Dying without a will can cause enormous problems for your loved ones, including additional costs. uncertainty and the potential for the wrong people inheriting your assets

A valid Will determines how your estate is dealt with after you die. Your Will can appoint an appropriate family member or trusted friend to administer your estate (your executor), nominate guardians for young children, determine who will receive your assets and give direction for specific funeral and burial arrangements.

If a person dies without a Will, this is known as dying ‘intestate’. If you were to die intestate, the administration of your estate could be left to somebody you would not wish to involve, and the distribution of your assets will be pre-determined by legislation. This is likely to be more stressful, complex and costly for your loved ones.

No matter what your age, health status or financial circumstances, dying intestate is likely to create additional burden on your family and will prevent you from having a final say in how your life earnings should be distributed.

What happens to your estate when you die without a Will?

If you die intestate your assets are distributed according to pre-determined formulae set by legislation in the relevant jurisdiction. Essentially, the rules provide for a specific order of distribution to the deceased person’s next of kin, depending on each situation.

This distribution is referred to as the rules of intestacy or statutory orders and each jurisdiction has a slightly different process. Importantly, in all jurisdictions these rules do not consider the wishes of a deceased person nor his or her unique circumstances – generally, without a valid Will, the rules cannot be altered to take account of any verbal or known wishes of the deceased.

What can go wrong?

The Succession Act 2006 sets out a formula as to who gets what, and in what proportions, if you were to die intestate. The formula attempts to reflect society’s expectations as to who should benefit from a person’s estate. The problem is however, we all know that most families are not ‘standard’ – many are blended, and there is often unequal distribution of personal wealth between family members.

Dying intestate therefore cannot guarantee a fair or intentional estate distribution (according to the deceased) and may result in undesired consequences, such as:

• family members or friends completely missing out from an inheritance;
• a disproportionate distribution of assets between family members or the possibility of leaving out more needy beneficiaries;
• a distribution to a family member with whom the deceased shared no significant or meaningful relationship.

There are a number of examples of how the formula set out by the Succession Act could fly in the face of what the deceased would have wanted.

Scenario 1

If a married couple has separated but not divorced, the ex-partner is still considered a ‘spouse’ for the purposes of the Succession Act. So, if there was no other de facto or children (or if the children were the children of that marriage), the ex would inherit everything.

Scenario 2

Consider a man in a second marriage or with a de facto partner. The man has children of a former marriage however the current partner has no children. If the man dies without leaving a Will in New South Wales, the partner will receive all of the man’s personal effects, a statutory legacy (approximately $573,000 as at 1 July 2024, and indexed each year), and 50% of whatever is left after payment of the $573,000. The children will share in the remaining 50%. So, if the estate was only worth $500,000, the partner would get everything.

But, what if there is more than one spouse? For example, the man was separated (but not divorced) from his wife and had a de facto. The Succession Act would consider him to have two spouses and the spouses may be left dividing the amounts referred to above.

Scenario 3

Consider a young woman who does not have a spouse or de facto, and has no children. Her parents divorced when she was younger and her mother has raised her – the young woman has no relationship with the father. If the young woman died without a Will, all of her estate (which may include substantial life insurance through superannuation) would be divided equally between the mother and the father.

Other reasons to make a Will – administrators and executors

An executor is the legal personal representative appointed under a Will to oversee administration of the estate. An administrator has a similar role however is appointed by the Court when a person dies intestate.

Generally, the next of kin may apply for this role however this may not be desirable in some circumstances. There are many dynamics within families and sometimes it may be preferable for a third party to be involved in the administration, removing the emotional factor and bringing more impartiality into the role. For example, if you are divorced, don’t have a new spouse/de facto, and your children are under 18, your children’s surviving parent – that is, the ex with whom you may now have a very difficult relationship – could very well be the person appointed by the Court to administer the estate until your children turn 18.

You may say ‘why can’t my brother or sister do the job’? The answer is that it is only through a Will that you can nominate a specific executor of your estate. If you want a say in who is making the decisions, you need to make a Will.

Other reasons to make a Will – flexibility (including tax)

Finally, the failure to make a Will may forego opportunities for estate assets to be treated more tax effectively or to protect vulnerable beneficiaries. This is usually affected through a testamentary trust, which is a trust contained in a Will that comes into effect upon the testator’s death.

A testamentary trust provides flexibility and control in asset distribution amongst beneficiaries and assists in protecting assets from third parties and creditors. Assets can be preserved so that they can pass through future generations and the trust can provide for different scenarios.

Summary

Having a Will gives you a voice when you die. Your testamentary wishes can be made known, and your beneficiaries identified. Good estate planning can also help provide for more tax-effective distribution of your assets and protect vulnerable beneficiaries.

No matter what your age, health status, or financial circumstances, putting off making a Will just doesn’t make sense.

This information is of a general nature only and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact please contact Stephen Lynch, Emily Priestley  or Mumtash Assudani (02) 9923 2321 or slynch@somervillelegal.com.au