What should an estate trustee, lawyer, or financial institution do when they hold money that cannot safely be released?
Rule 72.02 of the Rules of Civil Procedure provides guidance on this question. It allows stakeholders to pay disputed funds into court, protecting them from liability while ensuring the money is preserved until the court determines entitlement.
Why Rule 72.02 Matters
Rule 72.02 as a whole acts as a protective mechanism for anyone holding funds that may form part of an estate or trust. When there is a risk of paying the wrong person, or of being unable to obtain proper instructions, the estate trustee can apply to the court to transfer those funds into the custody of the Accountant of the Superior Court of Justice.
Once the money is paid into court under a judge’s order, an estate trustee may also seek a discharge from further responsibility.
Typical Scenarios Where Rule 72.02 Applies
- Conflicting Claims: When multiple parties claim entitlement to the same funds, Rule 72.02 allows the estate trustee to pay the funds into court, avoiding the risk of wrongful payment.
- Uncooperative Beneficiaries: If beneficiaries are unresponsive or refuse to provide necessary instructions for fund distribution, the rule provides a mechanism to move the funds into court custody.
- Unclear Beneficiary Entitlements: In cases where the rightful beneficiaries are not clearly identified or there is uncertainty about their entitlements, paying the funds into court ensures they are held securely until resolved.
- Pending Legal Disputes: When there are ongoing legal disputes regarding the distribution of an estate or trust, Rule 72.02 allows funds to be held by the court until the dispute is settled.
In each case, the goal is to protect the estate trustee and preserve the property until entitlement is determined.
Takeaway
Rule 72.02 is a practical, risk-mitigating tool for trustees, lawyers, and institutions who face obstacles in distributing funds.
By paying the money into court and seeking discharge, the estate trustee ensures that:
- The property remains preserved;
- Competing claims can be resolved fairly; and
- Their fiduciary or contractual obligations are preserved.
Thanks for reading!
David Morgan Smith and Zahra Panju (student-at-law)