Winding up an estate: 11 steps to help get the job done

Winding up an estate: what’s involved

Acting as executor means you are responsible for finalising all the various legal obligations of the deceased. You also take ownership of the deceased’s estate and distribute the assets it contains to the beneficiaries in accordance with their Will.

Administering most estates is not as simple as organising the funeral and paying a few outstanding bills. You are also responsible for settling all the deceased’s outstanding tax obligations and lodging a tax return for the estate.

Finalising an estate can take anywhere from six months to several years depending on the complexity of the deceased’s affairs, the assets involved, the number of beneficiaries and whether there are competing claims.

Depending on the complexity of the deceased’s affairs, there are 11 basic steps executors need to work through to administer an estate:

Step 1: Organise the funeral (or memorial service)

The first step is to determine who has legal authority to make decisions about the deceased’s estate and to check whether or not the named executor is willing to take on the role. (If you don’t wish to act as executor, you need to formally withdraw from your appointment by writing a letter of renunciation and lodging it with the relevant probate office or supreme court.)

The executor is responsible for carrying out the wishes of the deceased in regard to the funeral, although they usually work with the deceased’s spouse or next of kin.

Step 2: Obtain the basic documents

If you’re executor, another important early task is locating the deceased’s Will. This is the key document governing the administration process and is a legal declaration of the deceased’s final wishes about disposal of their assets after death.

Where there is no Will, the deceased is said to have died ‘intestate’. When this happens, generally the next of kin or person with the major claim to the estate must apply to the supreme court in their state or territory for Letters of Administration. Once approved, they can take on the role of estate administrator. Laws of intestacy apply if there is no valid Will and the estate is usually distributed using a standard formula set out in state government law. 

Another important document to obtain is a death certificate for the deceased. Generally the funeral director will register the death with the state Office of Births, Deaths and Marriages, with a formal death certificate issued approximately three to four weeks later.

It’s essential to obtain the death certificate, as certified copies will be required by most organisations (such as banks, utilities and telcos) when you deal with them on behalf of the estate.

Step 3: Identify the estate assets

While you wait for the death certificate to be issued, the executor should access the deceased’s home to begin compiling a list of their assets and start valuing the total estate.

As executor you need to make a list of everything the deceased owned (such as their home, car, jewellery, bank accounts, shares and insurance), together with any entitlements (such as unpaid loans, a rental bond or part-ownership of a business).

If the deceased lived alone, it may be sensible to collect all the keys, as it’s important to ensure assets are not removed prior to the formal asset distribution. Potential beneficiaries may wish to take possessions now, but this may be illegal as valuation needs to take place to ensure assets are distributed in accordance with the Will.

It’s also important to notify banks of the death so they can freeze the deceased’s accounts and protect them from unnecessary charges and withdrawals. Most banks have online forms available for this purpose. Alternatively, you can use the Australian Government’s free service (the Australian Death Notification Service), which informs multiple organisations with a single online notification.

Once you have obtained the death certificate, most banks require formal notification you are acting as executor. You will need to provide certified copies of the death certificate and Will, and complete a personal identification check.

Step 4: Apply for probate

After formally notifying banks you are acting as executor, they will tell you what you must do to close the deceased’s account and transfer money to the estate.

If the account balance is over a certain amount (often around $20,000), the bank may require the executor to apply for legal authorisation – called probate – from the relevant state supreme court (see details below). Where probate is not required, the bank usually requests executors provide certified copies of the Will and death certificate and asks them to sign an indemnity form before releasing any money.

Joint accounts don’t need to apply for probate as the bank will help the remaining joint accountholder to take over sole ownership of the account.

Probate is the legal process of validating a deceased’s Will and giving the named executor legal authority to carry out the provisions in the Will. Documents conferring this authority are referred to as Grants of Representation. If there is a valid Will the executor applies for a Grant of Probate, but if there is no Will, as mentioned earlier you need to apply for Letters of Administration.

You need to apply to the relevant state supreme court and provide the original death certificate and personal identification to receive a Grant of Representation. Probate applications can take several months to process, depending on the current workload of the court.

Once you receive the Grant of Representation, you can apply to open an Estate of the Late account at a bank. This can be used to collect closing balances from the deceased’s bank accounts, together with proceeds from the sale of any assets (such as shares or real estate) needing to be sold for distribution to the beneficiaries.

Step 5: Pay outstanding bills

Executors are required pay any outstanding bills (such as utilities, rates or personal debts) on behalf of the deceased if the estate is solvent.

Banks generally release funds to pay funeral costs even if an account is frozen, but will require an invoice or receipt, death certificate and copy of the Will. Funeral and any estate administration expenses have priority when it comes to paying debts.

Outstanding credit card balances need to be paid to avoid interest charges. Any direct debits linked to the deceased’s bank accounts and credit cards should be cancelled.

Step 6: Prepare and sell assets

If the deceased owned assets (such as shares or real estate) that must be sold so the proceeds can be distributed to the beneficiaries, the executor is not legally permitted to sell them until they hold a Grant of Representation. Certified copies of the grant will be required by state land title offices and share registries to transfer asset titles.

If real property was owned by the deceased as a joint tenant (rather than tenants-in-common), the property automatically reverts to the other joint tenant.

Step 7: Claim any outstanding benefits and refunds

Once you have certified copies of the death certificate, you can cancel services or benefits provided to the deceased and claim any refunds on behalf of the estate. Subscriptions (such as media streaming services and newspaper or magazine deliveries) should be cancelled to avoid the estate paying unnecessary fees.

It’s also important to cancel any social media accounts held by the deceased.

If the deceased was a member of a club or trade union, or a public safety officer (such as a firefighter or police officer), the estate may be entitled to claim a death benefit. A small refund may also be available from the state government when cancelling the deceased’s Driver’s Licence.

You should notify the Australian Electoral Commission of the death to ensure the deceased’s name is removed from electoral rolls.

Step 8: Apply for super death benefits

A superannuation death benefit is not covered by the terms of the deceased’s Will, so while awaiting a Grant of Representation, the executor should identify any super accounts held by the deceased and notify the fund of the death.

If a death benefit nomination is in place, you should also inform the named beneficiary. When claiming a super death benefit, a certified copy of the death certificate will be required by the super fund.

Step 9: Apply for insurance benefits and refunds

Insurance benefits may form part of the estate so you need to check if the deceased held any policies and if a claim can be made. The total value of any claimable benefits needs to be added to the estate’s asset list so it can be distributed in accordance with the Will, apart from funeral insurance which will be paid directly to the funeral director.

Typical insurance policies to check for include health, income protection, home, contents, mortgage protection, car or other vehicles and pet insurance. Cancellation of these policies may provide refunds that must be added to the asset list.

Step 10: Notify the ATO and finalise tax obligations

The ATO needs to be notified when a taxpayer dies. While awaiting probate, you can unofficially notify the ATO and ask for tax correspondence to be paused by phoning 13 28 65. For more information, check the ATO website.

Once you have a formal Grant of Representation, you must complete an online death notification form to inform the ATO you are responsible for managing the estate. You also need to attend an interview appointment at an Australia Post branch and provide original or certified copies of the Will and Grant of Representation.

After submitting the documents, the ATO will supply you with a data package covering the deceased’s tax and super information for the previous three years. You can use this information when lodging the deceased’s Date of Death tax return, which covers any income the deceased received in the financial year from 1 July to their date of death.

Step 11: Finalise and distribute the estate

For tax purposes, income received by the deceased’s estate is treated separately from their pre-death personal income. Estate income is reported to the ATO in a trust tax return covering any income or capital gain received. To lodge a trust return, you need to apply for a separate Tax File Number (TFN) for the estate.

Generally, a trust tax return is required if the sale of any estate assets (such as property) resulted in a capital gain, or if the estate generated profits (such as bank interest, share dividends and business or managed fund investment income) over the tax-free threshold of $18,200. This tax can be paid immediately or set aside from the assets distributed to the beneficiaries.

In some states, before making the final asset distribution to beneficiaries, you are required to publish a Notice of Intent to Distribute. This provides a final opportunity for creditors – or anyone who believes they are entitled to an inheritance – to make a claim on the estate.

Once all the necessary steps have been completed, the executor finalises the estate by distributing the assets to the various beneficiaries and closing the Estate of the Late bank account.