Communicating the Inheritance & Preparing an Estate Distribution Letter to Beneficiaries

Now that you have nearly finalised the Deceased Estate for distribution, you may already have a good idea what assets and liabilities of the Deceased Estate will be transferred to which Beneficiary.

At this point in time, it will be a good idea to send Estate distribution letters to the Beneficiaries individually. If you don't know how to write a letter to the Beneficiaries of a Will and Estate, you may refer to a sample letter from Executor to Beneficiary to get a fair idea of how it should read and the information it must contain.

An Estate distribution letter is a crucial document in the Estate Administration process, as it plays a pivotal role in communicating the proposed distribution of the Estate, and provides transparency about the Estate administration among Beneficiaries.

In terms of content, an Estate distribution letter should include:

• the deceased's personal details;
• a detailed and complete list of all assets and liabilities;
• the Beneficiary names and the details of their respective inheritances;
• any details on debt settlement and creditor communication;
• an overview of the testamentary costs, taxes and other payments made from the Estate;
• a timeline for asset distribution; and
• contact information of the Executor or Administrator and legal representatives.

An estate distribution letter provides peace of mind that the Beneficiaries accept the proposed distribution per the wishes of the deceased in their Will or intestacy laws. It also offers clarity to Beneficiaries during a potentially emotional time.

To ensure you are able to draft effective letters to the Beneficiaries regarding the distribution of funds of the Estate, we recommend using our Estate Distribution Letter to Beneficiaries Template. Ensure you write a letter to each Beneficiary of the Estate.

If a Will is in place and the administration process thus far has been supported by family members and Beneficiaries, you should have a good idea of the eligible Beneficiaries, their particular inheritance and the total value.

If no Will is in place, you would have already determined the likely Beneficiaries and what their estimated inheritance percentage is in Step 13 – Determine the Beneficiaries using the simplyEstate Intestate Beneficiary Assessment Tool.

If claims were made against the Estate or there has been some hostility or animosity between family members and Beneficiaries, you should seek legal advice before making any commitments and stating specifics to individual Beneficiaries.

Note: Make sure not to overstate the inheritance at this stage if you are still unsure about the proposed distributions as you want to manage the Beneficiaries' expectations.

Even if you are unable to arrive at a final figure just yet, it is still worthwhile speaking with each Beneficiary or their legal guardian about the concept of inheritance and which assets and liabilities are available for distribution.

By speaking to each Beneficiary, you will get a good sense of whether they have a good understanding of finances and will be able to make good financial decisions.

Others who may not be so familiar with their options may not make equally good decisions and possibly make unreasonable and impulsive choices, such as:

• resigning from their jobs;
• increasing their spending unreasonably;
• buying real estate in a bad market;
• overcommitting themselves by increasing their debts; or
• wasting money on unimportant or ultimately valueless goods and services.

If you have any concerns about a Beneficiary's ability to make good financial decisions and the possibility of them putting themselves at a financial disadvantage, you can try to help by suggesting they seek appropriate advice.

Note: The decision to seek advice is ultimately up to each Beneficiary and not the Executor or Administrator.

There may be situations where one or multiple Beneficiaries have a strong sentiment towards a family home or other expensive assets.

If the decision was made not to sell those particular assets, Beneficiaries will need to be fully aware of the ongoing costs associated with servicing financial obligations and maintenance.

This is especially true with real estate that is still mortgaged or requires a new mortgage by a Beneficiary to pay out other parties. Therefore, the person inheriting the property (or any similar asset) should fully understand all aspects associated with property ownership, such as the following, to work out whether they can afford the inherited asset(s) and consider:

• the value of the mortgage associated with the inherited property;
• the minimum repayments of that mortgage and how those payments will change if interest rates increase during the life of the mortgage;
• the duration of those repayments;
• all other rates including council, water and strata levies (where applicable);
• costs of the ongoing maintenance of the property, etc.

If you did not seek tax advice about the Estate assets and liabilities for the most effective distribution in Step 28 – Inheritance Tax & Tax Effective Estate Distribution in Australia, you may want to do so.

If Beneficiaries are interested in seeking personal tax advice for their inheritance, you may share the tax specialist's contact details you used. If you did seek tax advice, you may want to share that with all Beneficiaries to help them get an understanding of the tax implications on the Estate.

simplyEstate works with select Trusted Partners across Australia, as listed to the right or below, who would happily help you and/or the Beneficiaries make the most informed decisions.

An inheritance, be that money or other assets, can be a valuable additional part of a Beneficiary's income stream or capital gains strategy, if done right.

If you think that a Beneficiary could benefit from investing some or all the inheritance money into an investment fund or other investment opportunities, you can suggest that the Beneficiaries speak with a financial planner.

If Beneficiaries are interested in seeking personal tax advice for their inheritance, you may share the contact details of the tax specialist you consulted. If you did seek tax advice, you may want to share that with all the Beneficiaries to help them get an understanding of the tax implications on the Estate.

Note: The decision to seek advice is ultimately up to each Beneficiary and not the Executor or Administrator.

Depending on the circumstances, you may find yourself in a difficult position where the Beneficiaries are pressuring you for an interim distribution of the Estate or want you to make the Estate distribution now. If this happens, make a point of reminding them of the following:

• As the Executor or Administrator authorised to administer the Deceased Estate, you oversee the process and determine when the Estate is ready to be distributed.
• Generally, you have up to 12 months from the date of death to administer an Estate without Beneficiaries being able to claim interest payments on the value of their inheritance.
• Deceased Estates should generally not be distributed within six months from the date of the Grant of Probate or Letters of Administration being issued by the Supreme Court due to possible claims against the Estate.

Interim Distribution of an Estate

In Australia, an interim distribution of an Estate refers to the partial distribution of assets from a deceased person's Estate before the full Estate Administration process is completed. It allows Beneficiaries to receive their entitlements (or a portion thereof) prior to the final settlement of the Estate. However, such interim distributions may be subject to specific circumstances and legal requirements.

In the following instances, an interim distribution may be allowed:

• Financial Hardship: If Beneficiaries are facing financial hardship and can demonstrate an urgent need for funds, the Court may permit an interim distribution to alleviate their immediate financial burdens.
• No Dispute or Outstanding Claims: Interim distributions are more likely to be allowed if there are no disputes among Beneficiaries, and all outstanding debts, taxes, and other claims against the Estate have been resolved.
• Executor's Discretion: The Executor may exercise their discretion to make interim distributions if they believe it is in the best interests of the Estate and Beneficiaries.
• Beneficiary Agreement: Beneficiaries unanimously agreeing to an interim distribution can be a determining factor, especially if it aligns with the deceased person's wishes.
• Court Approval: In complex cases or when disputes arise, the Court may grant approval for an interim distribution if it is deemed fair and reasonable.

Important considerations:

• Interim distributions must not deplete the Estate to the extent that it hinders the fulfilment of other obligations or remaining bequests.
• Careful accounting and record-keeping are essential to track interim distributions and ensure they are accounted for in the final Estate settlement.
• Executors must exercise caution to prevent any potential challenges or disputes by Beneficiaries who may feel their interests are jeopardised.

The interim distribution of an Estate is possible if the administration process is likely to extend beyond 12 months (e.g., there have been significant delays, or everything is completed except the tax return lodgement and assessment to be done after the financial year ends, which may be a few months away).

Note: It is absolutely crucial to keep back enough funds to cover the payment of taxes and any other known or unforeseen costs as clawing back inheritance that has already been paid out may not be possible, and the Executor or Administrator may need to pay from their personal funds.

You have been working diligently to reach this point and have come a long way. Request some more patience from the Beneficiaries and ask for their understanding. You should emphasise that you will be working through the final step and inform them when the distribution can be made.

We recommend not to provide a deadline if you are unsure how long the final step will take to manage expectations and avoid the same situation in a few weeks' time.

The final step may take longer if the deceased person died Intestate without a Will, as the distribution will need to be completed based on the legislation of the relevant state/territory.

As the Executor or Administrator, certain questions pertaining to the Beneficiaries of the Estate had to be considered: What information are Beneficiaries entitled to? Does an Executor have to show an accounting to Beneficiaries in Australia? What happens to Executors delaying distribution? What are the rights of Beneficiaries of a Will and Estate in Western Australia and other states or territories?

In Estate law, Beneficiaries are individuals or entities named in a Will or determined by intestacy laws to receive assets or benefits from a deceased person's Estate. Beneficiaries possess several rights to ensure their interests are protected during the Estate Administration process.

In your role as Executor or Administrator, understanding these rights is essential to help you navigate the complex world of Estate law effectively. Here are the key rights of Beneficiaries:

• Right to Receive Notice: Beneficiaries have the right to be informed of their status as Beneficiaries and of the contents of the Will or Estate plan. They should receive formal notice when the deceased person's Will is admitted to Probate or when Letters of Administration are granted in intestate cases.
• Right to Be Informed: Beneficiaries have the right to be kept informed about the progress of the Estate Administration, including updates on asset valuations, debts, and liabilities.
• Right to Challenge the Will: Beneficiaries have the right to challenge the validity of the Will if they believe it does not accurately represent the deceased's wishes, was made under undue influence, or lacks legal formalities.
• Right to Contest the Estate: If a Beneficiary is dissatisfied with their inheritance or believes they have not been adequately provided for, they have the right to contest the Estate under certain circumstances, such as financial need or dependency on the deceased. A claim can be lodged within a certain period (mostly six months) of the date the Grant of Probate or Letters of Administration, or the date of death. If the claimant is unable to do so within this timeframe, some state legislation allows to apply for an extension so long as the application is lodged within that specified period.
• Right to Information on Assets and Liabilities: Beneficiaries entitled to a portion or all of the residuary Estate are entitled to detailed information about the assets and liabilities of the Estate, including property, investments, bank accounts, and outstanding debts.
• Right to Prompt Distribution: Once Estate Administration is complete, Beneficiaries have the right to receive their share of the Estate promptly, provided there are no legal disputes or delays.
• Right to Fair and Equal Treatment: Beneficiaries are entitled to fair and equal treatment under the law. Discrimination or favouritism in the distribution of assets is generally not permitted.
• Right to Seek Legal Counsel: Beneficiaries can seek legal advice to protect their interests, especially if they suspect any mismanagement of the Estate, breaches of fiduciary duty by the Executor, or other irregularities. It is important to remember that any legal disputes or enquiries against the Estate may incur legal fees by the Estate to respond, reducing everyone's inheritance.
• Right to Inspect Estate Records: Beneficiaries entitled to a part or all of the residuary Estate have the right to inspect and review Estate records, including financial statements, receipts, and transaction documents, to ensure transparency and accountability.
• Right to Disclaim an Inheritance: In some cases, Beneficiaries may choose to disclaim or renounce their inheritance, transferring their entitlement to another Beneficiary.
• Right to Be Notified of Litigation: If the Estate becomes involved in legal proceedings, Beneficiaries have the right to be informed about the litigation and its potential impact on their inheritance.
• Right to Request a Family Provision Order: If they have been left out of the Will or inadequately provided for, certain eligible Beneficiaries may have the right to request a family provision order to receive a fair share of the Estate.

Understanding these rights is essential for you to ensure the rights and interests of the Beneficiaries are protected and that the Estate Administration process is carried out fairly and in accordance with the law. Consulting with a qualified Estate lawyer can provide you valuable guidance and representation when needed.