Distribution of the Assets of a Deceased Person’s Estate
An administrator or executor has 2 roles. One is the role as a personal representative of the estate; the other is that of a trustee. Both roles are distinct. A personal representative’s duty is to call in the assets of the deceased, pay off his debts and other liabilities, settle funeral and testamentary expenses and hold the distributable assets of the estate.
A trustee’s role is to hold and distribute the assets of the estate to the beneficiaries according to the terms of the will or the Intestate Succession Act. There are factors to be considered before the distribution of a deceased person’s estate.
Understand the Provisions of the Will before Distribution
If there is a will, the trustee has to fully understand the provisions of the will before he commences distribution. There may be certain clauses or qualifications before a beneficiary may enjoy the gifts set out in the will. For example, proceeds from a life policy XYZ are to be placed in a trust fund for 15 years when beneficiary (A) becomes an adult.
The trustee has to pay careful attention to what funds the debts of the estate are to be paid from. Where there’s no specific provision set out in the will, the Second Schedule of the Probate and Administration Act on this point will apply. The schedule provides for the order of application of assets in the case of a solvent estate.
Determine the Lawful Beneficiaries
If there is a will, the trustee has to establish the identity and relationship of the beneficiaries (set out in the will) based on legal proof (like identity card, birth certificate, marriage certificate, passport etc.).
If in the case of intestacy, the trustee has to seek guidance according to the Intestate Succession Act. The proving of relationships in an intestate situation is very important. This is because certain relationships (like those involving co-habitation and step-children) have no legal standing under the Intestate Succession Act. In the case of Muslims, a legally adopted child also has no legal standing under Faraid.
If a couple is going through separation, the surviving spouse is still considered as spouse with considerable intestacy legal standing.
Need for Advertisements
The Trustee Act provides that the trustee may advertise inviting claims against the deceased person’s estate. This is usually done in government gazette or in the leading newspapers setting out the particulars of the estate and asking whoever is owed money by the estate to submit his claims.
Holding the Balance between Income and Capital
Depending on the provision of the will, there will be times when the testator directs that the income from an asset be given to beneficiary (A) for certain years, before it is passed to beneficiary (B). In this “implied trust” situation, the trustee has the responsibility to ensure that the subsequent beneficiaries who take the assets do not suffer adversely as a result of this holding.
Peter wanted to give Jane, his child, a landed property on his death through his will. Shortly before Peter’s death, the landed property was acquired by the state to develop an MRT line. Should the compensation given by the state on the landed property be given to Jane? The answer is no, unless there is a specific provision in the will providing for this contingency. This is a classic example of ademption.
Ademption is a term used in the law of wills to determine what happens when property bequeathed under a will is no longer in the testator’s estate at the time of the testator’s death.
Therefore, it is important to take the contingency of a gift being “adeemed” into consideration in the writing of a will, especially with regard to convertible bonds, stock options, landed property. This is because such gifts might undergo a change (in form) at the time of distribution, disadvantaging certain beneficiaries.
“Abatement” occurs when a provision has been made for a legacy in a will, but the fund from which this legacy is to be paid is insufficient.
In such situations, it is the duty of the trustee to provide for such a legacy from the funds that are available in the estate. This is where the provisions of the Second Schedule of the Probate and Administration Act will apply.
Assume Peter owes Michael $10,000. At the time of Peter’s death, the debt has still not been discharged. However, Peter had provided for a legacy of $10,000 to Michael. Can the provision of such a legacy be considered payment of the debt owed? This is where the doctrine of satisfaction arises. If the legacy reflects the amount actually owed, an inference can be drawn by the trustee that the legacy is in satisfaction of the debt owed to Michael. This means that Michael cannot claim that the debt has still not been settled, and therefore, in addition to the $10,000 legacy, the debt owed to him should be paid separately.
In conclusion, it is important for a trustee to exercise due diligence by observing the above points in distributing the estate to the rightful beneficiaries. Once a court order is obtained directing the trustee to act in a manner that the court has sanctioned, the trustee is freed from all liabilities. However, if there is any suppression of facts by the trustee that will hinder the court from arriving at a proper decision, the trustee will be held liable for breach of trust. He will have to make good whatever loss may be suffered by a beneficiary.