28 Aug Common claims against Deceased Estates
Common claims against Deceased Estates
One of the duties of an executor/administrator of a deceased estate is to pay out valid claims against the deceased. The most common types of claims against a deceased estate are based around:
- Family provision claims (disputing inheritance amount)
- Contractual obligation (unpaid loans)
Family Provision claims – Inheritance Disputes
Family provision claims are becoming more and more common. In an attempt to stem the flow of bitter claims, the laws have been tightened in this area to only allow the closest family members contest and limited other blood relatives.
These changes included changes to when a claim can be made. For example, in determining the amounts to be made for an adult child, the Court must now have regard to the degree to which the person is not capable of providing adequately for their own maintenance and support. This additional requirement may serve to restrict the provision that can be obtained by an adult child who is already of reasonable means.
Although the laws have restricted who can claim and the requirements for them to claim, there are still plenty of claims in the Courts being made, which risks the deceased estate being diminished in having to defend such claims.
We recommend that when preparing your Will you consider who might want to contest your estate. We can then include provisions into your Will to discourage that person contesting, for example allowing them a small gift or bequest so they do not feel completely left out and providing reasons why they are not receiving more.
It is always best to speak to a lawyer before preparing your Will to reduce the risk of claims against your estate after you die.
In the event you are an executor of a Will, it is imperative that you urgently seek legal advice as soon as you become aware of any potential claims.
Contractual claims against estates – unpaid loans
Contractual obligations usually do not just end when a person passes away. A lot of contractual obligations flow on to the estate of the deceased and become the responsibility of the executor to pay from the estate.
Most people will sign a large number of contracts during their lifetime with that number continuing to increase every year.
The most common types of contract that can cause problems for a deceased estate are loan agreements ie car, joint holder of credit card or being guarantor of a loan. As society relies more heavily on borrowing money it is increasingly difficult for executors to be sure of what money is owed by the estate because of what loan agreements the deceased signed.
When bank accounts freeze after a person’s death upon the bank being aware, this causes direct deposits and After Pay payments to stop being taken from their account. The direct deposits should stop as soon as possible after death, to avoid the estate paying for services that can no longer be rendered or are no longer required. This also avoids the need for the executor to try to claw back any money paid to organisations.
However, payments such as After Pay repayments or mortgage payments are generally still required to continue after a person passes. Banks are generally reasonable in allowing an estate time to sort out plans on the mortgage before requiring payment, however they will continue to charge interest until they receive their money. After Pay and Zip might not be quite as accommodating. Although they generally are for small amounts borrowed, the time frame for applying for probate could cause these fees to be well and truly overdue by the time the executor can pay for them.
Other contractual obligations that often cause problems are verbal family agreements not based in writing and difficult to prove. We regularly hear of allegations from family or friends of the deceased that they loaned the deceased X amount of dollars. Unless that agreement is in writing or it is very common knowledge amongst all the other beneficiaries with proof it was not paid back, it is unlikely that such claims will be paid from the estate.
If you have a family loan agreement or any other agreement with family members that you want to repaid to your estate/beneficiaries after you pass away, it is always best to speak to a lawyer about including mention of this in your Will and also documenting the loan agreement.
It is always best practice to instruct a lawyer when preparing your Will and tell them of any liabilities that you currently have and any ongoing contractual obligations. We can help with identifying which obligations may impact on either the drafting of the Will and/or the subsequent administration of the estate. We can specify in the Will how certain debts and obligations are to be discharged and which funds or assets of the estate are to be used for such purpose. We can help you identify different measures you can take during your lifetime to address this aspect of estate planning.
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