An interim distribution in New South Wales refers to a partial distribution of the assets of an estate to the beneficiaries before the completion of the full administration process. It is a distribution made by the executor or administrator of the estate while the estate is still being administered. Essentially, it is a small payment to a beneficiary out of their total payment.
Typically, the executor will need to wait 12 months before distributing the estate assets. This allows for any eligible person to challenge the validity of the Will or make a family provision claim against the estate, it also allows them to discharge any liabilities or debts the estate may have. However, a beneficiary can request for there to be interim distributions either by asking the executor or applying through the Court.
An executor can make interim distributions in NSW under certain circumstances. The executor or administrator must apply to the Court and provide sufficient reasons for the need for an interim distribution. The Court will consider the circumstances and exercise its discretion in granting or denying the application. There are various factors in determining whether to approve an interim distribution, including the urgency of the beneficiaries’ financial needs, the availability of funds, impact on the overall administration process, and any potential claims or disputes regarding the estate. Sometimes certain conditions and safeguards Will be imposed when granting an interim distribution such as providing security or obtaining consents from other interested parties. However, there are some risks involved in interim distributions as if the distributions are not properly distributed, the executor is personally liable for the assets distributed. Executors will generally request that the beneficiary provide indemnify and release the executor from any liability at the time of providing the early distribution.
There are several factors that need to be considered by the executor before interim distributions occur. The most important one being whether the estate has sufficient funds to cover:
• all pecuniary bequests;
• all outstanding debts; and
• the size of the final distribution of the estate less the interim distributions.
If you, or the executor, are planning on interim distribution of assets from a deceased estate, please contact us to arrange for an initial conference to discuss your circumstances.
