A valid Will determines how your estate is dealt with after you die. Your Will can appoint an appropriate family member, trusted friend, or professional to administer your estate (your executor), nominate guardians for young children, determine who will receive your assets and give direction for specific funeral and burial arrangements.
Without a Will, the finalisation (administration) of your estate could be left to somebody you would not wish to involve, and the distribution of your assets will be pre-determined by legislation. This is likely to be more stressful, complex and costly for your loved ones.
No matter what your age, health status or financial circumstances, dying intestate (without a Will) is likely to create an additional burden on your family and will prevent you from having a final say in how your estate should be managed and distributed.
What happens to your estate when you die without a Will?
If you die intestate your assets are distributed according to pre-determined formulae set by legislation in the relevant jurisdiction. Essentially, the rules provide for a specific order of distribution to the deceased person’s next of kin, depending on each situation.
In New South Wales, the Succession Act 2006 deals with the distribution of an intestate estate. In such cases, ‘spouse’ includes de facto partners and those in a domestic partnership with the deceased (as prescribed by law). Generally, the more common scenarios are:
- If the deceased leaves a spouse and no children, or a spouse and children who are all also the spouse’s children, then the spouse is entitled to the whole estate.
- If the deceased leaves a spouse and children who are not the spouse’s children, the spouse is entitled to:
- the deceased’s personal effects; and
- a statutory legacy which is adjusted by the Consumer Price Index ($573,866 as of 1 July 2024), plus interest if not paid within one year from the date of death; and
- one-half of the remainder (if any) of the estate
The balance of the estate (if any) is shared equally between the deceased’s children.
- If the deceased left no spouse but left children, then the children will inherit the whole of the estate in equal shares.
This is a general overview only, and the circumstances of each case must be considered in their entirety. The formula can become complicated, particularly in cases involving blended families and multiple relationships and the Act provides for a range of scenarios. For example, there are provisions about how the estate is distributed if the deceased leaves more than one spouse (with and without children) and various other provisions dealing with the distribution of the estate among relatives (i.e., parents, siblings, grandparents) if there is no surviving spouse or children.
There are also provisions about a spouse’s right to elect to acquire property from the intestate estate, and provisions dealing specifically with indigenous Australians and intestacy.
What can go wrong?
The formula set out in legislation attempts to reflect society’s expectations as to who should benefit from a person’s estate. The problem, however, is we all know that most families are not ‘standard’ – many are blended, and there is often unequal distribution of personal wealth between family members.
Dying intestate therefore may not guarantee a fair or intentional estate distribution (according to the deceased) and may result in undesired consequences, such as:
- family members and/or those important to the deceased completely missing out from an inheritance;
- a disproportionate distribution of assets between family members or the possibility of leaving out more needy beneficiaries;
- a distribution to a family member with whom the deceased shared no significant or meaningful relationship.
Letters of Administration
In the absence of a Will appointing an executor, dying intestate often necessitates an application to the Supreme Court for letters of administration before the estate can be administered. In such cases, the applicant is typically a spouse, partner, child or other close relative of the deceased with a beneficial interest in the estate. In addition to the extra stress this can cause a family, the court-appointed administrator may not necessarily be someone the deceased would have chosen to manage their affairs. There are many dynamics within families and sometimes it may be preferable for a neutral party to be involved in the administration.
More convincing reasons to make a Will
Finally, the failure to make a Will may forego opportunities for estate assets to be treated more tax effectively or to protect vulnerable beneficiaries. This is usually affected through a testamentary trust, which is a trust contained in a Will that comes into effect upon the testator’s death.
A testamentary trust can provide flexibility and control in asset distribution amongst beneficiaries and may assist in protecting assets from third parties and creditors. Assets can be preserved so that they can pass through future generations and the trust can provide for different scenarios.
Summary
Having a Will gives you a voice when you die. Your testamentary wishes can be made known, and your beneficiaries identified. Good estate planning can also help provide for more tax-effective distribution of your assets and protect vulnerable beneficiaries.
No matter what your age, health status, or financial circumstances, putting off making a Will just doesn’t make sense.
This information is of a general nature only and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact us on (02) 9818 2888 or email [email protected].