When does an executor have to pay beneficiaries?
29 March 2021
One of the most common questions that we hear from clients during probate is how long executors can take to distribute the estate to beneficiaries.
Even the most straight forward estate will take some time before beneficiaries receive their inheritance. A simple estate with no property to sell and a single bank account may take as little as 3 months, but the majority of estates take around 9-12 months to administer. If there are any delays along the way, or if there are complex assets to deal with, it can take significantly longer.
How long do executors have to pay bequests?
The executor has a duty to collect in the estate's assets and settle any outstanding debts (or liabilities), including the funeral bill.
After all liabilities have been settled, whatever's left can then be distributed to the beneficiaries. There's a strict order of priority for distributing the estate:
- Pecuniary legacies (gifts of specific sums of money)
- Residuary estate (the rest of the money in the estate)
If the deceased left gifts of specific sums of money to some beneficiaries, 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.
Even cash gifts shouldn't be prioritised over outstanding debts though - all liabilities must be settled before any beneficiaries can be paid.
There is a legal rule that pecuniary legacies should be paid out within a year of the death. This is known as the 'executor's year'. If the executor isn't able to pay the pecuniary legacies within that time, the beneficiaries are entitled to claim interest.
What issues could delay beneficiaries being paid?
An executor would be expected to demonstrate a basic level of competence during the estate administration and act in the best interests of the beneficiaries. This includes not delaying things unnecessarily.
However, there are certain issues that could arise during probate and cause a delay. Examples include:
A missing beneficiary – if a named beneficiary can't be found or contacted, this can cause a delay. Reasonable investigations should be carried out by the executor to try and find them, usually by using a tracing agent.
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 sell a probate property, because conveyancing is a complicated process with its own risk of delays.
Dealing with foreign property or assets – if a foreign property needs to be dealt with, this can delay the process. The executor will probably have to instruct foreign estate agents and lawyers, make sure they comply with the legal requirements of that country and obtain the necessary permissions to sell the property.
Investigation by the DWP – another common cause of delay 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 – an executor will usually place a notice of death in the London Gazette and in local papers. This notice gives creditors 2 months to make any claim they have against the estate. It also protects executors from personal liability if a creditor makes a claim later on. The executor will need to wait until the 2 month time limit is up, before distributing the estate.
Six month limit to bring a claim – in other cases, it can be sensible for the executors not to pay any beneficiaries until at least 6 months after receiving the grant of probate. This is because there's a 6 month time limit for family members or dependents to make a claim against the estate.
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 the estate.
If there's enough money in the estate account, an interim payment can be made to beneficiaries, with executors holding back some money to cover potential costs. These payments should be recorded by asking the beneficiaries to sign a written receipt. Once the rest of the estate costs have been covered, the rest of the money would then be paid to the beneficiaries.
What if there are unreasonable delays?
If there's unreasonable delay, the beneficiaries can ask the executor for an update. The executor has an obligation to keep the beneficiaries updated on the progress.
As a beneficiary, you can also ask the executor for an account of the estate. This 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.