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Demystifying probate – what is probate and why do I need it?

September 7th, 2021

When you are appointed as an executor of an estate in most cases one of the first decisions you will be confronted with is whether you need to apply for a grant of probate.

What is a grant of probate?

Probate is the official recognition by the court that the executor appointed under a will has the right to administer the deceased’s estate (i.e. collect in assets of a deceased person and distribute them to the beneficiaries in accordance with the will). The executor of an estate applies for a grant of probate as “proof” that the court is satisfied that the person was correctly appointed under the will.

It is not always necessary to apply to the court for a grant of probate, but some recent decisions of the courts serve as a reminder of the potential consequences if assets of an estate are released to an executor without a grant of probate.

As an executor, you may seek to avoid applying for a grant of probate to avoid costs in the administration of the estate. In almost all cases, in order to have assets released by organisations such as banks, they will seek that the executor release and indemnify them from any liability by signing a document to this effect. This means that the executor personally promises to cover the bank should there be any problems in the future, for example if they pay the money incorrectly.

Most of the time, an executor would request that the requirement to produce probate be waived in situations where the estate is small or assets sought to be released are low in value.

Why do I need to get probate?

More and more we find that institutions and organisations are reluctant to release assets without a formal grant of probate. The reason for this is well demonstrated in the recent case of Public Trustee v CBA & Ors [2018] SASC 25.

In this case Ms Martin passed away in 2008. Prior to her death, she had made three wills as follows:

• a 2008 will, appointing her son, Michael as the executor;
• a 2007 will, appointing her daughter-in-law, Alba as the executor; and
• a 2002 will, appointing the public trustee as the executor.

A grant of probate was not made until 2013, and the grant was for the 2002 will that appointed the Public Trustee as the executor of the estate on the basis that Ms Martin did not have the mental capacity to make the later wills.

However, in 2008 after her death, her son Michael had contacted the Commonwealth Bank and the Bank of South Australia to seek to have her accounts closed and money in them given to him as the executor under the later 2008 will.

Each of the banks initially asked for a grant of probate, but waived the requirement at Michael’s request on the basis that there were minimal assets in the estate. Each of the banks released the funds ($69,290.33 and $108,461.00 respectively) to Michael as executor and Michael signed an indemnity in favour of each bank.

Following the grant of probate being issued to the Public Trustee in 2013 on the basis of the earlier will, the Public Trustee demanded that the Banks repay the proceeds of the accounts to them as the lawful executor of the estate. When the banks refused to do so, pointing to the earlier payments made to Michael as the executor and their discharge from liability due to the indemnities he had signed, the Public Trustee commenced proceedings against the banks.

Michael was unable to be located for the proceedings and his whereabouts are unknown.

The banks argued that they had a defence to the claim on the basis of the discharge that they had received from Michael.

Lessons for an executor

While the banks were ultimately successful in relying on the indemnity as a set-off against the claim, this case highlights why institutions like banks are more frequently insisting on a grant of probate being issued before they will release funds. A grant of probate protects them from having to defend a claim in court and effectively reduces the risk an institution is taking when releasing assets to an executor in the course of administration of a deceased estate.

If you would like further information about the production or waiving of a grant probate in estate administration matters or are an executor who needs assistance applying for a grant of probate, please do not hesitate to contact our wills and estate planning solicitor Lauren Doktor on 07 4036 9700.

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