Passing away without a valid will can mean:
- the distribution of your assets may not reflect your wishes;
- you can not put structures in place that can assist your beneficiaries to minimise risk of third parties (including creditors) accessing their succession;
- the cost of administering your estate can be higher, particularly if there are trouble locating beneficiaries; and
- more tax payable on the distribution of your assets.
What is ‘intestacy’?
Here is an overview to understand deeper. Passing away without a valid will is known as dying ‘intestate’. Intestacy arises:
- where the deceased dies without a valid will; or
- where the deceased leaves a valid will, but the will ineffectively disposes of all the person’s estate.
Intestacy means that the deceased’s estate will likely be distributed other than as the deceased intended. Ideally, how the estate is distributed will be determined by legislation, with the estate being distributed among the deceased’s nearest blood relatives. There may be an inevitable reduction in the size of the estate, since this situation can lead to a bitter and costly disputes.
Additionally, Intestacy means that the will does not appoint an executor, therefore, there must be an appointed administrator. Applying to the court for letters of administration is the same as applying for probate of a will, but does often lead to additional costs and complexities.
Distribution upon intestacy – the default rules and how they may affect you If you pass away without a valid will, then your estate will be divided according to intestacy rules. These are default rules which:
- decide to whom the estate is distributed and in what proportions; and
- are complex and will vary depending on the value of the estate, the relevant jurisdiction and the type and number of family members you leave behind.
The default rules mean that you will not be able to:
- guarantee your assets are distributed to close friends or remote relatives – that is, those not covered by default rules; and
- eliminate certain individuals from receiving distributions.
Differences between intestacy laws in states and territories
Location Of Assets
There are two statutory schemes may govern distribution of the estate if a deceased’s estate is located in more than one jurisdiction.
Generally:
- movable property (for example, motor vehicles, pets and personal effects) is governed by the default rules in the place where the deceased resided; and
- immovable property (for example, land, a house, property rights) is governed by the default rules in the place where the property is located.
Spouses
TThe definition of ‘spouse or partner’ varies between the states and territories even on their entitlements under law.
For example, if the person who died has no surviving children then:
- the laws in New South Wales, Victoria, Queensland, South Australia, Tasmania and the Australian Capital Territory provide that the surviving spouse is entitled to the entire estate;
- the laws in Western Australia and the Northern Territory provide that a surviving spouse is only automatically entitled to the entire estate if the deceased has no surviving parents or siblings.
Simultaneous Death Of Spouses
Depending on state and territories, it will also treat the simultaneous death of spouses in different ways.
The method of seniority is used to determine who died first in the state of Victoria. This means that:
- the older spouse is assumed to have passed away first and their estate is then administered before the younger spouse’s estate – which can be a problem where the spouses own an asset jointly; and
- the jointly owned asset forms part of the younger spouse’s estate if there is no valid will, and will be dealt with through intestacy laws.
In that example, if the couple has no children, then the family home passes to the younger spouse’s parents, effectively diverting the relationship assets to one side of the family.
Conclusion
Among the many benefits of making a valid will, a will-maker can:
- assign to transfer assets to relatives in greater or lesser proportions than would result from the default rules;
- assign to transfer assets to a close friend or a remote relative (or an organisation which is important to the will maker) who would otherwise be excluded from any benefit under the default rules;
For more information, contact us now on 1300 844 678 or send us an enquiry via our form here.
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