Bereavement is always difficult for friends and family. If you don't create a will before you pass away, it could lead to an even more strenuous situation for those you've left behind. No matter how old you are, having a plan in place for the disposal of your estate will make this time easier for the people you care about.
When you die, your estate—all your property and assets—will need to go somewhere or to someone. Your will is a legal plan of how your estate will be distributed and managed at this time.
If someone dies without a valid will, their next of kin or another appropriate person must apply for Letters of Administration—a court order enabling them to act as the Administrator of the estate and then distribute it according to the relevant provisions of The Administration and Probate Act 1958. This process is referred to as intestacy. Unfortunately, the eventual outcome of intestacy may not reflect the true intentions of the deceased.
What is intestacy?
Intestacy is the condition of your estate if you die without a valid will. Failure to prepare a will means you have no formal arrangements in place for the disposal of your property and assets.
Intestacy laws set out the way in which an estate will be distributed when there's no will. This process is very specific and may not reflect your personal wishes for the distribution of your estate.
Having an up-to-date and valid will is the best way to ensure that things go according to plan when you’re no longer around. It also ensures that your hard earned cash and assets are given to the people you want to receive them.
What happens someone dies without a will?
When someone dies, their will cannot be affected until the Supreme Court makes the order for a Grant of Probate. This order establishes the will is legally valid and confirms the authority of the executor.
If the deceased didn't have a valid will, the next of kin must apply to the Supreme Court for an Order of Letters of Administration, appointing them as the Administrator and giving them the power to deal with the assets.
First, the Administrator will make a list of all the assets in the estate. This includes everything from bank accounts and investments to the house, furniture, and the silverware. The Administrator must preserve the condition of these items and assets up until the moment they can be distributed to beneficiaries.
The list of beneficiaries is determined by the intestacy laws in Victoria. The order in which a deceased estate will be distributed is:
- Where the deceased leaves a partner but no children — the partner receives the entire estate.
- Where the deceased leaves a partner and children of that surviving partner — the partner takes the whole of the estate.
- If there are children from another partnership — the deceased's spouse or partner will inherit their personal chattels; the first $451,909, called the statutory legacy, and half of the balance of the remaining estate. Any children will receive an equal share of the remaining estate.
- If one of the deceased's children is deceased but leaves a child or children — then that child or children will receive their grandparent's estate.
- If there is no spouse or domestic partner and no children — the deceased's parents will receive their whole estate. If the deceased's parents are also deceased, the estate will be passed on to the deceased's siblings. If the deceased has no siblings, the estate will pass to the surviving grandparents. If there are no surviving grandparents, then the inheritance will pass to aunts and uncles and then cousins.
- In the event that none of the above mentioned people can be found — the government will receive the entire estate.
The statutory legacy is indexed each year for movement in the Consumer Price Index, and the statutory formula for intestacy differs for every state and territory. Intestate assets are distributed according to the relevant statutory jurisdiction, which means that if the deceased had assets in both Victoria and the Northern Territory, the assets will distributed according to the intestacy laws of each state.
How does a will avoid complications?
Intestacy laws cannot account for the unique circumstances in your personal life, they can only attempt to prescribe a fair outcome in very general terms.
The reality is that most personal circumstances are not general. Only you know your unique family situation, the friends you most value, and who will appreciate certain possessions when you are gone.
Intestacy means that you will leave your friends and loved ones with no clear indication of your preferences for who-gets-what. A will provides security and structure to what could otherwise be an awkward and difficult process during an emotionally charged time.
Intestacy laws are unable to take into account the people you feel are most deserving of your estate as it only considers your next of kin. A customised will can ensure a distribution of your estate, in a manner you believe to be fair, in the event of your death.
Consider the following situations where intestacy laws would not deliver a satisfactory result in the event of intestacy:
De facto relationships: While intestacy laws recognise the rights of ‘domestic partners’, there are stringent tests in place to ensure that the relationship did exist. This process could be unnecessarily frustrating or humiliating for your partner. It may also run the risk of your partner missing out entirely.
Special needs children: If you have a special needs child, you need to consider a Disability Trust Will, as this ensures that they will receive their inheritance in a way that will not affect their disability pension.
Exclusion of certain family members: You may have family members who you feel are not entitled to a share of your estate. This unique family circumstance could be ignored without a will.
Friends: There may be people in your life who are not members of your family, but who you feel should be entitled to a share of your estate. This bequest will not happen without a will.
How do I make a will?
Making a good and valid will requires care and effort. There are three main options for constructing your will, namely:
- Follow the will requirements set out in the Wills Act 1997
- Complete a standardised ‘will kit’
- Get a lawyer to help you prepare a will
The safest option is always to have a lawyer prepare your will. A professionally constructed will ensures that it is a valid document, so that the preferences for your estate will be carried out after your death.
A will you have prepared by yourself runs the risk of having legal errors. This will complicate matters for your loved ones when you are gone. If you prepare your own will, and it is found to be invalid, your intended beneficiaries may not receive their share.
Intestacy is the state of a person dying without a valid will. Intestacy laws dictate which of relatives will receive a part or all of your estate.
The arrangements made to the beneficiaries under intestacy laws likely will not reflect how you want your estate is to be divided between your friends and loved ones.
Getting a professional to prepare your will is the best way to ensure that things go according to plan once you are gone.
Do you have questions about intestacy? Call us on 03 9878 5222 to discuss your situation.