While the life expectancy of the average Australian is increasing, and we’re retiring later than ever, that is no reason to put off your estate planning. If you die without a Will, your estate may be distributed in a way that is contrary to your intentions and which causes distress to loved ones.
Having the proper documentation in place can help to protect a client’s wishes and reduce the emotional stress and turmoil on their loved ones, writes Troy Palmer and Isobel Feben.
What do each of the following situations have in common?
- A retiree and pensioner, who has just lost his wife to cancer, is forced to sell his family home and transfer two-thirds of its value to his children
- A backpacker staying temporarily in a woman’s garage receives her whole estate when she passes away, because he claims to have been her boyfriend
- A seventeen year old child with spendthrift tendencies and an upcoming schoolies trip is soon to be handed seven million dollars, being a lifetime of his father’s hard work
Answer:
- A person died without a Will; and
- Their estate was distributed in such a way that one could only infer was not what they would have wanted, had they documented their wishes in a Will
If you pass away without a Will in Australia, you are said to have died ‘intestate’. Your legal personal representative (usually your next of kin) will be legally obligated to distribute your assets to certain people in accordance with a rigid statutory formula.
This can see surviving spouses and children suffer through a range of complex and undesirable intestacy circumstances — on top of the already heavy burden of having a loved one pass.
When a person who is married or in a de facto relationship and has children dies without a Will, the following rules will apply:
- Their spouse will receive a portion of the estate — in Victoria this will be the personal chattels, the first one hundred thousand dollars of the estate and one-third of the residuary; and
- In most Australian states, the child or children will receive the remaining two-thirds in equal shares
While this mandatory division provides a solution, it can be far from ideal. For example, as in the example above, where the home is owned by one member of a couple who passes, the surviving spouse may be forced to sell the home in order to distribute two-thirds of the total estate to the children.
If there is a family member with special needs or who requires extra assistance, the legal representative will not be able to provide them with the funds they may need (and which the deceased person may have wanted to provide). Or, if there is a beneficiary who struggles with managing money, there will usually be no option to hold the inheritance in a protective testamentary trust.
Recently we worked with a widow whose husband passed away without a Will and with an eight million dollar estate. Under the law, two-thirds of the estate was to be locked away for close to 18 years until her one year old child (the only child) was to come of age.
In situations such as these, children can be left with large sums of money and assets over which they will have full access the moment they turn 18. It is often undesirable for children to be gifted large sums of money at such a young age.
We have also seen situations in which a parent has been forced to transfer estate assets to a family member that neither they nor their deceased spouse would have wanted to happen. Estranged children and children who are already financially secure can lead to a person’s estate being distributed in an unfair and unwanted way.
Having a properly drafted and valid Will is vital to ensure that your final wishes in regard to your assets are carried out, and that your family will be provided for on your passing. At Mills Oakley, we work closely with our clients to create Wills that accurately reflect their wishes and intentions, giving our clients the peace of mind knowing that their wishes will be carried out on their passing.
Troy Palmer is a Special Counsel at Mills Oakley and a Law Institute of Victoria Accredited Specialist in Wills and Estates. Troy specialises in estate planning, estate litigation, deceased estate administration and applications for Supreme Court Grants in relation to probate and intestacy.
Isobel Feben is a lawyer at Mills Oakley and specialises in estate planning, estate litigation and legal issues associated with aged care (including granny flat arrangements and other co-living arrangements, retirement villages and aged care facilities).
