Finding the money

An estate cannot be administered until you know what is in it. Probate applications need an inventory with values. Tax returns need the same. And beneficiaries cannot be paid until the debts are known.

The obstacle is that nobody keeps a current list. Accountants hold records that are one or two years old. Statements arrive annually and get filed or thrown out. Online accounts leave no paper trail. Investments get sold without anyone updating the file. A list handed to you by the family accountant is a starting point, not an answer, and every line on it needs confirming with the institution that holds it.

Superannuation, first

For most Australians over sixty, superannuation is the largest asset. It also does not pass under the will, which catches families out repeatedly. Each fund pays a death benefit under its own rules and any nomination on file, and if there is no valid nomination the fund's trustee decides.

Ask each fund four questions

1. Is there a nomination on file?
2. Is it binding, and is it still current? In industry and retail funds, a binding nomination generally lapses three years after signing unless the fund offers a non-lapsing option. A lapsed nomination is treated as none at all.
3. Who does it name? Superannuation can only be paid to a spouse or de facto partner, a child of any age, someone in an interdependency relationship, someone who was financially dependent, or to the estate.
4. Is there insurance attached to the account? Life and total permanent disability cover held inside super is often the single largest amount in an estate, and there is frequently no paperwork for it outside the fund's own records.

Expect it to take time

The corporate regulator reviewed how superannuation trustees handle death benefit claims and found that most delays came from problems inside the funds themselves rather than from families. Claims commonly run for months. Funds also often run a claim-staking process, notifying potential beneficiaries of a proposed decision and allowing a period to object. That is normal and it adds weeks.

Start every claim early, keep a note of who you spoke to and when, and escalate to the fund's internal complaints process if it stalls. The Australian Financial Complaints Authority handles complaints about super funds when the fund's own process does not resolve it.

Tax on a death benefit

This affects who should receive it. Understand it before anything is paid:

• A lump sum to a tax dependant (a spouse, a child under 18, someone financially dependent, or someone in an interdependency relationship) is entirely tax-free.
• A lump sum to a financially independent adult child is taxed on the taxable component.
• Payment to the estate is taxed by reference to who ultimately benefits, so directing super through the will does not avoid the issue.

Get advice before choosing the form of payment. The difference between options can be tens of thousands of dollars.

Moneysmart: claiming a super death benefit · ATO: superannuation death benefits

Superannuation nobody knew about

People who changed jobs often left small accounts behind. Some have been transferred to the ATO as unclaimed super. As the recognised legal personal representative you can ask the ATO to search, and representatives of deceased estates are expressly authorised to make that request.

Do this even when you believe you have found everything. It costs nothing and regularly turns up an account.

ATO: searching for lost and unclaimed super · ATO: accessing a deceased person's tax and super information

Getting the ATO to open its records

This step unlocks the rest. Once the ATO records you as the legal personal representative, you can request a data package covering their recent income years, which shows employers, banks that reported interest, funds that reported super, and dividend income.

Being recognised generally requires a grant of probate or letters of administration. You can notify the ATO of the death with the death certificate alone, but full access needs the grant. This is one of the better arguments for applying for probate even when no single institution has demanded it.

ATO: who can represent a deceased estate

Shares and managed investments

Listed shares are administered by a registry rather than by the company. The four in Australia are Computershare, MUFG Pension & Market Services (formerly Link), Automic and Boardroom. Each has a deceased estate process.

Work out how the shares are held

• A reference number beginning with I is an issuer-sponsored holding, administered by the registry. There is a separate number for each company, so there may be many.
• A number beginning with X is a broker-sponsored holding. One number covers everything held with that broker, and the broker's estate team handles it rather than the registry.

Registries have a small-estate declaration and indemnity for holdings below their own threshold, which lets shares transfer without probate. Ask for it by name; it is rarely offered.

Record the closing price on the date of death for every holding. You need it for the inventory and for capital gains tax later, and it is fiddly to reconstruct.

Computershare deceased estates · MUFG Pension & Market Services · ASX: sponsored and issuer-sponsored holdings explained

Managed funds, investment platforms and investment bonds each have their own claim form and usually report only once a year. The last tax return is the reliable way to find them.

Unclaimed money

Dormant bank accounts, matured life insurance, uncashed dividends and old share proceeds are transferred to ASIC or to a state revenue office after a period of inactivity. Searching is free and takes five minutes, and the money keeps indefinitely.

Moneysmart: find unclaimed money · Money held by state governments

Property

Start with a title search at your state land registry. It tells you two things that matter: whether the property was held as joint tenants, in which case it passes automatically to the survivor, or as tenants in common, in which case their share is part of the estate, and whether there is a mortgage or other interest registered against it.

Rates notices tell you about council and water accounts that need to keep being paid.

Get a value as at the date of death. Two written agent appraisals are usually enough for probate; a registered valuer is worth it for a large estate, a contested one, or where the home will be kept.

Debts

Debts are paid by the estate. Family members are not personally liable for someone else's debts unless they were a joint borrower or a guarantor. Say that plainly to anyone in the family who is frightened by a letter.

What to ask each lender for, in writing

• The balance as at the date of death
• A copy of the loan contract
• Their deceased estate process and the contact who handles it

Reverse mortgages

A reverse mortgage is repaid when the last borrower dies, usually from the sale of the home. There is no single statutory deadline; the loan contract sets the period, so get the contract early and ask the lender directly how long the estate has and what interest accrues meanwhile.

Reverse mortgages taken out from 18 September 2012 carry a statutory no-negative-equity guarantee: the debt cannot exceed what the home is worth. For older loans, ask the lender to confirm the position in writing.

Moneysmart: reverse mortgage and home equity release

The rest

• Mortgages keep falling due. Ask about hardship arrangements while the estate is being sorted. A surviving joint borrower remains liable.
• Credit cards and personal loans in their sole name are claims against the estate. Do not pay them from your own money.
• HELP and HECS debts are cancelled on death, apart from any compulsory repayment on income earned before it.
• Tax debts and Centrelink overpayments are not cancelled. The ATO does not write off a deceased person's tax debt, and it must be settled before beneficiaries are paid.

If a debt collector contacts the family, they must comply with the ASIC and ACCC debt collection guideline. Tell them the person has died, give them the executor's details, and stop taking the calls.

When the records are wrong

This happens constantly. The accountant's list is from two years ago and half the investments have been sold. A managed fund has been through a merger and now trades under a different name. A share registry has no record of a holding that plainly generated a dividend last year.

What works:

• Follow the money, not the list. A dividend hitting the bank account proves a holding exists, whatever the file says.
• Ask for a statement as at the date of death, not a current one. Everything downstream needs that date.
• Put every request in writing and keep the replies. When an institution says something different four months later, the earlier letter settles it.
• Chase in batches on a set day. Some organisations take months to send a closing statement, and an estate cannot be finalised without them. A weekly hour of follow-up beats waiting.

The ATO's own expectation is that finalising a deceased estate takes six to twelve months, and longer where assets are hard to trace. If yours is taking that long, it is running normally.