Intestacy

When a person dies ‘intestate’, it means that they have passed away without a valid will (wholly intestate) or with a will that doesn’t dispose of all of their property (partially intestate). When someone dies intestate, the intestacy laws of the relevant jurisdiction will determine how their assets will be distributed.

How is an Intestate Estate administered?

When someone dies without a will, it is necessary for an individual to apply to the Supreme Court for a Grant of Letters of Administration to obtain the authority to manage and distribute the estate. Typically, those with the greatest entitlement to the estate will have the first right to become the
estate Administrators. In cases where there is no beneficiary willing or able to apply for Letters of Administration, creditors or State Trustees may be able to apply for Letters of Administration.

The process of administering an intestate estate typically involves identifying the deceased person’s relatives, determining the assets and liabilities of the estate, paying any outstanding debts and taxes, and then distributing the remaining assets according to the intestacy laws.

Who is entitled to benefit from an Intestate Estate?

In Victoria, the Administration and Probate Act 1958 establishes a hierarchy of relatives who are entitled to inherit from an estate in the absence of a will. The distribution of an estate will depend on its size and whether the deceased had a partner and/or children or extended family. 

If the deceased had a partner and the estate is valued at less than the ‘statutory legacy’ amount (which is indexed and as of 2023-2024 is $539,100) after debts and funeral costs, the entire estate goes to their partner. For larger estates where the deceased has children from another relationship, the children are also entitled to a portion of the estate. In this case, the partner will first receive all personal belongings and the statutory legacy amount, with the remaining estate being distributed half to the partner and half to the deceased’s children.

If the deceased is survived by neither a partner nor children, the estate is distributed to their parents first, followed by siblings, grandparents, uncles, aunts, and cousins. If the deceased is survived by none of these, the State is entitled to receive the estate.

De Facto and Multiple Partners

The laws of intestacy now recognise the rights of de facto partners and treat them the same as a person who is legally married. A de facto relationship is defined as a couple that are not married but live together as a couple on a genuine domestic basis. It is generally sufficient if the couple has lived together for several years, share a child or significant assets together, or have formally registered their relationship.

Intestacy laws also provide for instances where a deceased had multiple partners during their lifetime.

Dependents and Household Members

Dependents and household members who do not fall within the defined categories of relatives are not in the first instance entitled to receive from the estate. If they were financially dependent on the deceased, they might need to make a claim under family provision laws to seek a share of the estate. These claims can be complex and often require legal assistance to resolve.

Can You Die Intestate if you Have a Will?

A will that is invalid because it does not comply with the necessary legal formalities, such as being signed or witnessed, can lead to intestacy.

Partial intestacy can also occur even with a valid will if it does not dispose of all the deceased’s assets. This can occur if a will is not updated as circumstances change, or if there is an oversight in drafting or instructions. In such instances, the executors named in the Will are responsible for applying the intestacy distribution principles to the portion of the estate that is not disposed of by
the Will. 

Intestacy can also result where a valid will is made but is then lost. For this reason, it is critical that a will is stored in a place that is not only safe but is or will be known to the executors.

What is the Importance of Having a Valid Will?

The intestacy laws attempt to reflect the ‘moral obligations’ society thinks a person has to provide for their loved ones on their death. This hierarchy assumes that certain relationships, such as those with a spouse or children, carry the most significant moral and financial obligations.

As everybody’s situation is unique, there are frequently instances where the intestacy laws do not achieve the desired outcome. This can happen for several reasons:
  1. Blended Families: In cases of blended families, where the deceased has children from multiple relationships, the rigid structure of intestacy laws may not reflect the deceased’s wishes or the needs of all family members.

  2. Estranged or Broken Relationships: The laws do not account for estranged or distant relationships. For example, a person may have been estranged from their children or siblings for many years, yet those individuals might still inherit under intestacy laws.

  3. Non-Traditional Family Structures: Intestacy laws often do not accommodate non- traditional family structures, such as chosen families or close friends who have acted as family.

A case example

Robert passes away, leaving behind his second wife and the children from his first marriage. His estate is valued at approximately $1.4 million. Prior to his death, Robert drafted a Will intending to leave everything to his wife, believing his children were financially independent and self-sufficient, while his wife had no assets and significant health issues. Unfortunately, the draft Will was not a valid will because it was neither dated nor signed.

Had the Will been valid, Robert’s wife would have inherited the entire $1.4 million estate. However, due to its invalidity, intestacy laws took effect. As a result, his wife received the statutory legacy of $539,100*, with the remainder of the estate being divided between her and Robert’s children. Ultimately, Robert’s wife ended up with $969,550, and the children collectively received $430,450.

While intestacy laws provide a structured approach to estate distribution, they may not always result in outcomes that reflect the deceased’s wishes or the complexities of modern family dynamics. Intestacy can also be more costly both in obtaining Letters of Administration and in distributing the estate. Therefore, it is important to consider creating a will to make sure your assets are distributed according to your preferences and to provide clarity and support for your loved ones.

If you have any questions related to intestacy or any other questions about wills and estates, please call us on 9063 0300 or send us an email to make an appointment.

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