Dying without a will can mean:
Dying without a valid will is known as dying 'intestate'. Intestacy arises:
Intestacy means that the deceased's estate will likely be distributed other than as the deceased intended. Instead, how the estate is distributed will be determined by legislation, with the estate being distributed among the deceased's nearest blood relatives. This can lead to bitter and costly disputes over inheritances that inevitably reduce the size of the estate.
Intestacy also means that the will does not appoint an executor, so an administrator must be appointed. Applying to the court for letters of administration is similar to applying for probate of a will, but does often lead to additional costs and complexities.
If you die without a valid will, then your estate will be distributed according to intestacy rules. These are default rules which:
The default rules mean that you will not be able to:
When a deceased's estate is located in more than one jurisdiction, two statutory schemes may govern distribution of the estate. Generally:
The definition of 'spouse or partner' varies between the states and territories – as do their entitlements under law.
For example, if the deceased has no surviving children then:
Different state and territories will also treat the simultaneous death of spouses in different ways.
In Victoria, the method of seniority is used to determine who died first. This means that:
In that example, if the couple has no children, then the family home passes to the younger spouse's parents, effectively diverting the relationship assets to one side of the family.
If the deceased dies without a valid will, then they will have lost an opportunity to put in place appropriate structures (such as a will with a testamentary discretionary trust) to minimise the risk that third parties will gain access to the estate. Common scenarios where a third party may gain access to a deceased's estate include where:
You can read an earlier ClearLaw article about the advantages of discretionary testamentary trusts here.
It is not simple to determine who is most eligible to apply for administration. The court has a very wide discretion as to whom it will grant administration, but in most cases whoever is entitled to the largest share in the estate is considered the most suitable.
Administration is an important role because administrators are in charge of splitting and distributing the assets. This can be done in many different ways, including where it is in the administrator's own interests rather than the interest of all beneficiaries. While this situation can be disputed by contesting the estate, it can cause greater administration costs and will also increase the time required to distribute the estate.
Efficient and timely administration of the estate is important because, until an administrator is appointed, the beneficiaries of the estate will not have access to any estate assets, including cash in the deceased's name. This may be a problem in single income households, where members of that household may have to wait until Letters of Administration are granted before they can access the deceased's assets.
Tax is a major consideration in the estate planning process to ensure that the potential taxation impact of distributing particular assets is reduced to a minimum. Where a person dies intestate, it is much more difficult to plan for, and effect, distributions in a tax effective way.
Depending on the marginal tax rates of different beneficiaries, an intestacy could potentially lead to an overall imbalance in the distribution of an estate due to higher rates of tax payable by some beneficiaries.
In contrast, when preparing a will, the will maker and their advisers can assess opportunities to manage, and reduce, the tax implications of assets passing to the deceased's beneficiaries.
Among the many benefits of making a valid will, a will maker can:
For more information, contact Maddocks on (03) 9258 3555 and as to speak to a member of the Private Client Services team.
You can read earlier ClearLaw articles on a range of estate planning topics here.
Julian Smith is a partner in the Maddocks Commercial team.
Julian advises extensively in the following areas:
Julian advises clients ranging from public companies servicing the wholesale financial services market to high net worth individuals and their advisers.
Julian has been with Maddocks since undertaking articles in 2001.
The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user's legal rights and liabilities. To assess their suitability for the user, legal accounting and financial advice must be obtained.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.