate (the estate is considered to be a different entity than the person who has died and needs a separate IRD number).

10. Distributing estate / finalising tax matters for estate

When the six months waiting period is up the estate can be distributed to the beneficiaries. As stated above, the estate will be distributed in accordance with the rules set out in the Administration Act.

We recommend making an interim distribution of most of the estate funds, having held back a small amount for finalising tax and any remaining estate matters. An accountant will need to prepare and file individual and estate tax returns.

In most cases once the tax returns have been filed, any tax has been paid and / or refunds received and all further expenses have been paid, a final distribution of the remaining funds can be done. This will complete the estate administration process.

Where there are minor beneficiaries, however, the final distribution cannot be done until the youngest of the children reaches twenty years of age (“Age of Majority”). This usually means that the estate will be required to hold all estate funds on investment (often in your solicitor’s trust account) and file tax returns each year until a final distribution of estate funds can be done.

Do you need assistance with an estate where there is no will? To schedule an appointment with author, Alex Dunne, please contact personal assistant, Suzanne Sumner by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840.