What Happens to Units When a Unit Holder Dies in Papua New Guinea?

Units in a unit trust are personal property, like shares or money in the bank. When a unit holder dies they pass to whoever is entitled to the estate, but the mechanics are set by the Capital Market Act 2015 and the trust deed rather than by the general law of succession alone.

The executor or administrator steps in

The personal representative therefore has a choice. They may have themselves entered in the register in place of the deceased, in their capacity as executor or administrator, and then exercise every right attached to the units: receive distributions, vote at meetings, lodge withdrawal requests and, when the estate is ready, transfer the units to the beneficiaries or sell them. Or they may, without becoming registered, instruct the scheme’s trustee to transfer the units to the beneficiaries or redeem them and pay the proceeds to the estate. The deed sets out the forms required. Section 255 applies equally where the deceased was “beneficially entitled to be registered”, for example because an accepted application had not yet been entered.

What the scheme’s trustee will ask for

The trustee of the scheme owes duties to all members and will not change the register on an unsupported request. It will normally require:

• a certified copy of the death certificate;
• a grant of probate (where there is a will) or letters of administration (where there is none) issued by the National Court under the Wills, Probate and Administration Act, or a resealed foreign grant; and
• a signed request or transfer form in the deed’s prescribed form, with identification of the executor or administrator.

For small estates some trustees accept a statutory declaration and indemnity instead of a grant, but that is a matter of the deed and the trustee’s policy, not a right. Until the documents are in order the units stay in the deceased’s name and distributions accumulate for the estate. The general law of administering an estate is covered in the site’s wills and inheritance series.

Marking units as held on trust

Section 255(2) allows a unit held by a trustee, executor or administrator in respect of a particular trust to be marked in the register, with the consent of the scheme’s trustee, so as to identify it as held for that trust. This is useful where an executor holds units for a child’s inheritance until the child comes of age, or where a family trust takes over the holding. The marking does not make the beneficiary a member; the registered holder remains the person with the rights and duties.

Section 255(3) then states the general rule: “Except as provided in this section, no notice of any trust expressed, implied or constructive shall be entered on a register or branch register”, and no liability is affected by anything done under the section. The scheme’s trustee deals only with the registered holder and is not required to investigate who stands behind them. A beneficiary who thinks the executor is misapplying the units must pursue the executor, not the scheme.

Joint holdings pass to the survivor

Many couples hold units jointly. The Act treats joint holders as a single member for counting purposes (section 187(4)(a)), sends notices to the first-named holder (section 219(2)) and counts only the first-named holder’s vote if the joint holders disagree (section 240). On the death of one joint holder the units pass to the survivor by operation of law and do not form part of the deceased’s estate; the survivor produces the death certificate and asks the trustee to amend the register. Spouses who want their share of a joint holding to go to their children rather than to each other should hold units separately and deal with them by will.

Proxies, pending requests and sales by the estate

A proxy vote cast after the member’s death remains valid unless the trustee received written notice of the death before the meeting (section 237(1)(a)). A withdrawal request lodged before death is generally processed in the ordinary way, with the proceeds paid to the estate. When the executor sells units in the course of realising the estate, no prospectus is needed: Schedule 6 lists as an excluded issue any sale of a unit “by a personal representative, liquidator, receiver or trustee in bankruptcy … in the normal course of realisation of assets”. If units are listed on PNGX the executor sells through a broker instead; if the scheme is not liquid, the estate must await a withdrawal offer like any other member. See withdrawing.