Distributing the estate before 12 months from the Date of Death
Understanding the 12-month rule, the risks of early distribution, and how to protect yourself as an executor in NSW
There is often a lot of pressure on Executors to distribute the estate quickly and beneficiaries often do not understand why it is taking so long. But there is a good reason why Executors do not rush to distribute the estate.
In NSW, Executors have the “executor year” to administer the estate and be in a position to distribute around 1 year from the date of death. The beneficiary can not force distribution to occur before this time and it is normal for Executors to wait at least 12 months before they will distribute any funds to beneficiaries.
In NSW, “eligible person” pursuant to section 57 on the Succession Act 2006 (NSW) have 12 months from the date of death to make a claim on the estate. Additionally, creditors or persons owed money by the estate also have 12 months to contact the estate and seek payment.
Therefore, if an executor distributes the estate before 12 months, they may risk being personally liable to any “eligible person” or creditor. Many executors therefore elect not to distribute the estate until the 12 months mark, or will only do small interim distributions during this period.
If you are an executor and want to distribute the estate before 12 months from the date of death, then you can minimise your personal liability by instructing the estate Solicitors to publish a Notice of Intended Distribution and have the beneficiaries sign an indemnity document.
What is a Notice of Intended Distribution?
It is essentially a “last warning” to any creditor or person who might wish to make a claim that you are about to distribute the estate and if they wish to notify you of a debt or make a claim -they need to notify us within 30 days of the date on the notice.
If a person makes a claim on the estate after you have distributed the estate after the 30 days, then they are unlikely to have a successful claim on you as executors.
If you do not publish the notice and distribute the estate, and then a person makes a claim on the estate or says the estate owes them money; then you are executors can be personally liable for same.
This notice is not mandatory, but recommended if:-
- You are distributing the estate before 12 months from the date of death; and/or
- If there is some conflict or if a claim/ contest of the Will might be possible; and/or
- If we are unsure about possible creditors or debts.
For further details on these notices, visit the official NSW Supreme Court website.