When a resident’s agreement for occupancy of a retirement village unit or residential aged care room ends, the operator must typically pay an exit entitlement or refundable deposit balance (exit payment). Where the resident has passed away, the exit payment is payable to the deceased’s estate.
When dealing with a deceased estate, it is critical that the exit payment is paid to the correct person or persons. If the exit payment is paid to the wrong person, the operator has not discharged its statutory and contractual obligation to make payment to the correct person and may need to pay the same amount twice. This could leave the operator hundreds of thousands of dollars out-of-pocket.
The challenge operators face is to correctly identify the deceased resident’s legal personal representative/s, as this is the person or persons legally entitled to collect the deceased’s assets and distribute them according to the Will or the laws of intestacy. Generally, this is the executor or administrator of the estate.
Beware of traps and don’t assume
Correctly identifying the legal personal representative/s is not always simple. Deceased estates can be a legal minefield and are often the subject of litigation. Examples of complications that can arise include:
- a resident’s Will being contested;
- a resident passing away without a Will;
- a resident making an “informal” Will which needs to be approved by the Court;
- uncertainty regarding whether a resident’s Will was validly made;
- a resident having made multiple versions of a Will and uncertainty/dispute arising as to which is the most recent valid Will;
- a later valid Will being discovered after administration of the estate has commenced; and
- someone fraudulently representing themselves to be a deceased resident’s legal personal representative.
During a resident’s occupancy of a village or facility, the operator may have dealt with their children or other members of their family. The resident may have nominated one or more next of kin, attorneys or emergency contacts. However, these people may not be (or only one or some of them may be) the resident’s legal personal representative/s after the resident passes away.
Further, a resident may have previously advised the operator of the resident’s executors, or given the operator a copy of the resident’s Will. However, the operator should not assume this information remains current at the time of the resident’s death, as Wills can be revoked and executors changed at any time before the resident passes away or loses capacity.
To avoid potential liability, operators must ensure that exit payments owed to deceased estates are only paid to the resident’s legal personal representative/s.
How can operators protect themselves?
The only way to ensure an operator is absolved from the risk of paying an exit payment to the wrong person is to pay that amount in good faith to the person/s named as legal personal representative/s in an appropriate Grant of Probate or Grant of Letters of Administration. These Grants are documents issued by a Court which prove that the last Will (if there is one) is the true Will of the deceased and confirm the names of the persons who are legally entitled to collect the deceased’s assets.
We have encountered instances in which operators mistakenly believed that a Grant of Letters of Administration is simply a letter from a legal firm confirming they act for the deceased estate. This is not the case – as noted above, it is a type of order issued by a Court.
To complicate matters, there are different types of Grants, including:
- Grant of Probate;
- Grant of Letters of Administration (with the Will);
- Grant of Letters of Administration (Intestacy);
- Grant of Letters of Administration (Limited);
- Exemplifications of a Grant;
- Reseal of a Grant; and
- Order to Administer.
Operators will be aware of their statutory obligation to pay exit payments within certain timeframes. Fortunately, despite these timeframes, both residential aged care providers and Queensland retirement village operators are relieved from the obligation to pay exit payments to a deceased estate until 14 days after the operator is shown the relevant Grant. These operators should utilise this legislative protection and insist on being provided with the relevant Grant before paying exit payments to deceased estates.
In our experience, some operators have made a commercial decision not to insist on a Grant where the amount of the exit payment is small and the estate would not otherwise need to apply for a Grant. In these circumstances, we recommend that operators insist on other measures, such as having the payee/s sign a Deed of Indemnity and Statutory Declaration. However, while this may provide the operator with some additional comfort, it does not afford the same level of protection as a Grant.
Grants not so simple
There are a number of criteria a Grant must satisfy in order to protect the operator from liability. These include, but are not limited to, the following:
- The Grant must have been issued or resealed by an appropriate Court in the relevant jurisdiction.
- Where applicable, a copy of the Will must be attached to the Grant.
- For limited Grants, collection of the exit payment must fall within the administrator’s authority.
- The operator should insist on a copy of the Grant that has been appropriately certified by a suitably qualified witness. The witness’ credentials should be verified.
- The Grant must not have been revoked (for example, where a legal personal representative has been removed for dishonest behaviour, or a more recent Will has been located after the Grant) – this needs to be verified by a search.
- Where applicable, evidence of identification for the legal personal representative/s should be obtained.
In addition, some Courts now issue electronic (paperless) Grants. Not only does this alter the required wording for certification, it also increases the risk of fraud. Operators need to be even more vigilant and adopt additional measures to verify the Grant’s authenticity. In Queensland, electronic Grants are currently in a pilot phase involving a small number of legal firms, including Mullins. We are therefore ideally placed to advise and protect operators in this regard.
Operators should also implement procedures to ensure exit payments to deceased estates, whether by cheque or EFT, are only made to “Estate of [deceased resident’s name]”. Under no circumstances should payment be made in the name of the deceased (e.g. deposited into the deceased’s personal bank account), a personal representative, an attorney, next of kin, a law firm or beneficiaries.
How we can help
To adequately protect operators of retirement villages and aged care facilities, it is essential that they adopt robust, documented procedures to ensure exit payments are always paid to the correct person. These procedures need to be universally communicated, understood and adhered to among relevant staff within the organisation. For each exit payment, detailed records should be maintained of procedural compliance and the evidence relied upon.
Mullins’ independently recognised expertise in retirement villages, aged care and estate law means we can assist operators to navigate this process by:
- reviewing their existing procedures and providing tailored, practical advice on any recommended changes or improvements;
- preparing procedure manuals and checklists for internal use by the operator and their staff, including common pitfalls and what to look out for when reviewing a Grant and arranging payment;
- preparing template letters to legal personal representative/s and solicitors acting for deceased estates;
- assisting to train staff in relevant procedures, including recognising different types of Grants, checking all criteria for an effective Grant, and identifying when further investigation or advice is required;
- advising on record keeping procedures; and
- for operators prepared to pay small exit payments without a Grant, preparing template Deeds of Indemnity, Statutory Declarations and supporting materials, to give the operator additional comfort.
Mullins can also assist operators who would prefer to “outsource” communications with legal personal representative/s, checks on Grants and payment responsibilities.