When Does an Executor Have to Pay Beneficiaries?
01 October 2018
One of the most common questions that we hear from clients during Probate is how long it can take Executors to distribute the Estate to Beneficiaries.
It is important for all involved in the Estate administration to recognise that even the most straight forward Estate will take some time before Beneficiaries receive their inheritance. A straight forward Estate with no property to sell and a single bank account may take as little as 3 months, whereas the majority of Estates take around 9-12 months to administer. However, more complex Estates with multiple properties, stocks and shares or foreign assets can take significantly longer.
How Long Do Executors Have to Pay Bequests?
First and foremost, Executors have a duty to collect in the assets of the Estate and settle any liabilities, which are the debts of the deceased person, including the funeral bill.
After all liabilities have been settled, whatever is left may then be distributed, but in a strict order of priority:
- Pecuniary legacies (gifts of specific sums of money)
- Residuary Estate (the remaining money in the Estate)
If the deceased left a Will which set out gifts of specific sums of money, then these must be paid first. The remainder of the Estate (known as the 'residuary estate') is everything left over after these gifts have been paid. So Beneficiaries who are entitled to a share of the residuary Estate will be paid after those who are receiving specific cash gifts.
However remember that all liabilities must be settled before any payments are made to Beneficiaries. So even cash gifts included in the will should not be prioritised over liabilities of the Estate.
There is a legal rule that pecuniary legacies should be paid out within a year of the death of the deceased. This is known as the 'Executor's year' and if it is not possible to pay the pecuniary legacies within the time period referred to, the Beneficiaries concerned are entitled to interest.
What Issues Delay Payment to Beneficiaries?
An Executor would be expected to demonstrate a basic level of competence during the Estate administration and they should not act with undue delay.
However, there are certain issues that can arise during the administration period that may cause a delay in distribution. Examples of the potential issues include:
A missing Beneficiary – this is where the whereabouts of someone who has been named as a Beneficiary in the will is not known. In these circumstances reasonable investigations should be carried out, usually by using a tracing agent in an attempt to find them.
Selling a property – if a property needs to be sold, a Grant of Probate needs to be obtained before contracts can be exchanged. It can take 3-6 months to obtain a Grant of Probate. Additionally, it can be difficult to anticipate the length of time it takes to market and find a buyer for a Probate property, which can often cause delays.
Dealing with foreign property or assets – if a foreign property needs to be dealt with, this may also extend the length of time it takes to make payment to Beneficiaries. In most cases, the Executor will have to sell the property by instructing foreign estate agents and lawyers, complying with the legal requirements of that country and obtaining the necessary permissions to sell the property.
Investigation by the DWP – another common reason for distribution to take a long time is if the Department for Work and Pensions (DWP) makes an investigation into any benefits the deceased received. This will usually add a further 6 to 9 months before the final sum due back to them is confirmed as a liability of the Estate.
Statutory advertisements – it is often prudent for the Executor to place a notice of death in the London Gazette and in local papers. This notice will give creditors two months from the date of publication to notify the Executors of any claim they may have against the Estate. Executors who advertise in this way are protected from personal liability for the debts should a valid claim arise later. Again this can prolong the process, as the minimum time given for people to come forward is two months.
Six month limit to bring a claim – in other cases, it can be sensible for the Executors to make no distribution until at least six months after the date of receiving the Grant of Probate. This is because there is a six month time limit whereby claims can be brought against the Estate, under the Inheritance (Provision for Family and Dependents) Act 1975. This timeframe runs from the date of the Grant of Probate. If a claim were to be brought, it would be far better that the Beneficiaries have not received the money rather than being asked to repay the money.
What If There Is Not Enough Money to Pay Bequests Straight Away?
It is important to note that Executors should not pay cash gifts out of their own money and should never mix their own money up with monies comprised in the Estate.
If the majority of the Estate assets have been received and there's enough money in the Estate account, an interim payment could be made to the Beneficiaries with Executors holding back enough funds to cover any potential costs. These payments should be recorded by asking the Beneficiaries concerned to sign a written receipt, acknowledging receipt of the interim payment. On payment of the final costs or disbursements, the remaining funds would then be distributed to the Beneficiaries.
What If There Are Unreasonable Delays?
If there is unreasonable delay, a Beneficiary should contact the Executor, pointing out their obligation to keep all Beneficiaries updated on the progress of managing the Estate.
As a Beneficiary, you can also demand that the Executor provide an account of the Estate which should outline how much you are due to receive and the progress made in the Estate administration. If refused, there is a relatively straightforward process for obtaining a Court order so the Executor must produce an inventory and an account of the transactions of the Estate.
Co-op Legal Services is the largest provider of Probate and Estate Administration services in England and Wales, trusted to deal with over £1.3 billion in Estates annually.