You may have heard the statistic that about half of Australian adults do not have wills. This means that many of us are rolling the dice when it comes to what happens to our assets when we die – and not everyone understands the rules of the game.
In this article, we will explain some of the complexities that arise when someone dies without a will.
If someone dies without a valid Will, he or she is said to have died "intestate"; or in a state of intestacy. The Administration and Probate Act 1919 (SA) ('the Act') sets out the rules for administering an intestate estate.
It is worth remembering that when we talk about the assets in a person's estate, we are referring to assets held by the deceased person in their sole name.
But it'll all go to my partner anyway, won't it?
This is one of the remarks we often hear when people discuss their reason for not making a will and it's not always true. The Act sets out the distribution of an intestate estate, and how your assets pass depends on your particular circumstances.
If the deceased is survived by a spouse or domestic partner and no children: it is true that the total estate does pass to the surviving spouse or domestic partner.
What if there is a spouse (i.e. an ex-husband or wife where there has been no actual divorce) and a current domestic partner? Then they will take an equal share of the estate. In this instance, the domestic partner may have some work to do to prove their status – we'll address this in more detail shortly.
If the deceased is survived by a spouse and a child or children: firstly we have to look at the value of the estate. This is determined by the gross value of the assets minus the sum of the debts, funeral expenses, testamentary expenses and costs of administering the estate; and minus the value of the personal chattels of the deceased, if survived by a spouse or domestic partner.
If the value of the estate is over $100,000 then the spouse or domestic partner (or both) is entitled to the personal belongings of the deceased, the first $100,000 of the estate and half of the remaining balance. The other half of the balance goes to the child or children, in equal shares if there are more than one.
If there is no spouse or domestic partner but a child or children, the child or children receive the whole of the estate (again, in equal shares if there are more than one). If the children are under 18 the funds will be managed by the Public Trustee.
We aren't done yet, folks. If there is no spouse or domestic partner and no children, but there is a surviving relative or relatives the relative or relatives (or their children) are entitled to the whole of the intestate estate. There's an order to the definition of relatives: the estate will go to parents first; if there are no parents – siblings; if there are no siblings – nieces and nephews.
If the deceased is not survived by a partner, spouse, children or any other relatives, the state government receives the estate.
There are many people who find the default distribution unsatisfactory and we see a number of clients who want to leave gifts to friends or charities. Making a will gives you greater flexibility and choice about who gets your assets. The chart below provides a handy overview of the distribution rules under the Act.
A domestic partner may have some extra legal work to do
A legal spouse (those recognised by marriage or registration under the Relationships Register Act 2016 (SA)) will automatically be entitled to the distribution terms outlined above.
If the relationship has not been codified through one of these means, then the surviving domestic partner will have to prove their status by obtaining a declaration as to domestic partners as outlined in the Family Relationships Act 1975 (SA).
This is an application to the Court in which evidence of all aspects of the relationship – duration of the relationship, how finances were handled, nature and extent of common residence and so on – are presented to the Court.
A copy of this application must be served on anyone who would be affected by the final order – in other words, whichever relatives stand to inherit – and any such person is given an opportunity to respond. This may include contesting the application.
The process of gathering sufficient evidence and making the application can add thousands of dollars in legal fees and several months of delay to the process of administering the deceased's estate. The delays can, in some estates, reach a point where the bank starts to talk of mortgage foreclosure proceedings. Of course, it also creates additional emotional stress in what is already a difficult time for someone grieving the loss of their partner.
After proving his or her status, a domestic partner has other obstacles to overcome, including making a formal election to acquire the house (and making a further application to the Court for an extension of time if the election is overlooked). This could all be avoided if there was a will in place.
Overseas or interstate beneficiaries
If any of the beneficiaries are not a resident of South Australia, are minors or otherwise lacking legal capacity, the Public Trustee may be involved, unless an agent has been appointed.
This is because the Act stipulates that, if there is no duly authorised agent, the administrator must deliver, convey and transfer any estate property destined for one of these beneficiaries to the Public Trustee who will then hold the property on behalf of the relevant beneficiary.
Not making a will means that should something happen to you, you potentially run the risk of your assets and personal belongings not being distributed as you had intended. Further, if you have a domestic partner who is not legally recognised as your spouse, they will have to prove their status before being entitled to any share of your estate. Creating a will removes these issues. If you are one of the estimated 50% of Australian adults without a valid will, it might be time to make an appointment with a lawyer who specialises in Wills & Estate Planning.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.