An estate may have valuable assets but little cash available to pay probate and administration costs. We explain how estate expenses are commonly funded, including when legal funding may help bridge the gap.
A deceased estate can be valuable on paper but have very little cash available at the beginning of the administration.
There may be a home worth $1.5 million, shares, superannuation or other investments, but the executor may still need money now to obtain probate, arrange valuations, maintain property and pay professional expenses.
This creates a common practical problem:
Who pays the expenses before the executor can access the estate?
Usually, reasonable legal and administration expenses properly incurred by an executor in administering a deceased estate are estate expenses rather than the executor's personal expenses.
That doesn't necessarily mean the estate has money immediately available to pay them.
Before probate or letters of administration have been obtained, access to bank accounts, investments or property may be restricted. Even after the grant, an executor may need time to collect assets or sell property before sufficient cash is available.
The result can be an estate that is asset-rich but temporarily cash-poor.
Depending on the estate, expenses may include:
The executor may also have to deal with ongoing mortgage payments, rates, strata levies, utilities or urgent repairs while the estate is being administered.
Where the deceased held sufficient cash, the executor may ultimately use estate funds to meet proper estate expenses.
Banks may also have procedures allowing certain expenses to be paid from a deceased person's account before probate, although the circumstances and requirements vary between institutions.
The estate's solicitor can help the executor determine what funds can lawfully be accessed and at what stage.
Executors sometimes pay expenses personally and later seek reimbursement from the estate.
That may be appropriate for modest expenses, but an executor should be cautious about personally funding substantial legal, property or administration costs.
Keep clear records and receipts for anything paid personally on behalf of the estate.
For larger expenses, it is worth discussing the position with the estate solicitor before committing personal funds.
This is particularly common.
An estate may contain valuable real estate but only a small bank balance.
The property might ultimately be sold, giving the estate more than enough money to meet its expenses, but the executor may first need probate and may also need to incur costs preparing the property for sale.
Waiting for the eventual sale proceeds isn't always practical.
This is one situation where estate funding may be worth investigating.
Urban Law Group is a partner firm of JustFund, which provides funding for eligible family law and deceased estate matters.
JustFund's estate funding may be available to assist with expenses before estate assets become available.
Depending on the particular application and funding approval, this can include expenses such as:
JustFund also offers separate inheritance advance products for eligible beneficiaries.
You can read more about its current estate funding products and eligibility requirements at JustFund.
JustFund states that eligible estate funding is generally repaid from the estate or settlement proceeds when the estate is finalised, rather than requiring monthly repayments while the administration is underway.
For an estate administration funding arrangement, JustFund assesses the estate and the amount of funding required. Approved funds can then be advanced as eligible expenses arise.
JustFund's current material states that the funding may ultimately be repaid from the estate before the remaining estate is distributed to beneficiaries.
That can help close the timing gap between the estate needing to incur expenses and the executor being able to realise estate assets.
Your solicitor-client relationship remains with Urban Law Group.
We continue to advise the executor about the administration of the estate and issue our invoices in the ordinary way.
Where JustFund funding has been approved, eligible invoices may be paid directly by JustFund in accordance with the client's funding agreement and authorisation.
Urban Law Group does not receive a commission or referral fee from JustFund.
JustFund paying one of our invoices doesn't increase the legal fee charged by Urban Law Group. The separate cost to the client or estate is the cost of the JustFund funding itself, including any applicable interest and fees under the funding agreement.
Funding can become particularly relevant where an estate is involved in litigation.
For example, an executor may need legal representation to respond to a family provision claim, or a beneficiary may require advice about whether to bring a claim against an estate.
Litigation can involve solicitor and barrister fees, mediation, valuations, expert evidence and Court costs.
JustFund states that funding may be available for executors defending a Will and for certain family provision proceedings, subject to assessment and approval.
The question of who ultimately bears the legal costs of estate litigation is a separate legal issue and depends upon the circumstances and any orders made by the Court.
No.
Finance has a cost.
If an estate already has sufficient accessible cash, external funding may be unnecessary.
Similarly, there may be other arrangements available which are less expensive depending on the estate's assets, the anticipated administration period and the executor's circumstances.
The purpose of funding is to solve a timing and liquidity problem. It shouldn't be treated as free money.
Before entering any funding arrangement, the executor or beneficiary should understand:
JustFund's current material confirms that its funding can involve an assessment or administration fee, ongoing fees and interest, depending on the product and agreement.
An executor shouldn't assume that they personally need to have thousands of dollars available before obtaining legal assistance.
In many estates, the underlying assets are sufficient. The real problem is simply that those assets cannot yet be accessed.
At Urban Law Group, we can explain the likely probate and estate administration costs, identify which expenses can properly be met from the estate and discuss the practical options available where there isn't enough immediate cash.
Where appropriate, we can also provide information about JustFund so that an executor or beneficiary can independently consider whether estate funding may assist.
Urban Law Group provides legal advice. We do not provide financial or credit advice.
Information about JustFund or any other funding arrangement is general information only and isn't a recommendation that you enter into a loan or funding agreement.
JustFund is separate from Urban Law Group. Funding is subject to JustFund's own assessment, eligibility criteria and terms. Any funding arrangement is entered into directly between the relevant client and JustFund.
Urban Law Group does not receive a commission or referral fee from JustFund. Where funding has been approved, JustFund may pay authorised Urban Law Group invoices directly under the relevant funding agreement.
Executors and beneficiaries should carefully review the cost of funding, including interest, fees and repayment obligations, and obtain independent financial advice where appropriate before entering into a funding arrangement.
JustFund: Estate and probate funding
JustFund: Compliance information
Supreme Court of NSW: Probate
If you're an executor or beneficiary dealing with a deceased estate, Urban Law Group can advise you about probate, estate administration and the practical options for meeting estate expenses while the administration is underway.