There’s a lot of confusion about what happens to what you leave behind if you die without a Will. Here are a few important facts worth knowing, writes Susan Bonnici, Estate Planning Solicitor at Equity Trustees.
More than 50 per cent of Australians do not have a valid Will according to research by finder.com.au*. This can create a huge challenge for family or friends who have to sort out assets that belong to someone who has died if they didn’t leave a Will to provide directions.
Dying “intestate” or without a valid Will can mean your hard-earned assets end up in the wrong hands, wrangled over and depleted in the courts, or sold inadvertently.
A common misconception about dying without a Will is that all your money goes straight to the government. There is usually a long process to go through before it gets to that stage.
When a person dies without a Will, an administrator is appointed by the Courts to deal with their assets. Each State and Territory in Australia has Intestacy laws that govern how the administrator divides the assets.
The first thing the administrator needs to do is to work out what assets the person owned. They will then pay any funeral expenses and other debts and taxes they owed. The remaining assets will then be distributed to eligible beneficiaries according to intestacy laws. If the person who died had a spouse (including a de facto partner) and children, then they will receive the estate assets.
If the person had no partner or children, the next in line are their parents, followed by their siblings if their parents have died. If a person doesn’t have surviving parents or siblings, then the assets will be distributed to grandparents, then aunts and uncles, then cousins. If there are no surviving relatives after all avenues are exhausted, then the estate will go to the Government.
It sounds easy and relatively stress-free, but actually, this process can be lengthy and expensive. It can delay the distribution of an estate, potentially trigger costly court battles between family members or friends of the person who died, and can create a huge amount of stress for those left. It’s not what anyone wants to leave behind.
Sometimes, when people are going through a separation process, they become so focused on the division of assets and the custody of children, that they forget about estate planning documents (their Will, Powers of Attorney and Superannuation beneficiary nomination forms) in which they may have nominated, years before, their partner to important roles – or to receive significant entitlements.
That information usually makes anyone in the process of a separation sit up and take notice. And so it should.
If a person dies before a divorce is finalised, then any provisions made for their ex-partner in their Will continue to apply. Similarly, if there is a separation and neither side has a Will in place, then it would be open to challenge under the intestacy laws – the point which would be argued would be whether they are still considered “partners” for the purpose of the estate distribution.
To prevent this from happening, it’s really important to sign a new Will as soon as possible when going through a separation to make sure that your children and loved ones are protected and that your assets are distributed in accordance with your wishes.
This new Will revokes the previous Will if you had one. If your children are still minors, then you may also need to consider who you want to appoint as their guardian and Trustee (that is the person who looks after and invests the proceeds of your estate – which may include assets from the partnership – in trust for them until they are old enough to manage it themselves).
If you don’t make sure you have a valid Will, you risk losing the opportunity to have your estate distributed the way you want it to be. For example, the laws of intestacy state that to be considered a “partner” then you must be in a domestic or de facto relationship with that person for at least two years or have a child together.
So, on the flip side of relationships that might be coming to an end, if yours is still in what is considered the early stages – you need to take steps. If you have been in a serious relationship with someone, and you would like them to receive part of your estate, but your relationship hasn’t passed the two-year milestone or you don’t have a child together, then it doesn’t satisfy this criteria, and they won’t receive anything.
There is also the risk that relatives who don’t have the right intentions in mind, may step forward to manage your estate funds on behalf of any children you have left behind. Having the right people appointed to the executor and trustee role is a vital part of estate planning, and without a Will in place, you don’t get a chance to say who you would like this to be.
You may also have specific wishes about leaving sentimental items to certain family members, including children, or friends, or leaving a gift to a charity that is important to you. Unless you document this in a valid Will, then these wishes won’t be enforceable and potential beneficiaries will miss out on the gifts that you intended for them. This is really unfortunate when family heirlooms (which may have significant sentimental value or tradition – even if they are not very valuable in the financial sense) are sold and lost forever.
Another factor that makes proper estate planning even more important is when there is a vulnerable beneficiary, such as a child or family member with a disability. A valid Will, and expert legal advice, can ensure that there are the proper structures in place to protect and secure the assets of this person for their lifetime. Without a Will, it would be up to the Courts and the intestacy laws to work out their entitlements (if any) and how they will be looked after.
One of the most precarious situations is having a child with special needs where the requirement for individual care may mean a higher proportion of the assets goes to them. If you don’t put a valid Will in place that is clear about your recognition of these needs and your intentions to care for that person, then the standard statutory formula under intestacy may apply, leading to them receiving much less than you intended.
A new Will doesn’t change the nominated beneficiaries on “non-estate” assets such as superannuation and life insurance, so make sure you adjust these accordingly – those funds will have specific process requirements for that purpose and can assist you. If you have children who are minors, then that alone is reason enough for getting advice when you are establishing your Will and appointing someone as their guardian if anything happens to you.
To be legally enforceable, an Australian Will must be made by someone over 18 and written without undue influence from someone else. The person making the Will must also be of sound mind and awareness. Lastly, the Will must be signed and witnessed properly.
While a Will isn’t always as straightforward as you might imagine from what you’ve seen in the movies, it is better to have one in place than not. Engaging professional estate planning services can help ensure your estate is passed on according to your wishes and will help minimise future conflict and legal and administrative costs in the future – and that’s not a bad legacy to leave behind.
*2018 finder.com.au survey of 2,011 Australians