9. Small estates

Introduction

Assistance for small estates

  1. 9.1 The Commission has been asked to review and report on whether there are more efficient ways of dealing with small estates.
  2. 9.2 Small estates for which a grant of representation is sought have fewer assets from which to meet the costs of obtaining the grant and administering the estate. Consequently, the cost of professional representation or assistance may be a barrier to the proper administration of these estates.
  3. 9.3 However, although small estates are not always easy to administer, they are more likely to comprise simple assets that may be easily transferred and distributed. A non-professional personal representative may be able to apply for a grant of representation, or administer the estate without needing to apply for a grant.
  4. 9.4 There is no comprehensive suite of measures to assist in the administration of small estates, but Victorian law and practice provide a number of measures to assist personal representatives in either obtaining grants of representation at less cost or administering the estate informally.
  5. 9.5 Some measures support non-professional personal representatives who administer the estate themselves, including:
  • a small estates service, provided by the Probate Office of the Supreme Court, that assists individuals to apply for a grant of representation for a small estate that is valued at $50,000 or less1
  • legal protection for personal representatives of small estates who do not apply for a grant of representation but instead administer informally.2
  1. 9.6 There are also measures designed to encourage trustee companies to obtain grants of representation for small estates. These are:
  • expedited processes for trustee companies when obtaining grants of representation for small estates that are valued at $50,000 or less
  • a government subsidy provided to State Trustees to administer small estates.
  1. 9.7 The Commission has found that these measures operate without significant difficulty but are not well targeted, particularly those that apply only to estates that are valued at $50,000 or less.

The Commission’s approach

  1. 9.8 In this chapter, the Commission makes recommendations to redirect and strengthen the measures to facilitate the administration of small estates. The recommendations are intended to:
  • promote cheaper methods of administration
  • promote simpler methods of administration
  • increase access to good information to complement existing methods of administration
  • maximise accountability by encouraging searchable records
  • facilitate simple transactions that might appropriately be conducted informally
  • clarify and simplify the role of informal administrators
  • promote consistency of process between various mechanisms
  • promote the regular update of determinative figures.
  1. 9.9 Generally speaking, the Commission wishes to encourage applications for grants of representation in respect of small estates. Grants of representation lessen risk, clarify the role of the personal representative, and protect the interests of third parties by creating records within the Probate Office.
  2. 9.10 However, the administration of small estates should not be unnecessarily complicated. Where, in defined circumstances, less formal routes of administration are appropriate, they should be acknowledged and supported.

National Committee for Uniform Succession Laws

  1. 9.11 Although statutory provisions for small estates are relatively similar across jurisdictions, there is considerable disparity in the degree to which the available mechanisms are used.
  2. 9.12 This was recognised by the National Committee for Uniform Succession Laws, which was concerned to recommend change primarily to the statutory framework rather than to administrative and procedural mechanisms.
  3. 9.13 The National Committee identified four guiding principles in developing its recommendations concerning the administration of deceased estates.3 Two of these are of particular relevance to smaller estates: a focus on simplification of processes, and recognition of the extent of informal administration. Although the National Committee’s specific recommendations on small estates have been closely considered, it is these broader principles that have informed the Commission’s recommendations in this chapter.

Assistance in seeking a grant of representation

Small estates service—Victorian Supreme Court Probate Office

  1. 9.14 Instead of engaging a lawyer or a trustee company to apply for a grant of representation, the person entitled to a grant for a small estate has the option of seeking assistance from the small estates officer of the Supreme Court Probate Office.
  2. 9.15 Applicants living outside the Melbourne metropolitan area may make an application through the Registrar of their nearest Magistrates’ Court. Registrars of Magistrates’ Courts will facilitate the transfer of documents and fees to the Supreme Court Probate Office.4
  3. 9.16 Distinct from general guidance that might otherwise be given to applicants by staff of the Probate Office, this is effectively a legal aid service. The small estates officer will actively prepare and file documents on behalf of the applicant.5
  4. 9.17 The Registrar is not required to provide this assistance to all eligible estates. Applicants are encouraged to seek independent legal advice where necessary, and will be unable to use the service where the estate is legally complex or too large.6
  5. 9.18 The Administration and Probate Act provides that a ‘small estate’ for the purposes of access to this service is one in which a deceased person leaves property:
  • not exceeding $25,000, or
  • not exceeding $50,000, if the only people entitled to share in the distribution of property are the child(ren), partner and/or sole surviving parent of the deceased person.7

The most recent amendment to these ‘dual threshold’ figures was in 1995.8

  1. 9.19 An administration fee of $102.70 is charged for this service, as well as the standard grant application fee of $281.90.9
  2. 9.20 The number of grants made under this assisted process has steadily decreased over the last ten years, with 108 grants made in the 2001–02 financial year, compared with 48
    in the 2011–12 financial year.10

Retention of the service

  1. 9.21 The Registrar of Probates has expressed concern about the appropriateness of the Supreme Court Probate Office continuing to provide this service at all, particularly given potential conflict arising from the Probate Office effectively adjudicating on applications it has itself prepared.11
  2. 9.22 However, the Commission believes that the role of the Probate Office in providing a formal small estates service is an extremely important one. The service provides an essential alternative route for those not wishing to engage a solicitor or trustee company, or those unable to navigate the grants process without assistance.
  3. 9.23 The service saves the applicant the time they would otherwise have spent preparing a grant application. It also saves them the money they might otherwise have spent engaging a solicitor to prepare the application. It encourages those in control of small estates to obtain a full grant rather than choosing informal administration, potentially avoiding some of the risks of liability that may arise with the informal process.12
  4. 9.24 The vast majority of stakeholders consulted throughout the reference expressed a high degree of trust in, and satisfaction with, the assistance provided.13
  5. 9.25 Although the number of estates obtaining a grant through this service is low, this may be attributable to the fact that the dollar value limit on small estates is currently very low. Submissions noted that the low number of applications may also be attributable to a lack of knowledge of the service among members of the public.14
  6. 9.26 Given the high level of community support for the service, and the lack of an appropriate alternative for the specific clientele of the service, the small estates service provided by the Probate Office should be retained.

Raising the limit to $100,000

  1. 9.27 As well as recognising the importance of the small estates service, the Commission believes that the utility of the service could be significantly improved by its expansion.
  2. 9.28 In the consultation paper on small estates, the Commission asked whether the current figure determining the size of a small estate15 should be raised.16
  3. 9.29 The current $25,000/$50,000 figure was considered in almost all submissions to be too low,17 with Moores Legal describing it as an ‘impractically low’ limit that in fact delineates ‘very small estates’.18 As noted above, the limit has not been increased since 1995.
  4. 9.30 According to State Trustees (the body dealing most frequently with smaller-value estates) estates valued at up to $100,000 are unlikely to include real estate or be subject to a family provision claim, and therefore ‘rarely involve administrative complexity’.19
  5. 9.31 Suggestions in submissions for an appropriate alternative figure generally ranged from $80,00020 to $150,000.21 The Law Institute of Victoria preferred retaining a figure of $50,000.22

Indexation of figure

  1. 9.32 It is reasonable to assume that, in setting this limit, the legislature judged estates under the $25,000/$50,000 limit to be those in which distribution of assets would be relatively simple, and legal fees disproportionately onerous.
  2. 9.33 Estates are certainly getting larger, while the defining figure remains static. $50,000 in 1995 terms is equal to approximately $77,711.54 in 2012 terms.23 Estates valued at $50,000 in 2012 represent those that were valued at $32,170 in 1995. The disparity between the $50,000 limit in the Act and the real size of ‘small’ estates will continue to grow, and the service will be available to a diminishing number of estates.
  3. 9.34 In order to maintain an appropriate figure over time, it was suggested that any revised figure be indexed to reflect changes in the Consumer Price Index (CPI), to ensure that its utility is not lost over time, and that an appropriate range of estates has access to the service.24
  4. 9.35 As recommended in relation to the indexation of a deceased person’s partner’s statutory legacy on intestacy,25 the CPI number used should be the All Groups Consumer Price Index number.26 This number is indexed quarterly. The Commission considers that it would be of assistance to personal representatives if the quarterly CPI-adjusted eligibility threshold for estates able to access the small estates service were published on the Supreme Court of Victoria’s website.

Abolishing the dual threshold

  1. 9.36 The consultation paper on small estates also asked whether the dual threshold of figures—up to $25,000 generally or up to $50,000 where the only beneficiaries are the child(ren), partner and/or sole surviving parent of the deceased person—should be retained.27
  2. 9.37 Although there was support in some submissions for the concept of differentiating between family member beneficiaries and other, more remote beneficiaries,28 there was broader support for discarding the dual threshold, including from the Registrar of Probates.29
  3. 9.38 Victoria is the only jurisdiction with a dual threshold of this type. In the interests of clarity and national consistency, the Commission believes that the relevant amount delineating small estates should be a single figure.

Impact on the Probate Office

  1. 9.39 If the availability of the service were to be expanded, it is likely that the Probate Office would experience an increase in applications. This would potentially require the Supreme Court to channel more funding into the service in order to manage increased demand.
  2. 9.40 Given the importance of the service, the Commission believes that a reallocation of funds to ensure its continuance would be wholly appropriate.
  3. 9.41 Although catering for estates with higher values could mean that more complex estates would be eligible to use the service, the Registrar may well refer those estates into Court, or to a legal practitioner, as is currently the practice.30
  4. 9.42 The National Committee for Uniform Succession Laws did not make recommendations in this area. The Committee was of the opinion that each jurisdiction’s choice to provide such services would depend on resourcing and was not a matter for uniform legislation.31
  5. 9.43 The Commission is of the view that the figure that determines which estates are eligible to access the assistance of the Supreme Court Probate Office’s small estates service should be significantly raised. The figure should be a single value, not based on the identities of beneficiaries, and should be adjusted quarterly to reflect changes in the All Groups Consumer Price Index.

 

Recommendations

67 Section 71(1) of the Administration and Probate Act 1958 (Vic) should be replaced with a provision that:

68 The Supreme Court of Victoria should publish on its website the quarterly Consumer Price Index adjusted maximum values of estates in respect of which the Probate Office may provide assistance in applying for a grant of representation.

 

Providing better information

  1. 9.44 It has become clear to the Commission throughout the course of the reference that there is a lack of clearly presented good information available to the public in the area of succession laws.
  2. 9.45 In Chapter 7, the Commission recommends that the Victoria Law Foundation prepare practical information to assist the community generally, and lay executors and beneficiaries in particular, to understand the role of executors and the operation of succession laws.
  3. 9.46 To assist lay persons to apply for a grant of representation, the Commission has also identified the need for the information that is currently available to them to be collated into a comprehensive package.
  4. 9.47 People should be supported, where possible, in making their own applications for grants. Certainly, where estates are legally complex, good legal advice is crucial. However, the application for a grant of representation—an important but essentially administrative process—should be cost-effective and time-efficient, and ideally be navigable without formal legal assistance.
  5. 9.48 The Commission is of the view that improved public information on the administration of estates would have a significant positive effect on the ability of people to navigate the grant-application process. This would be a valuable supplement to the formal assistance provided by the Probate Office, and may well reduce reliance on the small estates service.

Current sources of information

  1. 9.49 A number of stakeholders have identified the difficulties faced by those who wish to seek a grant of administration without the assistance of a legal practitioner, the small estates officer of the Probate Office or a trustee company. The likely starting points for seeking information for such people include the Law Institute of Victoria, Victoria Legal Aid, the Supreme Court Probate Office and website, and community legal centres.
  2. 9.50 The Law Institute of Victoria provides a referral service that links people with suitably qualified private legal practitioners listed with the Law Institute of Victoria. This service includes a thirty-minute inquiry interview that is free of charge.32
  3. 9.51 Victoria Legal Aid operates a free legal advice phone service, but provides only very basic information on wills and probate. Victoria Legal Aid refers inquiries in this area either to the Law Institute of Victoria or to the Probate Office.33
  4. 9.52 The Federation of Community Legal Centres has informed the Commission that Victorian community legal centres rarely assist clients to obtain grants of probate. Their resources tend to be directed to assisting clients with pressing criminal and civil matters.
  5. 9.53 That said, community legal centres have reported that they field a large number of inquiries, both in person and over the phone, for this type of assistance. Some clients seek a community legal centre solicitor to take them through the process, while others are looking for resources and information to complete the process themselves.
  6. 9.54 A number of community legal centres refer inquiries to a commercially-available probate kit, which can be accessed online. This kit is sold at one community legal centre. Although such kits are intended to help people navigate the grants process without formal advice, the information provided is static, and cannot take particular details of each estate into account.
  7. 9.55 The Probate Office itself is unsurprisingly the first port of call for the majority of inquiries relating to obtaining a grant of representation. The Registrar has told the Commission that by far the most common inquiry to the Probate Office involves a named executor asking ‘what to do’.34
  8. 9.56 The Probate Office staff and website provide the information necessary to apply for a grant, including relevant forms and legislation. Although the information on the Probate Office website is complete, it is presented in a way that is difficult to navigate, with large amounts of information contained in a variety of areas.
  9. 9.57 Information and legislation are cross-referenced, without a clear guiding procedure set out for those seeking to apply for a grant. A potential applicant could easily be unsure whether they had completed all steps and collected all necessary documents. Nevertheless, the Probate Office plays a central role in helping applicants to fill in the gaps, providing guidance where necessary.
  10. 9.58 There are a number of options available for those who wish to engage legal assistance in obtaining a grant of representation. However, for those who wish to complete the process themselves, there is a need for an accurate and complete source of information.

Probate pack collated by Probate Office

  1. 9.59 The consultation paper on small estates asked whether the formal assistance provided by the small estates officer of the Probate Office could be replaced by clearer, more comprehensive Court-generated information.35
  2. 9.60 Submissions on this topic were in favour of the provision of better information by the Court, and noted that this should supplement the current formal assistance of the Probate Office, rather than replace it.36
  3. 9.61 A clearly presented package of information—a ‘probate pack’—is necessary. It should be a complete collection of information, insofar as this is possible when each estate will have individual characteristics, to reassure potential applicants that they have all the tools available to them to procure a grant. This includes information that indicates when legal advice should be sought, such as when the will is not clear or the estate is too complex for a non-professional representative to administer without assistance.
  4. 9.62 The pack should be downloadable from the Supreme Court website in a simple format that includes factsheets, checklists, forms and extracts of legislation. It should also be linked to the websites of relevant legal and social assistance organisations.
  5. 9.63 It is important that the pack be created with the oversight of (if not actively managed by) the Supreme Court. The reasons for this are to ensure accuracy of information, and avoid over-simplification of the required process.
  6. 9.64 The Registrar and Probate Office staff are highly experienced in this field. Court control over a probate pack would ensure that changes to the law and practice are regularly updated in the pack, and common mistakes, misunderstandings and questions frequently asked of the Probate Office could be included.
  7. 9.65 Court control over this information would reduce the likelihood of mistakes in applications and the need for further advice and involvement by Probate Office staff. The provision of fixed, collated information may also relieve Probate Office staff of the potentially conflicting role arising from adjudicating on applications made by the small estates officer.37
  8. 9.66 The Commission considers that the pack should be written and developed in consultation with Victoria Legal Aid, the Law Institute of Victoria, the Federation of Community Legal Centres, and other bodies with expertise in the area or in contact with members of the public to whom the information needs to be directed.
  9. 9.67 Design and production by an organisation with experience in presenting complex legal information clearly, such as the Victoria Law Foundation, would be desirable.38
  10. 9.68 Given the shortcomings of current information, and the clear need to assist people applying for grants in person, the creation of a probate pack would be a valuable addition to the resources currently available for small estates.

Recommendation

69 The Supreme Court of Victoria, in consultation with Victoria Legal Aid, the Law Institute of Victoria and the Federation of Community Legal Centres, should develop and make available on its website in community languages a package of information for those wishing to seek a grant of representation without professional assistance.

Informal administration

  1. 9.69 There is no statutory requirement to obtain a grant of representation after a death.39 In fact, where both a person’s death and the resulting entitlement of any claimant can be proved by other means, and depending on the type and value of the estate assets, there may be no real need to obtain a grant.
  2. 9.70 The Commission understands that a large proportion of deceased estates are administered informally. Although it is difficult to obtain precise figures in this area, a comparison of the number of deaths with the number of grants obtained through the Probate Office leaves a significant number of estates where no formal representation has been obtained.40
  3. 9.71 The assets of estates administered informally are either those which can be accessed without recourse to a grant (for example, goods), or those for which the asset-holder will accept other forms of authority, such as a death certificate (for example, low-value bank accounts).41 Significant assets may have passed by survivorship (for example, jointly-owned real estate).42 Depending on the types of assets involved, any estate may potentially be informally administered in whole or in part.
  4. 9.72 As less valuable assets are easier to deal with informally, the availability and ease of use of informal processes is particularly significant for smaller estates. The simplification of process and the avoidance of fees and charges associated with formal grants will also be of value to smaller estates and their beneficiaries.
  5. 9.73 The National Committee for Uniform Succession Laws was concerned to recognise the extent of informal administration. Given that the chapter in which it discusses its recommendations on this topic is headed ‘Mechanisms to facilitate administration and minimise the need to obtain a grant’,43 it is clear that the National Committee was generally working towards, rather than against, the protection and general support of informal administrators.
  6. 9.74 The Commission seeks to strike a balance between recognising the utility of informal administration in some situations and promoting formal administration by ensuring that a number of cheap and accessible options exist for obtaining a grant.
  7. 9.75 Submissions and consultations concerning current processes of informal administration did not identify significant problems. Consultees were generally of the view that most people would ‘have a go’ at administering informally, and would only seek a grant of representation where a bank or other asset-holder required one.44
  8. 9.76 For this reason, the recommendations in this area represent a clarification and strengthening of the existing protections available to those administering informally. They do not introduce significantly broader or different protections.

Clarifying the role of an informal administrator

  1. 9.77 Informal administrators may not see themselves as administrators or representatives of the estate, rather just as people trying to deal with the estate generally. It is important to clarify the extent of their rights and responsibilities.
  2. 9.78 Currently, those acting under a formal grant of representation are afforded a general protection for acts done in good faith in the administration of the estate.45
  3. 9.79 Informal administrators are, however, protected only to the extent that they correctly administer the estate. They are otherwise liable to be sued by any of the rightful personal representatives, creditors or beneficiaries for any property received by them or any loss to the estate arising from their actions.46 Such a situation might typically arise where a later will is discovered after the estate has been informally distributed, or where the debts of the estate were not fully paid before distribution.47
  4. 9.80 Although it is clear that there may be pragmatic reasons for an informal administrator to deal with estate assets, this can be problematic. For example, where an informal administrator seeks to pay debts of the estate by releasing funds from the estate to a creditor, an executor or administrator under a later grant of representation cannot recover that money from the creditor. The creditor is not required to enquire about the authority of the person purporting to act as the representative of the estate.48
  5. 9.81 Victoria is one of the few jurisdictions in which the legislation clearly deals with liability and protection of informal administrators. Section 33(1) of the Administration and Probate Act provides:

33 Liability of person fraudulently obtaining or retaining estate of deceased

(1) If any person, to the defrauding of creditors or without full valuable consideration, obtains receives or holds the estate or any part of the estate of a deceased person or effects the release of any debt or liability due to the estate of the deceased, he shall be charged as executor in his own wrong to the extent of the estate received or coming to his hands, or the debt or liability released, after deducting any payment made by him which might properly be made by a personal representative.

  1. 9.82 The effect of this provision is to clarify the extent to which a person acting without a grant is liable to account for the estate assets that they have dealt with. It makes clear that they are effectively protected when they make payments which would have been legitimate had they had a grant of representation. As such, this provision provides significant protection to informal administrators.

National Committee for Uniform Succession Laws

  1. 9.83 The National Committee recommended a model provision that reads almost identically to the Victorian provision, section 33(1). As noted above, the Victorian section is headed ‘Liability of person fraudulently obtaining or retaining estate of deceased’, and sets out the liability an unauthorised person is exposed to in informally administering an estate.49
  2. 9.84 However, this section also outlines limits to liability, and legitimises payments ‘which might properly be made by a [legal] personal representative’. The National Committee recommended that the model section be headed ‘persons acting informally’, to reframe the focus of the provision and to recognise the increasingly common role played by informal administrators:

Persons acting informally

(1) This section applies if a person who does not hold a grant of representation of a deceased person’s estate—

(a) obtains, receives or holds the estate other than for full and valuable consideration;

or

(b) effects the release of any debt payable to the estate.

(2) The person is liable to account for estate assets to the extent of—

(a) the estate obtained, received or held by the person; or

(b) the debt released.

(3) However, the person’s liability is reduced to the extent of any payment made by the person that might properly be made by a personal representative to whom a grant of representation of the estate is made.50

  1. 9.85 The model provision is drafted more simply and with a more accessible layout than the Victorian equivalent. This is very important in a section that sets out to define for informal administrators, who may not have legal training, the limits of their liability.51
  2. 9.86 The Commission’s consultation paper on small estates asked whether this change would be appropriate.52 Moores Legal agreed that:

… although the overall effect of the amendment would perhaps be equivocal, it would assist by changing the focus away from a liability approach to a protection approach… the reworded section would allow informal administrators to feel that their role and actions are legitimised.53

  1. 9.87 Other submissions called for a redrafted, simplified section, noting that this would allow informal administrators to readily understand their potential liability and its limits.54
    The Commission agrees and thus recommends that the provision outlining the liability of informal administrators be redrafted along the lines of the National Committee’s model provision.

Recommendation

70 Section 33(1) of the Administration and Probate Act 1958(Vic) should be redrafted in the simpler form reflected in the National Committee’s model provision dealing with persons acting informally.

 

Access to indemnities for parties releasing funds

  1. 9.88 While it is possible for a third party to transfer funds to which the deceased would have been entitled to someone informally administering the estate, there is an inherent risk in doing so. The third party could be exposed to liability where payments are made incorrectly or a grant of representation is later taken out by another person.
  2. 9.89 Accordingly, the third party normally requires evidence from the person requesting transfer of the asset that the request is legitimately made, and that the requester is entitled. Where the evidence is less than a full grant of representation, the third party will want to limit its exposure to risk by requiring from the requester a discharge of liability.
  3. 9.90 An executor or administrator acting under a grant of representation is able to give a discharge of liability by virtue of acting under the grant,55 while someone administering informally is generally not able to do so.56 However, some jurisdictions have enacted provisions that allow for discharge of liability in limited circumstances.57
  4. 9.91 In Victoria, section 32(2) of the Administration and Probate Act provides that a receipt from the informal administrator will constitute a discharge of liability in the circumstances referred to:

A receipt signed by any person above the age of sixteen years to whom money or property is paid or transferred by an employer in the bona fide exercise of the powers conferred by this section shall be a complete discharge to the employer of all liability in respect of moneys or property so paid or transferred.

  1. 9.92 This automatic discharge of liability only operates where, without a grant of representation, an employer transfers wages that are owed to a deceased employee to the partner or child of the employee, or to another person entitled to the wages. Under the provision, the net estate cannot exceed $25,000, and the payment made is limited to wages not exceeding $12,500.58

National Committee for Uniform Succession Laws

  1. 9.93 Although the Victorian provision assists employers in making informal payments, others who hold funds cannot use section 32 of the Administration and Probate Act and do not get the benefit of the protection it provides.
  2. 9.94 A submission to the National Committee for Uniform Succession Laws on this topic said that ‘it [is] a matter of particular concern that the current legislation forces what could be a satisfactory informal administration down the official path solely because the administrator cannot obtain an asset’.59
  3. 9.95 The National Committee recommended that a broader provision of more general application, based on section 32 of the Administration and Probate Act, was desirable, and drafted the following model provision:60

Protection for limited payments made without production of a grant of representation

(1) This section applies if a person holds money or personal property for a deceased person of not more than $15,000 in value.

(2) The person may, without requiring production of a grant of representation, pay the money or transfer the property to any of the following persons having full legal capacity—

(a) the surviving spouse [or domestic partner] of the deceased person;

(b) a child of the deceased person; or

(c) another person who appears to be entitled to the money or personal property.61

(3) A payment of money or transfer of personal property under subsection (2), if made in good faith, is a complete discharge to the person of all liability for the money and personal property.

Increasing limit on funds held and removing limit on the size of the estate

  1. 9.96 The South Australian equivalent to section 32 of the Victorian Administration and Probate Act extends to money of deceased patients held by public hospitals, but is limited to sums of under $2000.62 South Australia and Western Australia also have specific provisions allowing banks to be discharged from liability for the payment of smaller amounts, under $2000 and $50,000 respectively.63
  2. 9.97 The $15,000 limit in the model provision reflected the National Committee’s view that most jurisdictions’ limits of around $5000 were far too low.64 Although Victoria’s section 32 is used as the model, the $12,500 payment limit in the Victorian provision was described as a ‘significant restriction’ on the provision’s utility.65
  3. 9.98 Section 69AA of the Banking Act 1959 (Cth) provides for release of funds, without production of the will or a grant of representation, of up to $15,000 in certain circumstances. It prescribes that no action lies against a bank for acting or failing to act under the section.66
  4. 9.99 Another difference between the existing provisions and the National Committee’s proposal is that the model provision provides a cap on the amount held by each person, rather than the maximum payment that can be paid out, as is the case under the Victorian section. This change avoids much larger sums being paid out in a number of smaller instalments. It also means that these informal procedures are available to all estates, and are not necessarily limited to small estates.
  5. 9.100 The model provision would remove the current stipulation that the payer must be satisfied that the total estate did not exceed a specified limit, such as the $25,000 limit in the Victorian provision. The National Committee was of the opinion that the value of the money actually held by the payer is a sufficient limitation, and that the payer should not need to ascertain the estate’s value, as this may well discourage them from releasing the funds. Removing this requirement means that the focus is on ensuring simple transactions can take place smoothly, regardless of the size of the estate.
  6. 9.101 The National Committee report which recommended a $15,000 limit was released in 2009. The Commission is of the view that this figure should be raised, in acknowledgement of the time between the National Committee’s work and the potential implementation of the recommendations contained in this report.
  7. 9.102 The Commission is of the view that the $15,000 limit could usefully be raised to funds or property up to the value of $25,000.

Expansion of section 32 to anyone holding funds

  1. 9.103 As noted above, section 32 of the Administration and Probate Act deals only with employers holding money on behalf of deceased employees.
  2. 9.104 The National Committee rejected any arbitrary limitation on the categories of persons who might take advantage of the protections afforded by the provision, recommending that anyoneholding money or personal property of the deceased person should be able to receive an indemnity upon its release.67
  3. 9.105 Submissions in response to the Commission’s consultation paper on small estates did not specifically address the extension of the provision to include payers other than employers, however the general support for expansion of the scope of the provision in line with the National Committee suggests that this too is supported.
  4. 9.106 Those holding funds or personal property could include financial institutions, hospitals, schools, employers and clubs, among others. Aside from banks, these bodies do not otherwise have clear legislative guidance for the release of these funds.
  5. 9.107 Importantly, neither the model provision nor the existing section 32 prevents anyone from making payments of anyamount to informal administrators. However, anyone transferring more than the amount set out will not be able to obtain a discharge of liability under the section.
  6. 9.108 The majority of submissions supported the expansion of section 32 in line with the proposed model provision.68 The form of the provision was described as ‘clear, concise and helpful’,69 and there was support for raising the dollar value for funds that may be released.70 

Recommendations

71 Drawing on model legislation proposed by the National Committee for Uniform Succession Laws, section 32 of the Administration and Probate Act 1958 (Vic) should be amended to:

72 The Supreme Court of Victoria should publish on its website the quarterly Consumer Price Index adjusted limit for the purposes of section 32 of the Administration and Probate Act 1958 (Vic).

 

Removing costs barriers to formal administration

Introducing a sliding scale for grant application fees

  1. 9.109 The application fee for a standard grant of representation is currently $281.90.71 A reduced fee of $110.30 is charged where estates are valued under $1000. Although a significant reduction in dollar value, this figure still represents over 10 per cent of any such estate.
  2. 9.110 In contrast, New South Wales applies a sliding scale to the cost of the grant application, depending on the value of the estate. Estates under $100,000 pay no fee, and those between $100,000 and $250,000 pay $650. There are several increments, the highest being for those estates over $5 million, which attract a $5,000 fee.72
  3. 9.111 The Commission’s consultation paper on small estates asked whether the introduction of a sliding scale would encourage people to seek grants of representation for smaller estates.73
  4. 9.112 Some stakeholders considered that a lack of community understanding of the importance of and protections provided by a grant, rather than the applicable fees, was more relevant to the decision whether or not to seek a grant.74
  5. 9.113 It was noted that, for uncomplicated estates, representatives will first seek to administer informally, and will only apply for a grant where they are unable to negotiate the release of an asset without one.75
  6. 9.114 However, while it may not necessarily be a decisive factor, the removal of any fee should encourage personal representatives of small estates to apply for a grant.
  7. 9.115 One submission expressed the view that a nil fee would be a strong incentive for people to seek grants, provided that they were aware of the benefits of so doing. It was also noted that the creation of court records is beneficial for third parties who wish to search for information about the estate’s administration.76
  8. 9.116 In his report to the Court at the end of his tenure, the former Registrar of Probates advocated the introduction of a sliding scale fee in Victoria.77
  9. 9.117 The Commission is of the view that, in line with the discussion and recommendations on the value threshold for estates seeking assistance from the small estates service, it would be appropriate for the first (no fee) bracket to apply to those estates valued at $100,000 or less.78
  10. 9.118 The Commission notes that the power of the Governor in Council to make regulations stipulating fees includes the power to make provision for fees that vary ‘according to value or time or class of matter’, and that it is not necessary for the amount of any fee to be related to the cost of providing the service.79
  11. 9.119 The introduction of a sliding fee scale in the Supreme Court Probate Office would provide consistency across a number of small estates-related mechanisms, as well as provide an incentive for seeking grants.

Recommendation

73 The applicable fee for obtaining a grant of probate or letters of administration in the Supreme Court Probate Office should be based on the estate’s value, in a sliding scale, with estates valued at no more than $100,000 attracting a nil fee.

 

Administration by statutory declaration

  1. 9.120 It was suggested to the Commission that an alternative process of administration by statutory declaration would be a worthwhile addition to the existing mechanisms designed to facilitate the administration of small estates.80
  2. 9.121 In response to the consultation paper on small estates, some submissions supported the introduction of such a scheme on the basis that it may provide increased confidence for parties releasing funds and a level of certainty for the declarant.81
  3. 9.122 However, a number of submissions expressed the view that a new mechanism along these lines would add little to the options currently available, because there are enough forms of administration available and the probable uses of such a mechanism are already covered by informal administration, which works well in suitable estates.82 One submission expressed concern that administration of small estates should not be ‘made too easy’, as dishonesty could be encouraged.83
  4. 9.123 The Commission does not favour the introduction of a process of administration by statutory declaration. The recommended sliding scale of fees will make obtaining a formal grant far more accessible.84 In other cases, the expansion of protections associated with informal administration recommended by the Commission will make that process more accessible.85

Expedited grants

  1. 9.124 A trustee company that is appointed as the personal representative of a small estate has access to expedited grant processes that reduce the time and cost of obtaining a grant of representation. Two forms of expedited grant have been established by legislation:
  • a process for election to administer, provided by section 11A of the Trustee Companies Act 1984 (Vic), which is available both to private trustee companies and State Trustees
  • a process for administration without a grant, set out at section 79 of the Administration and Probate Act, which is available only to State Trustees.86
  1. 9.125 The fee to file an election to administer is currently $186.70, compared to the $281.90 commencement filing fee for a standard grant of representation.87 The cost of administering under the section 79 process is limited to the cost of the requisite advertisement, discussed below.

Elections to administer—section 11A of the Trustee Companies Act

  1. 9.126 The election to administer process allows a trustee company to obtain a grant of representation by filing an election in the prescribed form, the will, and an inventory of assets at the Probate Office and by advertising its intention to file the election to administer the estate.88
  2. 9.127 Section 11A of the Trustee Companies Act also establishes the following pre-conditions to filing:
  • the estimated gross value of the estate must not exceed $50,000
  • the trustee company must otherwise be entitled to a grant of representation
  • there cannot be another grant, or any caveat in force against any application for
    a grant, in respect of the estate.89
  1. 9.128 The company must publish notice of its intention to file an election to administer in a daily newspaper at least 14 days before filing. It must then publish notice of the election within one month after filing. This notice after filing is conclusive evidence that the company is entitled to administer the estate.90
  2. 9.129 If the value of the estate is later found to exceed a threshold of $60,000, which operates as a safety net beyond the $50,000 limit, the company must revoke the election to administer and seek a standard grant of representation in relation to the estate.91
  3. 9.130 The Court may revoke an election to administer where it ‘sees fit to grant an application by any other person’, or where a will is subsequently found for a person who was believed to have died intestate.92

Small estates administration without a grant—section 79 of the Administration and Probate Act

  1. 9.131 Under section 79 of the Administration and Probate Act, State Trustees may employ a simpler process in relation to estates designated as small estates—those below $25,000 (or $50,000 depending on the relationship of the beneficiaries to the deceased).93
  2. 9.132 For the authority to administer to be validly obtained, State Trustees must otherwise be eligible to apply for a grant of representation94 or to elect to administer under section 11A of the Trustee Companies Act.95
  3. 9.133 Under this process, State Trustees is not required to file anything with the Court. However, it must give notice of its intention to administer by advertising in a daily newspaper. Fourteen days after the advertisement is published, State Trustees will be taken to have been granted representation. State Trustees may then proceed as if it had a grant of representation in relation to that estate.96

Use of the mechanisms

  1. 9.134 Section 11A was introduced into the Trustee Companies Act to provide trustee companies with access to a similar mechanism to the small estates administration process available
    to State Trustees under section 79 of the Administration and Probate Act.
  2. 9.135 However, the election to administer process is rarely used. Despite the high number of estates that would fall within the threshold for election to administer, the Registrar of Probates has informed the Commission that there have been only two elections to administer filed since the provision’s introduction.97 Reasons for this are:
  • Private trustee companies have no commercial interest in administering estates of such a small size.
  • State Trustees prefers the simpler and cheaper process open to it under section 79 of the Administration and Probate Act
  1. 9.136 Figures provided to the Commission by State Trustees suggest that the section 79 grants process is frequently used.98

Procedural integrity

  1. 9.137 Both of these mechanisms have been criticised by the Registrar of Probates as lacking in procedural integrity. The Registrar’s main criticisms of the process under section 79 of the Administration and Probate Act are:
  • There is no requirement to file a will or inventory, meaning that there is no Probate Office scrutiny or record of which estates are being administered under this process.99
  • There is no requirement to search for caveats, deposited wills or prior applications, which increases the risk that a will may be overlooked, or that a grant could be made twice in relation to one estate.
  • There is no record of the administration within the Probate Office, with the result
    that the completeness and integrity of the Court’s online search system is brought into question.
  1. 9.138 These criticisms recognise that the public has an interest in comprehensive court records being generated in relation to estate administration, not only as potential beneficiaries or family provision claimants, but also as potential creditors or alternate personal representatives of the estate.
  2. 9.139 While noting that the accompanying process for elections to administer under section 11A of the Trustee Companies Act is more robust than the process under section 79 of the Administration and Probate Act, the Registrar is of the view that any perceived benefits of the expedited grants processes are far outweighed by the above shortcomings.100

The role of State Trustees

  1. 9.140 The value of the estates administered by State Trustees is often very low. State Trustees estimates that a quarter of the estates administered under section 79 of the Administration and Probate Act are valued at $10,000 or less101 and that the cost of administering them is higher than the amount that could be collected in commission and fees. State Trustees receives a subsidy to ensure that a form of regulated administration remains available for smaller estates.
  2. 9.141 Under its community services agreement with the Department of Human Services, State Trustees receives funding from the government to ensure that members of the public have access to services relating to managing and administering their estates and property. This relates not only to deceased estates, but also to trust administration and guardianship services.102
  3. 9.142 The Victorian Civil and Administrative Tribunal frequently appoints State Trustees as administrator of homeless, disadvantaged or otherwise marginalised people who are likely to have very small estates. It is important that there continues to be an organisation in Victoria that is prepared to administer the estates of these people on death, and to administer small estates generally.
  4. 9.143 The Commission is of the view that the current system can be improved by redesigning the expedited grants to take into account actual usage and the concerns of the major interested parties in this area—the Registrar of Probates and State Trustees.

Repeal of section 11A of the Trustee Companies Act

  1. 9.144 The Registrar has expressed the view that he would strongly prefer that all estates be administered under a full grant (where informal administration is not possible). Reform to the cost of obtaining a grant would promote access to this system, and has the Registrar’s in-principle support.103
  2. 9.145 State Trustees, on the other hand, has emphasised to the Commission the importance of the availability of an expedited mechanism for it to continue in its role as administrator of small estates. State Trustees is not attracted to the election to administer process as it entails the filing of documents and the payment of fees and is not as straightforward as the process under section 79 of the Administration and Probate Act. The latter process is, in effect, little more than an accounting exercise. State Trustees also indicated that it may not stay in the field of small estate administration were the section 79 process not available to it.
  3. 9.146 This being the case, and given that the election to administer process is not being used, the Commission is of the view that two mechanisms are not necessary. Retention of the section 79 process is important, for the reasons noted above, and some of the Registrar’s concerns relating to procedural integrity can be attended to without making the process too onerous from State Trustees’ point of view.
  4. 9.147 Accordingly, the Commission considers that section 11A of the Trustee Companies Act should be repealed and that the remaining form of expedited grant should be a variation of the process currently contained in section 79 of the Administration and Probate Act.
  5. 9.148 Repealing section 11A of the Trustee Companies Act will mean that trustee companies other than State Trustees will no longer have access to an expedited mechanism. Given that private trustee companies rarely use the current mechanism, this ought not to place them at any unreasonable disadvantage in the marketplace.

Recommendation

74 Section 11A of the Trustee Companies Act 1984 (Vic) should be repealed.

 

Amendments to section 79 of the Administration and Probate Act

  1. 9.149 Section 79 of the Administration and Probate Act should be amended to improve the procedural integrity of the process and increase the value of the estates to which it applies. The amendments recommended by the Commission are discussed in the following sections and include:
  • raising the threshold dollar value of estates that may be administered under the scheme to $100,000
  • indexing this value to reflect changes in the Consumer Price Index, thereby ensuring that the figure remains up to date
  • inserting a second, safety net value, expressed as a percentage of the threshold figure, above which State Trustees would need to apply for a full grant, to accommodate any underestimation of the value of the estate at the time of filing
  • adding a requirement to file the will, if there is one, which would alert the Probate Office to the expedited grant
  • replacing the requirement to advertise in a newspaper with a requirement to advertise on the Court’s website, thereby creating a searchable record.

Increased upper limit

  1. 9.150 The upper limit on the value of the estates that State Trustees may administer under section 79 of the Administration and Probate Act is determined by the value of the estates in respect of which the Probate Office may provide aid in obtaining a grant of representation under section 71(1). This is because an estate administered under section 79 must be a ‘small estate’, which is defined as ‘an estate not exceeding the values specified in section 71(1)’.104
  2. 9.151 The Commission has recommended above that section 71(1) of the Administration and Probate Act be amended to extend the assistance provided by the Probate Office to estates not exceeding $100,000 in value, and that this figure should be adjusted quarterly to reflect changes in the Consumer Price Index.
  3. 9.152 The Commission is of the view that the value of estates in respect of which the Probate Office will provide assistance, and those which State Trustees may administer under section 79, should continue to be linked, subject to the safety net recommendation discussed below. For this reason, the dollar value of estates that State Trustees may administer under section 79 of the Administration and Probate Act should also increase to $100,000 and be adjusted quarterly to reflect changes in the All Groups Consumer Price Index.
  4. 9.153 An increase is necessary in order to:
  • better reflect the current value of the existing limit while still targeting estates
    that “are usually straightforward to administer
  • reflect State Trustees’ comments that ‘estates under $100,000 rarely involve administrative complexity’, as they rarely involve real estate105
  • recognise that the addition of improved procedural integrity mechanisms
    (filing a will, online filing) lessens the risk to those with an interest in the estate
  • provide congruity with the Commission’s recommendation that there should
    be no filing fee for estates that are worth no more than $100,000.
  1. 9.154 State Trustees supports this view. It maintained in its submission that estates which may be administered under section 79 should be matched to those eligible for assistance from the Probate Office’s small estates service, and suggested that the relevant figure should be $100,000.106

Safety net value

  1. 9.155 The consultation paper on small estates noted that the election to administer process in the Trustee Companies Act provides for a safety net value slightly higher than the maximum value of estates that may be administered under that provision.This second threshold acknowledges that it may take a trustee company time to confirm the actual value of estate assets.107 The second figure provides some flexibility so that, unless the actual value of the estate exceeds this figure, the trustee company will not have to seek a full grant.
  2. 9.156 The applicable figure for the section 79 process does not currently have such a safety net. In response to the consultation paper on small estates, State Trustees and the Law Institute of Victoria both specifically supported the introduction of a second figure,108 while other submissions, in suggesting amounts for an appropriate figure, supported the introduction of a second figure by implication.109
  3. 9.157 Most submissions supported expression of the upper figure as a percentage of the lower figure. A proportional amount was identified as the ‘simplest way to keep this second threshold in line with an increasing base line [due to indexation]’.110
  4. 9.158 The Commission is of the view that a safety net figure of 120 per cent of the adjusted base figure is reasonable. State Trustees would be able to use the section 79 process in relation to an estate that it estimated was $100,000 or less in value when it advertised its notice of intention to administer but which was subsequently valued at between $100,000 and $120,000.

Recommendation

75 Section 79 of the Administration and Probate Act 1958(Vic) should be amended to provide that, if in the course of administering a small estate under that section, State Trustees ascertains that the value of the estate exceeds 120 per cent of the adjusted upper value for small estates as set out in section 71(1), it must as soon as practicable apply in the same manner as any other person for a grant of representation.  

Online advertising

  1. 9.159 As noted above, section 79 of the Administrative and Probate Act currently requires State Trustees to give notice of its intention to administer by advertising in a daily newspaper.111
  2. 9.160 In the consultation paper on small estates, the Commission asked whether notices should be advertised online, as is required for full grants.112 In most submissions and consultations, it was noted that advertising online would be less costly,113 as the cost of advertising on the Supreme Court website for full grants is significantly lower than the cost of advertising in a newspaper.114
  3. 9.161 General reliance on newspapers for this sort of information in rural and regional areas was noted.115 One submission suggested that the advertising requirement should prescribe notice in both a local newspaper and on the Supreme Court website.116 The Commission is of the view that advertising in both newspapers and online is unnecessarily onerous and would detract from the streamlined and cost-effective nature of the section 79 process.
  4. 9.162 Further, notices in newspapers, while potentially more likely to be read by some people, are not collected in a central repository. Notices on the Court’s website would be more easily searched. Family members, friends and Probate Office staff would be able to assist in basic searches for those unfamiliar with using computers.
  5. 9.163 The creation of a searchable record of grants received under section 79 would provide the Probate Office with some level of oversight of State Trustees’ small estates administration. Electronic advertising would link these automatic grants with the Probate Office. Such a record would also be valuable for legal practitioners working in the area of wills disputes.117
  6. 9.164 State Trustees, which would be the advertising party in this process, has told the Commission that advertising online would be preferable to advertising in newspapers.118 Importantly, the Registrar of Probates has informed the Commission that the Probate Office is seeking to move towards online filing generally.
  7. 9.165 Given the continuity, accessibility and integrity of searchable records, the Commission is of the view that advertising section 79 notices online is an important step in streamlining the process.

Recommendation

76 Section 79(2) of the Administration and Probate Act 1958(Vic) should be amended to require that notices of intention to administer an estate under
this section should be advertised on the Supreme Court’s website rather than in a daily newspaper.

Requirement to file the will

  1. 9.166 One of the primary criticisms of the section 79 process is the fact that it is effectively a ‘deemed’ grant process, with little or no external scrutiny of the estates that are administered pursuant to the process.119 As noted above, there is currently no requirement for State Trustees to file any documentation with the Supreme Court when it uses the section 79 process.
  2. 9.167 The Commission asked in the consultation paper on small estates whether there should be a requirement for wills to be filed online as part of the section 79 process.120
  3. 9.168 State Trustees noted that it often files wills for section 79 grants as a matter of internal policy.121 Most submissions supported the introduction of this further procedural safeguard in section 79.122 One submission noted that filing a will, which creates a court record, is a crucial step given that anyone searching for information relating to an estate is likely to begin at the Probate Office.123 Importantly, State Trustees informed the Commission that it advocated that wills be filed when the section 79 process was being developed.124
  4. 9.169 The Commission recommends that section 79 should be amended to provide that State Trustees file the will with the Supreme Court Probate Office.

Recommendation

77 Section 79 of the Administration and Probate Act 1958(Vic) should be amended to require that the will be filed with the Supreme Court Probate Office.

 

Access to expedited grants for legal practitioners

  1. 9.170 While most jurisdictions, like Victoria, allow the public trustee and often other trustee companies the right to file elections to administer, the Northern Territory has empowered legal practitioners to do so as well.125
  2. 9.171 The consultation paper on small estates asked whether legal practitioners should be able to file elections to administer, and whether they should be able to utilise the section 79 process.126
  3. 9.172 A number of submissions supported expanding expedited grants to legal practitioners, relying largely on arguments of competitive fairness between State Trustees and private practitioners.127
  4. 9.173 It was also noted that solicitors are more accessible to the general public, and that opening up the market would give executors more options.128 One submission noted that there may be costs savings passed on to estates where the fees charged are not those of a trustee company.129
  5. 9.174 State Trustees noted in its submission that:

Allowing legal practitioners to file elections to administer and advertise for deemed grants would create greater flexibility for the Victorian public as to who can administer smaller value estates in a cost-effective and efficient manner.130

  1. 9.175 However, both the Victorian Registrar of Probates and the New South Wales Registrar of Probates have made clear to the Commission that they are strongly opposed to allowing legal practitioners to use the above mechanisms.
  2. 9.176 The Commission does not recommend that legal practitioners be permitted to avail themselves of either expedited grant process. Where those seeking to have a small estate administered engage a solicitor to assist in the administration, it is likely that they can afford to file for a full grant. Further, should the recommendation relating to a sliding scale of fees be implemented,131 there would be no fee involved in filing an application for a full grant in respect of an estate of up to $100,000 value.
  3. 9.177 The purpose of the section 79 process is to reduce costs to State Trustees and encourage administration of estates where providing this service would not otherwise be commercially viable. As indicated, State Trustees is given a government subsidy to provide this service.

Other amendments to Part II of the Administration and Probate Act

  1. 9.178 In reviewing sections within Part II of the Administration and Probate Act over the
    course of the reference, the Commission has noted two errors, and recommends that they be corrected.
  • Section 71(2): ‘registrar of the Supreme Court’ should read ‘registrar of the Magistrates’ Court’.
  • Section 72: the reference in the heading to the County Court registrar should
    be removed.

Recommendation

78 The following corrections of errors in the Administration and Probate Act 1958 (Vic) should be made:

 

Footnotes

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