The importance of a Will – The new intestacy laws
What happens if you die?
At some point, we all think about making a Will. We know it is important to have one, but many people aren’t really sure why. The most important reason to have a Will is because if you die without one (or die with a Will that does not properly dispose of your assets) your estate gets divided as per the laws of intestacy.
The law, as of 1 November 2017 has changed and it is now more important than ever to ensure that you have a valid Will and direct where, how and to whom you want your estate to be directed to.
The Administration and Probate and Other Acts Amendment (Succession and Related Matters) Act 2017 dictates how your estate is to be distributed in the case you die without a Will and most people would not want their estate to be divided in this manner.
For example, under the new laws if you pass away leaving one partner and no children, your partner is entitled to the whole estate. There is no provision for siblings, parents, nieces, nephews or even a charity that is close to your heart. Your partner will get all your real and personal estate including your chattels.
Another example is if you pass away leaving one partner and a child/children from that same partner, your partner is still entitled to the whole estate. That means your child or children will not receive anything pursuant to your estate.
Many people perceive this as an issue, if their partner remarries there is no way to ensure that your child/children receive any benefit under the surviving parents’ estate. Relationships are ever changing and everybody’s circumstances are different, whilst it is presumed that your partner will provide for your child (or for your children equally) this may simply not be the case. Similarly your wishes may be that your children share in your inheritance upon your passing in order to assist them to purchase a house, establish financial security or simply enjoy the financial benefit.
The new laws extend to numerous circumstances to encompass the modern family and step-children, children to different partners etc.
If you pass away leaving one partner and child/children who is not from the same partner, the partner is entitled to your chattels and the ‘statutory legacy’ amount, which is $451,909.00 (this amount is increased each year by CPI).
If your estate is not worth more than the statutory legacy, then your partner is entitled to the whole estate, including your personal chattels.
If your estate is worth more that the statutory legacy, your partner will be entitled to that amount and fifty percent (50%) of the remaining amount plus your personal chattels. Your child is then entitled to the other fifty percent (50%) of the remaining amount and if you have more than one child, the amount is to be divided equally between your children.
The laws are very complicated and quite frankly confusing! We have devised the following scenario to assist – Bob passes away without a Will and his estate is worth $1million. Bob’s Wife Jane and Bob’s two children John and Sarah from a previous marriage survive him.
Bob’s estate will be divided as follows:
Jane is entitled to $451,909.00 (statutory legacy), plus $274,045.50 (50% of the remaining amount).
Bob’s children John and Sarah, who are both from a previous relationship are entitled to share the remaining $274,045.50 equally, resulting in them receiving $137,022.75 each.
In this circumstance the children are left with a small pool of money, if any at all as it is very common for estates to be worth less than the statutory legacy. This creates a huge issue, especially when there is young children, as the step-parent – who has been left everything – does not have an obligation to provide for those children.
If you pass away leaving no partner, then your estate is distributed in accordance with the following hierarchy:
- Your whole estate is left to your surviving child and if you have more than one then it is divided equally between them.
- If you had no children, the whole estate is left to your parents in equal shares, or to your surviving parent if there is only one.
- If you had no children and your parents have predeceased you, your whole estate is left to your siblings in equal shares.
- If you had no children, and your parents and siblings predecease you, the estate is to be divided between any remaining grandparents equally or to your surviving grandparent if there is only one.
- If you had no children, parents, siblings or grandparents, then any aunts or uncles are entitled to your estate in equal shares.
- If none of the above are applicable, the Crown (i.e. the government) is entitled to your entire estate.
In all cases, any person entitled to the estate must survive you for a period of 30 days.
The above hierarchy does not suit all circumstances as it does not account for any step-children and assumes all family relationships are amicable. Commonly, people also like to leave bequests to their neighbours and close friends who while aren’t blood related are important and significant individuals in their lives. There is no provision for those people.
The final step leaves your estate to the government when in fact many people would prefer it to be left to a favourite charity – some people may even prefer to give their money to charity over an extended family member who they do not have a relationship with or may have never met.
Interestingly there is now also extensive legislation on how an estate is dealt with if you die leaving more than one partner. This creates unnecessary conflict when grieving partners must either reach an agreement with each other or enter legal proceedings which are often drawn out and expensive.
In light of the above, we recommend having a Will professionally drafted in all circumstances to ensure your wishes are met.
One of our experienced practitioners would be happy to assist you if you would like to make an appointment to discuss your Wills.