It’s a situation I see more often than you might think.
A client comes into my office after the death of their last surviving parent and says something like:
“Mum has just passed away. We need to do probate.”
That’s when I ask the obvious follow-up question:
“What happened when your other parent died?”
The answer is sometimes surprising.
Nothing.
Probate or letters of administration were never obtained. No assets were transferred. No shares were moved into the surviving parent’s name. No records were gathered. Sometimes this has been the case for 10 or even 15 years.
At the time, the surviving parent may have continued living in the house, using the bank accounts and managing things informally. Life moves on, and dealing with the paperwork after a death is rarely anyone’s priority.
It is often only years later, when the second parent dies, that the family realises the consequences of leaving the first estate unresolved.
The Practical Problems
When an estate isn’t administered after the first parent dies, things become far more complicated later.
Instead of dealing with one estate, we may need to deal with two estates at once. That can mean:
- applying for probate for both parents
- reconstructing records from many years earlier
- locating assets that were never formally transferred
Then there are the missing documents!
Over the years I’ve seen families struggle to locate things like:
- the Shareholder Reference Number (SRN) for shareholdings
- the tax file number (TFN) of a parent who passed away years earlier
- old bank account records
- paperwork confirming investments
Don’t even get me started on missing superannuation!!
Before everything moved online, many of these details existed on a single piece of paper that was easy to misplace.
Years later, tracking that information down can take considerable time and cost.
It Also Costs More
Administering an estate years later almost always costs more than dealing with it promptly.
By that stage, important records are missing, assets may have changed, and the estate may need to be unravelled years after the fact. What could have been simple often becomes far more complicated.
A New Tax Risk: The “Double Death” Problem
Beyond the administrative headaches, there may now be serious tax consequences for delayed estates.
Recent draft guidance from the Australian Taxation Office (ATO) has raised concerns about what The Age has called a “double death tax trap.”
The issue arises where:
- One parent dies, leaving assets to the surviving spouse, but
- The estate is not finalised before the second parent dies.
Under existing tax rules, assets passing through an estate usually receive favourable capital gains tax (CGT) treatment, including rollovers and potential main-residence exemptions.
However, the ATO’s draft interpretation suggests that these concessions may not apply if the surviving spouse never actually becomes the legal owner of the assets before they die.
In practical terms, that means:
- an asset may be treated as though it was sold by the second estate, and
- CGT could become payable on the increase in value between the first and second death.
For families dealing with high-value assets such as property or long-held shares, this could potentially result in large and unexpected tax bills.
The Simple Lesson
When someone passes away, it can be tempting to delay dealing with the estate.
Families are grieving, life is busy, and things often appear to be working fine as they are.
However, from a legal and financial perspective, leaving an estate unattended for years can create unnecessary complications, higher costs and, in some circumstances, tax consequences that might otherwise have been avoided.
In short, administering an estate promptly after death is almost always the simplest path.
When someone passes away, dealing with legal and financial matters is rarely anyone’s priority. However, leaving an estate unresolved for years can create complications that are far more difficult and costly to untangle later. Taking steps to properly administer an estate at the time of death can save families significant time, stress and expense down the track.
If you are unsure whether an estate has been properly administered, it is worth seeking advice sooner rather than later.
