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Address any disputes or challenges to the will or claims against the estate

CM Law's Ultimate List: The top 50 FAQs on Administration of Estates #16: Handle Disputed Claims

Handling disputed claims is a critical part of administering an estate in New South Wales, Australia. Executors are often faced with challenges or disputes regarding the validity of a will, claims against the estate, or disagreements among beneficiaries. Addressing these disputes effectively is essential to fulfilling the executor's duties and ensuring the estate is administered according to the law and the deceased's wishes. This section provides essential guidance on handling disputed claims under NSW law, the common grounds for disputes, and practical steps for resolution.

Understanding Disputed Claims in Estate Administration

Disputed claims in estate administration can arise from several situations, including disagreements over the interpretation of the will, allegations of undue influence or fraud, or claims by individuals who feel they were unfairly omitted or inadequately provided for in the will. Executors must be prepared to address these claims, whether through negotiation, mediation, or legal proceedings.

Common Grounds for Disputes and Claims

Common grounds for disputes and claims against an estate include:

  1. Challenging the Validity of the Will: Claims that the will was improperly executed, forged, or created under duress or undue influence.

  2. Family Provision Claims: Under the Succession Act 2006 (NSW), eligible persons, such as a spouse, child, or dependent, may claim further provision from the estate if they believe they were not adequately provided for in the will.

  3. Disputes Over Asset Distribution: Disagreements among beneficiaries regarding the distribution of assets, especially when the will's language is ambiguous or open to interpretation.

  4. Claims by Creditors: Claims made by creditors who believe they are owed money by the deceased.

The Role of the Executor in Handling Disputed Claims

The executor’s role is to manage and resolve disputes or claims against the estate promptly and fairly. This includes:

  • Communicating Clearly with Beneficiaries: Keeping all parties informed about the estate administration process and any claims made against the estate.

  • Seeking Legal Advice: Consulting with a legal professional to understand the nature of the dispute and the best course of action.

  • Negotiating or Mediating Disputes: Attempting to resolve disputes through negotiation or mediation before resorting to legal proceedings.

  • Defending the Estate in Court: If necessary, defending the estate against claims in court to protect the interests of the beneficiaries and uphold the will’s terms.

Legal Framework Governing Disputed Claims in NSW

Under the Succession Act 2006 (NSW), the executor must act in accordance with the law when handling disputed claims. The Act outlines the rights of eligible persons to make a family provision claim, the legal requirements for contesting a will, and the procedures for resolving disputes. Executors must comply with these regulations and seek to resolve disputes in a manner that is fair, lawful, and consistent with the deceased’s wishes.

Case Study: Prolonged Estate Dispute in NSW

Case Overview

In the case of Re Estate of Murphy [2022] NSWSC 1047, a prolonged dispute arose over the distribution of assets. The estate included a rural property valued at $2.5 million, several investment properties worth a total of $3 million, and a substantial art collection appraised at $1 million. The executor faced multiple claims from beneficiaries challenging the validity of the will and seeking further provision from the estate.

Behavior of the Participants

The executor, a trusted family member, initially attempted to mediate the disputes informally. However, as tensions grew, the beneficiaries became increasingly hostile, believing the executor was not acting impartially. The beneficiaries, feeling excluded from critical decisions, began to suspect that the executor had a personal interest in delaying the distribution. This suspicion created a sense of urgency and desperation among them, leading to numerous heated confrontations.

With emotions running high, the beneficiaries sought legal advice to challenge the executor's actions formally. Frustration mounted as legal bills piled up and the estate's value began to diminish due to ongoing disputes and delays. The beneficiaries, fearing they would lose a significant portion of their inheritance, filed an urgent application with the court, demanding the removal of the executor and the appointment of an independent administrator.

Legal Process and Court Involvement

The beneficiaries filed a formal application with the NSW Supreme Court, seeking the removal of the executor and contesting the validity of the will on the grounds of undue influence. The court examined evidence from both sides, including testimony from witnesses who claimed the deceased was not of sound mind when the will was made. The court also reviewed the executor's actions, focusing on whether they had fulfilled their duties fairly and impartially.

After extensive hearings, the court found that while there was no conclusive evidence of undue influence, the executor had failed to adequately communicate with the beneficiaries and manage their expectations. The court ordered the appointment of an independent administrator to handle the estate's remaining distribution and directed the parties to attempt mediation to resolve outstanding issues.

Financial Consequences

The estate faced substantial financial consequences due to the prolonged dispute. The legal fees incurred by both sides totaled over $400,000, significantly reducing the estate’s value. The rural property, initially valued at $2.5 million, was sold below market value due to the urgency of the sale, resulting in a loss of $300,000. The ongoing disputes also delayed the sale of the investment properties, leading to further depreciation and losses of approximately $200,000.

Lessons Learned

  • Prompt Resolution is Essential: Executors should address disputes quickly to prevent escalating legal costs and delays in estate distribution.

  • Maintain Transparency and Communication: Clear communication with all beneficiaries can help prevent misunderstandings and foster trust.

  • Seek Professional Advice Early: Legal counsel should be sought early in any dispute to explore options for resolution before litigation becomes necessary.

Statistics on Estate Administration and Disputed Claims in NSW

  • Family Provision Claims: Approximately 18% of estate disputes in NSW involve family provision claims by eligible persons.

  • Executor Mismanagement: Around 12% of probate cases in NSW result in disputes over the executor's handling of the estate.

  • Legal Costs: The average cost of legal proceedings involving disputed claims in NSW ranges from $150,000 to $600,000.

  • Court Proceedings Duration: Disputed claims typically extend court proceedings by 12 to 24 months in NSW.

  • Impact on Estate Value: Estates involved in disputes may see a reduction of 20-30% in their overall value due to legal fees and delayed asset management.

  • Resolution Time: The average resolution time for estate disputes in NSW is between 18 and 30 months.

  • Will Challenges: Approximately 8% of contested wills in NSW are challenged on the grounds of undue influence or lack of testamentary capacity.

  • Success Rate for Claims: About 25% of family provision claims in NSW result in some form of court-ordered provision to the claimant.

  • Mediation Success: Mediation resolves about 65% of estate disputes in NSW without the need for a full court hearing.

  • Complaints to Legal Authorities: The NSW Legal Services Commissioner receives around 200 complaints annually related to disputes over estate administration.

Government and Non-Profit Organisation References

Government Resources

Non-Profit Organizations