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Monday, July 12, 2010

Why won't the executor give me an advance on my inheritance?

When I've acted on behalf of estates, I've occasionally been asked by beneficiaries for an advance on their shares of the estate. It's the executor's decision, not the lawyer's, but generally the executor will talk it over with the lawyer to find out his or her obligations to the beneficiaries.

When a beneficiary is refused an advance for any reason, the response is usually along the lines of "but that's MY money - I'm entitled to it!" A beneficiary is, of course, entitled to receive the share of the estate left to him or her in the Will, but not necessarily on demand. There are plenty of other things going on in an estate at any given time.

On one estate, the executor was asked to advance money to a beneficiary a day or two after the deceased's house was listed for sale. The beneficiary called numerous times, insisting that we give her her share of the proceeds. But the house hadn't sold yet. There were no proceeds to give her. This is very common. The beneficiaries don't always realize that the estate doesn't have any money until assets are sold or cashed in, and transferred to the executor's estate account.

The other thing to take into account is that on every estate, the debts must always be paid in full before the beneficiaries get their shares. It takes time to contact everyone (banks, insurers, suppliers) to find out what was owing, calculate interest, collect in or sell an asset, and pay the bill. Sometimes determining a debt means a long wait, particularly if it's for something like income tax where the amount is not always immediately known.

The executor is under no obligation to give any money to beneficiaries until debts have been ascertained and paid, and assets have been cashed in. That might take a year. It might take much longer if the estate is complicated, such as having a business to wind down or sell, or real estate in another country to sell.

If an executor is willing to advance funds before the estate is fully wound up, there is a procedure for that. The executor can hold back enough money for taxes and expenses and advance the rest to beneficiaries. Even if only one beneficiary is asking for an advance, the executor would likely give every beneficiary the same amount to keep the books simple and the beneficiaries happy. Beneficiaries should be prepared to sign a Release (not the same as a receipt) giving approval of the executor's work to the date of the advance.

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