Estate liabilities play an important role in final distribution

Date: Feb 06, 2015

In estate disputes where the value of the estate is large, there is potential for the total amount to fluctuate over the course of settling the estate as different liabilities are settled - creating a challenge for executors.

For individuals that are specifically seeking an interim distribution - essentially an advance on the amount they have been left in the will - this can also make it harder to determine how much they can receive in advance from the estate.

For example, if an individual receives the bulk of their inheritance, only to find the estate's liabilities have not yet been settled, the beneficiaries will then be forced to repay a portion of the estate.

The difficulties that can arise around an application for interim distribution were seen recently in a case before the NSW Supreme Court. In the case, a man sought an interim distribution of his share of his mother's estate.

The deceased's will split her estate, with her three children each entitled to a share, along with further legacies for her grandchildren and great-grandchildren.

Before the estate was settled, the executors made interim distributions to the plaintiff and one of his sisters. The plaintiff in this case then sought a further distribution from his share of the remaining estate.

The Court was required to consider a number of factors in deciding this case. The first was whether or not the remaining value of the estate would be sufficient to meet this application.

In particular, there were a number of liabilities held by the estate that had yet to be settled by the executors. In the event the remaining residue of the estate was insufficient to meet these costs, any interim distributions would need to be transferred back to the estate in order to meet these debts.

What's more, because these were unqualified liabilities - that is, there was no way of knowing how much they would cost to settle in the future - the executors were unable to accurately predict the deduction from the estate ahead of time.

As a result, the Judge ruled against the plaintiff, finding that a further interim distribution would further complicate the process of settling the estate's liabilities.

For those looking to contest a will, or seek an interim distributions from an estate, this case highlights the range of issues the courts will take into consideration in such an application. Often, success in these cases will depend on the balance of the estate and any outstanding liabilities that have yet to be deducted.

To begin the process of an estate dispute or application for an interim distribution, make sure to contact a wills and estates lawyer.