Duties and costs

They say the only certainties In life are death and taxes, so it’s fair to say that the only certainty in death is, well, death taxes or, In this case, fees. Yes, it costs a lot of money to die and, though you won’t be around to pay the fees associated with your death, your estate will, likely, have to bear those costs.

State probate duty

Probate duty in Victoria was abolished on 1 January 1984 for the estates of all persons dying on or after that date. Since 7 June 2000 no formalities are required, even for estates where the deceased died prior to 1 January 1984.

Federal estate duty

This duty was abolished on 1 July 1979. It can be levied only where the deceased died prior to that date, leaving assets to a brother or sister, remote relative or total stranger. Enquiries should be made at the Australian Taxation Office.

Australian Taxation Office (ATO)

Tel: 13 28 61

Web: www.ato.gov.au

Income tax

The estate will be liable to pay income tax on the deceased person’s income up to the date of death as if the deceased was still alive. If the estate continues to earn income after the date of death, the estate or the beneficiaries will be liable for income tax on that income.

Capital gains tax is not attracted merely because of death, but could be incurred if the estate or a beneficiary subsequently sells an estate asset and there is a capital profit on the sale. The law here is complex and advice should be taken from an accountant or lawyer as to liability in any particular case (div 128 Income Tax Assessment Act 1997 (Cth)).

Costs

The different sources of expense involved in the administration of estates are as follows.

1 Executor’s commission can be charged by executors and trustees, if appointed as executor under the will of the deceased (s 65 A&P Act); commission is also payable to trustee companies (seeTrustee companies”).

2 Legal fees may be charged.

Legal fees

The recommended charges for solicitors proving the will depend on the gross value of the estate. Additional charges will be made where a solicitor also acts as an executor or where conveyancing or other work is involved (e.g. where a joint tenancy is converted to a single tenancy). The following charges are therefore a basic minimum for obtaining the grant of probate or administration only. See order 9.01 and appendix 3-A of the A&P Rules.

Gross value of estate

Legal charges

Up to $50,000

$499

Up to $70,000

$572

Up to $80,000

$608

Up to $90,000

$644

Up to $100,000

$680

+ for every $50,000 over $100,000
of the gross value of the estate

$35

State Trustees

State Trustees charge up to 5.5% of the total value of the estate, and 6.6% per annum on gross income received by the estate.

Trustee companies

For administering an estate, a private trustee company may charge up to 5.5% of the capital value of the estate, and up to 7% on income received by the estate (s 21 Trustee Companies Act 1984 (Vic)). The State Trustee and other trustee companies will give particulars of their exact charges upon request.

Private executor

A person appointed executor/trustee or granted letters of administration is entitled to apply to the Supreme Court of Victoria for a commission or percentage not exceeding 5% of the deceased’s gross assets (s 65 A&P Act). The usual rate of capital commission that is allowed by the court is between 2% and 3% of the gross assets of the estate, depending on the amount of time and trouble the executor incurs in winding up the estate. An executor may also be granted commission on income of an estate during the time the estate is administered by the executor. No specific rate is fixed by legislation, but percentages of up to 5% are usual, depending on the difficulty of administration.

It is unusual for the full amount of commission of 5% to be granted unless the estate is very complex or the circumstances are very unusual. The commission will be reduced or refused if the court is satisfied that the executor, administrator or trustee was guilty of misconduct or incompetence in relation to carrying out their duties to the estate.

It is possible to avoid an application to the court if:

a specific rate is set out in the will; or

all beneficiaries are legally capable and agree on a rate (under 5%) with the executor.