Insolvent estates

Contributed by Maree van der Kwast and current to 1 September 2005

If the deceased had more debts than assets it is necessary to deal with the estate in a different way from the normal administration. The estate is then administered, so far as payment of debts is concerned, in the same manner as the estate of a person declared bankrupt. Alternatively, the estate may be made bankrupt (in the same manner as a living debtor would be: see BANKRUPTCY ) and the estate is administered by a trustee in bankruptcy. In this case the executor or administrator does not play any part in the administration of the estate.

One asset that is always preserved for the executor (or administrator) to distribute in accordance with the will (or intestacy) is the proceeds of any life insurance policies of the deceased, regardless of debts (s.205 Life Insurance Act 1995 (Cth)).

HOW MUCH WILL IT COST TO ADMINISTER AN ESTATE?

The main source of expense in administering a deceased estate is legal fees or trustee companies’ fees.

Lawyers

The legal fees involved in the administration of an estate will vary according to the amount of work required to be done. This in turn will depend upon the nature and number of assets and to some extent the terms of the will. The size of the fee is calculated on the basis of the size of the estate.

Public Trustee

The Public Trustee is a statutory corporation with the power to administer deceased estates. Although it performs various statutory functions it charges for work done in performing the function of executor for its clients. The current fee schedule for administration of deceased estates can be found at the website of the Department of Justice (www.justice.wa.gov.au).

In some cases the Public Trustee’s fees can be lower than the fees of private lawyers and other trustee companies. It will depend on the value of the estate and the amount of work involved. In other cases it may be higher. One service provided by the Public Trustee is the drafting of wills free of charge. They will do this as long as the Public Trustee is appointed as Executor. The Public Trustee will then charge a percentage of the estate to administer it.

A booklet containing information about the Public Trustee which includes its services, functions and charges is available from the office of the Public Trustee and on the Department of Justice website. There are a number of private trustee companies. Details of these companies can be found in the yellow pages.