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Insolvent Estates - Rights of creditors

Where a deceased dies insolvent, the estate can be declared bankrupt, just as if the person was still alive. Before any debts can be discharged, the priority of the estate is to pay the funeral, testamentary and administration expenses (Schedule II, Part 1, s1Administration and Probate Act 1935 (Tas)). But, the real and personal estate (real estate being houses, etc, and personal being other items) of the deceased are assets for payments of debts before they can be disposed of in accordance with the terms of the will (s32, Administration and Probate Act 1935).

If There is No Will

Where there is no will, the Intestacy Act sets out a hierarchy of beneficiaries and procedures, as set out in the Intestacy section.

If There is a Will

If there is a will, an estate will be disposed of in accordance with that will, except where there is the potential for a challenge. See ‘Contesting a Will’.

Are Probate and Letters of Administration Necessary?

Probate and letters of administration are usually necessary to administer a will where the estate contains things like property, large sums of money, valuable items that are not personal goods, shares, trust funds, etc. There are situations where probate and letters of administration are not necessary (see the section on this), but are often useful anyway. Letters of administration and probate are obtained from the Supreme Court of Tasmania. The Supreme Court takes applications for the grant of probate and administration of deceased estates, and can grant:

  • Probate
  • Letters of administration with the will annexed; and
  • Letters of administration.

Probate

Probate is where a court has declared that the will of the deceased is valid and registered, and that the authority to administer the deceased estate has been granted to the executor of the will. Once the 30 days waiting period prescribed in the Wills Act has expired (s64, Wills Act) and probate has been granted, the deceased estate may be distributed to beneficiaries and/or for the purpose of discharging debts (including funeral and administration expenses).

See the Supreme Court website for contact details of the Probate Supervisor, and further information.

When Probate and Letters of Administration are not necessary

It is not possible to list all the situations where probate or letters of administration are not necessary. These are some standard situations, but procedure varies depending on institutional practice.

Banks

Money held in a joint bank account automatically goes to the survivor of the account when one account holder dies. If the account was only in the deceased’s name, banks can and will usually release enough to cover funeral and associated expenses. Situations in which banks will release funds to the executor include:

  • Where they have probate or Letters of Administration
  • Evidence of the deceased’s account use (such as their ATM card)
  • Sometimes, a death certificate along with the written consent and indemnity forms of family or next of kin consenting to the executor’s access to the account

Building Societies

Building societies will need similar evidence, such as evidence of access to the deceased’s account (such as an ATM card), a death certificate, and letters of indemnity. As with banks, it is useful to have Letters of Administration or Probate.

Insurance Companies

Where a sum is not over $10,000 insurance companies will usually release life insurance policies to the executor or family. Life insurance policies mature on the death of the policy holder, and often the beneficiaries will be mentioned in the life insurance document itself – such as spouses or dependent children.

Real Property – Joint Tenancy

While it is necessary to have probate or letters of administration for real property, the situation of the ‘joint tenant’ does not require either. Joint tenancy, on the death of one joint tenant, means that the tenancy automatically goes to the surviving tenant/s. So, if three people own one third each of a property, and one dies, the two remaining will each receive half shares of that person’s third. Upon the decease of one of the remaining two, the whole of the estate will go to the remaining joint tenant.

The Recorder of Titles, who acts out of the Titles Office (part of the Department of Primary Industries, Parks, Water and Environment), must be informed of this change. The surviving tenant must complete and lodge a correctly completed Registration of an Application to be Registered Proprietor by Survivorship form. There is a fee. There are other requirements.

Cars

To transfer ownership of a car, all that is needed is alteration of the name of the owner for registration purposes. This is through the Motor Registry. Simply head to Service Tasmania, or see their website.

Personal Goods

There are no special requirements for distributing personal goods.

Release of Assets

Assets will be released according to probate and Letters of Administration. However, if a testator/rix dies insolvent then assets will be administered under the Administration and Probate Act (ss 32 and 34) to enable the discharge of debts to creditors. Only after these debts are discharged will assets be released to be dispensed under the will.

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