Closing of Estate
It is important for a legal representative and estate trustee acting for an estate to do a proper closing. This is to prevent misunderstandings and future law suits by estate beneficiaries or creditors.
A proper discharge from the beneficiaries and creditors of the estate should be obtained before winding up the estate. The discharge should be in the form of signed receipts or acknowledgement by the beneficiaries and the creditors that their due shares or debt have been fully paid (or satisfied) and that they have no claims whatsoever.
Closing of Small Estate
The trustee or legal representative himself can prepare the accounts and appropriate the shares to each of the beneficiaries. The beneficiaries should be given a copy of the accounts, and should then acknowledge that the account is in good order. After the beneficiaries have been paid their respective shares, the trustee should seek a discharge from the beneficiaries, and ensure that they have no further claims whatsoever against the estate.
Closing of Large Estate
For a large estate with multiple asset classes (e.g. properties, controlling shares of companies etc.), the trustee or legal representative should seek professional accountants to draw up the accounts, so that there will be no complaints raised by interested parties that the accounts are not satisfactory, and the case will not be reopened. A proper account also helps to enforce certain contractual rights of the estate. A common contentious area is business succession. The surviving business partners might not be keen to exercise the buy-sell agreement, and might seek to liquidate the company the deceased had partially owned. A professionally done inventory of the estate can help to minimise any conflict in the estate settlement process.
A trustee is entitled to appoint agents to administer the estate, and the expense incurred in the appointment of such agents is provided for under the provisions of the Trustee Act. Proper discharge by the beneficiaries and creditors is very important for the legal representative or estate trustee.
Closing of Estate with Creditors
In the case of creditors, a proper discharge and receipt should be obtained from them. Even if the payment to the creditor is only a portion of what was liable to be paid, a receipt acknowledging the discharge and a declaration that there are no more rights or claims by the creditors against the estate will be sufficient to protect the trustee from any further claims from such creditors.
Point to pay attention to:
It is not uncommon for the estate to have contingency assets, for example, the estate could be a beneficiary of a life policy whereby the life assured is still alive. It is important for the trustee to make settlement plans for such situations before closing the estate and moving on.