A common question asked in relation to deceased estates is whether an executor can make an interim distribution of the estate assets to the beneficiaries.
What is an interim distribution?
An interim distribution is not a final, but rather a provisional or interim payment, to a beneficiary – usually because of an urgent need or if an estate is complex and there are delays in the administration.
The interim distribution does not exceed the beneficiary’s final entitlement. As a general rule, it is accounted for in the settling of the final accounts.
An executor is not precluded from making an interim distribution – even where there are some administrative duties yet to be performed.
However, careful consideration of the possible risks and rewards of early distribution of the estate must be made by the executor prior to any distribution.
Caution when making interim distributions
There are a number of factors to be considered before an executor can determine to make an interim distribution.
1. Keeping in mind an executor’s duties
Beneficiaries are, understandably, always eager to receive their interest in the estate and executors are eager to finalise their duties as quickly and efficiently as possible.
However, where an interim distribution is contemplated, an executor should be cautious as to not jeopardise their executor’s duties.
Of those duties, is the duty to distribute the estate “as soon as may be”. It does not follow though that the duty only arises once the administration is complete.
Therefore, in real terms, if any interim distribution to the beneficiaries carries no risk to the administration of the estate, the executor may consider making an interim distribution.
2. Account of all assets and liabilities of the estate
Keeping in mind an executor’s other duties, an executor should only determine to make an interim distribution if they are certain that the estate will have sufficient funds to cover:
- all pecuniary legacies;
- all outstanding liabilities (including tax and superannuation tax liabilities); and
- the final distribution of the balance of the estate.
An executor who distributes the estate early, can be held personally liable for shortfalls that result from early distribution.
Therefore, an executor must weigh up all the circumstances of the estate as a whole, before determining to make an interim distribution.
3. Risk of a claim against the estate – time limits to consider
An executor must also consider whether there are any claims foreshadowed against an estate before paying out any funds.
In Queensland, an executor should not make any distributions (of any nature) to any of the beneficiaries before 6 months from the date of death.
If an executor makes a distribution before 6 months from the date of death has passed, and a claim is subsequently made against the estate, the executor risks being held personally liable if the claim is successful.
Furthermore, as a general rule, if a claim is foreshadowed or has been made against an estate, an executor should not make any distributions until such time as the claim is withdrawn or resolved.
Communication and consent is key
In order to avoid disgruntled beneficiaries, the best approach would be for the executor to formally communicate any proposed interim distribution to all beneficiaries of the estate and to obtain their written consent.
If there is an interim distribution made, it ought to be equal across all parties involved.
If you have any queries on the distribution of an estate, or need advice surrounding making an interim distribution, please feel free to contact us for advice.
The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, Wills, Estates and Probate Lawyers (WEP Lawyers) cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. WEP Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. WEP Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.