Statistics show that about 50% of Australians do not have a will. This is perhaps due to the common misconception that if you die without a will, your family will be able to sort it out and ensure that your wishes are carried out. Unfortunately, it is not always that simple.
If you die intestate (ie without a Will), your estate will be distributed to specific relatives of yours according to a rigid formula set out by the Administration Act 1903 (WA).
Does what I want count?
The intestacy rules may not take into account factors that you would have considered if you were deciding who to leave your assets to. For example, under the intestacy rules:
- your stepchildren won't be entitled to any part of your estate, regardless of whether you considered them to be your own;
- your spouse won't be entitled to all of your estate, even if that is what you would have wanted; and
- your estranged children will be entitled to part of your estate, regardless of how poor your relationship with them was.
What you would have intended, or what suits your circumstances, isn't relevant to the operation of the intestacy rules – the rules are one size fits all.
Consider the example of a 50 year old man, Jack, who died suddenly without a will – leaving a widow, his parents and four siblings. Jack's estate has:
- his home, where he lived with his wife, worth $500,000 (debt free and in his sole name); and
- a bank account worth $75,000.
Pursuant to the intestacy rules, Jack's estate would be distributed roughly as follows:
- his wife would be entitled to $325,000;
- his parents would be entitled to share $128,000;
- his siblings would be entitled to share $122,000.
Under this outcome, Jack's wife wouldn't be entitled to keep the home she had been living in with Jack – as it would be less than her entitlement. Jack's family might have to sell the home in order to pay out the entitlements, leaving his wife homeless and with only $325,000 to buy an alternative home.
But what if my family agree?
Most people are optimistic about how their family will behave in the event of their death and rely on the premise that their family will behave sensibly and with empathy, ensuring that their estate will be distributed in a way that would match their intentions. Thankfully, this can often be the case.
If a family agree that the intestacy rules don't leave a favourable outcome, it is possible for the family to come to an agreement to distribute somebody's estate in a different manner. This agreement is often documented by a "deed of family arrangement".
This option generally presents two hurdles:
- All persons entitled to the estate under the intestacy rules must agree. As you might imagine, this can sometimes be difficult to achieve, particularly when the deceased has come from a blended family or there is a person entitled who might have alternative interests to the remainder of the beneficiaries. Added difficulty can come if a child is entitled to part of the estate. Being underage, the child is unable to give consent to any agreement.
- The agreement reached might be a dutiable transaction under the Duties Act 2008 (ie stamp duty might be payable on it). If you are entitled to property under a will or under the intestacy rules, generally speaking, you can have that property transferred to you for nominal duty. However, duty will only be nominal if what you are receiving matches your entitlement under the will or under the intestacy rules. If you and the other beneficiaries agree that you can get more of the property than you are entitled to, you will need to pay transfer duty on that extra part of the property you are taking which you aren't entitled to.For example, let's say that Jack's family agree that it isn't fair for Jack's wife to be kicked out of her home and decide to give all of the property (ie $500,000) to her. They enter into a deed of family arrangement documenting this agreement and arrange for the property to be transferred to her. In order for the property to be transferred to her pursuant to the deed, Jack's wife will need to pay duty in the amount of $4,085. That amount is significantly more than what it would have cost Jack to have a simple will prepared leaving his wife the property.
Who will organise my estate after my death?
When you make a will, you should turn your mind to who the most appropriate person in your life is, to be the executor of your estate. It's imperative that you have trust and confidence in this person. Your executor will need to organise your funeral, claim your assets, pay your debts and distribute your estate in accordance with your will. If you die without a will, somebody still needs to do these jobs. In the case of intestacy, an administrator is appointed in the place of an executor. They do everything an executor does.
The job of administrator is open to each person entitled to your estate – equally. In Jack's scenario, his siblings are just as entitled to apply as his wife. Generally, all beneficiaries will need to agree to the proposed administrator being appointed. This can often cause complications and delay because beneficiaries might not have trust or confidence in the proposed administrator, particularly in a fragmented family.
Even in instances where all beneficiaries agree to one person being appointed as administrator, problems can still follow. If the deceased person left minor children then those children will be entitled to part of his estate. In such instances the Court won't appoint somebody as administrator unless that person provides the Court with two sureties guarantees – that is, two personal guarantees from someone other than the proposed administrator, who are willing to personally guarantee (to the value of the minor children's entitlement) that the administrator will carry out their job properly and according to law. These sureties guarantees can often be difficult to obtain, causing delay and pain to the person trying to administer the estate.
What should I do to ensure my wishes are carried out?
All of the above can be avoided by making a will – an experience that doesn't need to be arduous or expensive.
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.
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