Capital gains tax in deceased estates

If you have been appointed to administer a deceased estate, it is important to consider the application of Capital Gains Tax (CGT) when disposing of estate assets. CGT can vary depending on a number of factors, including the type of assets involved and the timeframe in which the estate is administered.

An executor (or administrator) may need to sell or transfer estate assets to beneficiaries as part of their role in administering the estate. There can be advantages and disadvantages of selling and transferring assets, which should be considered carefully during this process.  

CGT applies when an asset is disposed that is subject to CGT, known as a CGT event. There are a number of factors to consider in determining whether CGT applies, including:

1. Whether the asset was acquired before 20 September 1985, when CGT was introduced. Assets acquired before this date are exempt from CGT.

2. Whether a property was the deceased’s principal place of residence. A CGT exemption may apply in these circumstances, including if a beneficiary sells the property within 2 years of the deceased’s death.

3. Whether the deceased had shares or investment properties – CGT generally applies to the sale of shares and investment properties, unless a relevant exemption applies.

There are other factors and exemptions that may apply in your circumstances.

If an executor sells an asset as part of the administration of an estate, the estate will be assessed for CGT when a tax return is filed on behalf of the estate. Whilst the proceeds can then be distributed to the beneficiaries as a gift, the overall value of the estate may be reduced by the application of CGT. As deceased estates are treated as individuals for tax purposes for the first three years, there may be benefit in selling assets over the course of that period to take advantage of the tax free threshold.

In the alternative, an executor may transfer estate assets to beneficiaries in specie (in its current form). This means no CGT is immediately payable on the transfer, but will rollover and apply to any future sale of the asset. As such, it is important to consider CGT before transferring specific assets to beneficiaries, particularly shares and other investments.

It is recommended to seek legal and accounting advice before administering a deceased estate. If you would like to discuss your situation and how we can assist you, please contact us today on (02) 6225 7040 by email info@rmfamilylaw.com.au or get started now online.

Author: Amy Davis

Distribution of a Deceased Estate: When can this occur?

As an executor of a deceased estate one of the biggest questions you might have is “when can I distribute the estate?”.  You’ve gone through the motions of obtaining the Grant of Probate and have taken steps to call in all of the assets. There is money sitting in a bank account, and you have beneficiaries enquiring of you as to when they can have access to the funds.

As tempting as it might be to wrap the process up as soon as possible, it is important that you continue to follow your obligations as an executor and take steps to act in the best interest of the estate.

Executors of a deceased estate in the ACT will need to have regard to and follow the Administration and Probate Act 1929 (ACT).

Section 64 of the Administration and Probate Act 1929 (ACT) outlines that an executor can only distribute the estate once:

1. 6 months have passed since the date of the deceased’s death; and

2. That the executor has published a Notice of Intention to Distribute the Estate (a published document that puts all creditors and interested parties on notice that the executor intends to distribute the estate in accordance with the deceased’s Will after the passing of a further specified number of days); and

3.  All debts of the estate have been paid.

You may be thinking “I already put creditors on notice when I filed my Notice of Intention to Apply for Probate”.  While that is correct, it is important to do so again before distributing the estate; a failure to do so could have significant ramifications for you as the executor.  The period of 6 months following the deceased death is seen to be a reasonable period of time for creditors to raise a debt with the estate.

Further, the Notice of Intention to Distribute will place any potential family provision claimants on notice of your intentions to distribute the estate; those potential claimants have a period of 6 months from the date the Grant of Probate was issued to challenge the Will.

In the event an executor fails to comply with section 64 of the Administration and Probate Act 1929 (ACT), there is a risk that the executor will be personally liable to repay funds into the estate in the event a creditor files a debt with the estate, or a family provision claim is made (in this regard costs will likely be incurred in responding/defending the claim regardless of whether the claim is successful).   

If you are unsure of your obligations as an executor, or what you need to do to ensure compliance with section 64 of the Administration and Probate Act 1929 (ACT), you should seek specialist legal advice from an estate lawyer.

Contact Robinson + McGuinness to arrange an appointment on (02) 6225 7040, by email on info@rmfamilylaw.com.au or get started now online with one of our experienced lawyers.

Author: Peta Sutton

Administration of Deceased Estates

Administering a deceased estate comes with a wide range of responsibilities. This includes managing the deceased’s assets, notifying institutions, paying debts and distributing the estate in accordance with the will or applicable law.

1. Obtaining the Death Certificate

   The first step in administering a deceased estate is to obtain the death certificate. This is required for various legal and administrative purposes, including to notify banks and other institutions, and to apply for a grant of probate or letters of administration.

2.  Identifying the Executor or Administrator

   If the deceased left a valid will, they will have appointed an executor. The executor's role is to ensure that the deceased's wishes are carried out in accordance with the will. In cases where there is no will or appointed executor, the court may appoint an administrator. The executor or administrator is responsible for managing the estate's assets, paying debts and distributing the estate.

3.  Applying for a Grant of Probate or Letters of Administration

   A grant of probate or letters of administration is obtained by filing documents with the Supreme Court of the state or territory where the deceased held the majority of their assets. You may need to file in multiple states/territories, which is known as obtaining a reseal of the grant.

4. Collecting and Managing Assets

   Once a grant of probate or letters of administration is obtained, the executor or administrator can begin collecting and managing the deceased's assets. This includes identifying bank accounts, shares, property and personal belongings. The executor or administrator should ensure they maintain accurate records of all financial transactions and estate related activities.

5. Paying Debts and Distributing the Estate

   Before distributing the estate to the beneficiaries, the executor or administrator must settle any outstanding debts and liabilities of the deceased. This may include paying debts owed to creditors, outstanding bills and tax obligations. Once this has been completed, the remaining assets can be distributed to beneficiaries in accordance with the will or the laws of intestacy if no will exists.

You may wish to seek professional advice and assistance with administering a deceased estate. Robinson + McGuinness offer fixed fees for an application for probate or letters of administration. If you would like to discuss your situation and how we can assist you, please contact us today on (02) 6225 7040 by email info@rmfamilylaw.com.au or get started now online.

Author: Amy Davis

Applying for Probate and Letters of Administration

Losing a loved one is an emotionally challenging experience and the responsibility of administering their estate can feel overwhelming. There are a number of financial and legal processes involved in managing a deceased person’s assets and liabilities, and this may include applying for a grant of probate or letters of administration.

What is an executor?

An executor is a person appointed by the deceased to manage their estate after they pass away. The executor is responsible for collecting assets, paying debts and distributing assets to beneficiaries in accordance with the deceased’s wishes.   

What is probate?

A grant of probate authorises an executor to manage the estate of a deceased person in accordance with their will. To apply for probate, the executor will need to gather documents relating to the estate, including the original will, death certificate, and supporting documents regarding the deceased person’s assets and liabilities.

There are a number of steps involved in applying for a grant of probate in the ACT, including:

1. Advertising your notice of intention to apply for probate with the ACT Supreme Court;

2. Executing an affidavit in support of your application detailing the deceased’s assets and liabilities; and

3. Conducting a search of the Court Registry to see whether a previous grant has been made or any caveats have been lodged.

The details required for the application will vary depending on your circumstances and the complexity of the estate. If the Court is satisfied with the application, a grant of probate will be issued and the executor will then have authority to transfer or release assets to the executor or beneficiaries.

Letters of Administration

When there is no valid will, an application may need to be made to the ACT Supreme Court for letters of administration. This is an order of the Court that authorises an ‘administrator’ to manage the deceased person’s estate. The administrator's role is similar to that of an executor, but they are bound by intestacy laws, which dictate how an estate should be distributed when someone dies without a valid will.

The process for applying for letters of administration is similar to that of probate, however beneficiaries of the estate will need to be notified of the application. The affidavit in support of the application will also require some additional information, including details of the beneficiaries of the estate.  

Navigating these legal processes can be an overwhelming task in an already difficult time. Robinson + McGuinness are able to assist you with this process and offer fixed fees for preparing an application for probate or letters of administration. If you would like to discuss your situation and how we can assist you, please contact us today on (02) 6225 7040 by email info@rmfamilylaw.com.au or get started now online.

Author: Amy Davis