Changes to the Law of Intestacy

Written by Natalie Darcy -

A person dies “intestate” if they die without leaving a valid Will. Commonly, people die intestate in the following circumstances:

1. If they have never made a Will.
2. If they have made a Will, but later revoke it without making a replacement Will.
3. If they have made a Will, but married after the Will was made, in which case, the Will is usually revoked.
4. If they have attempted to make a Will, but the document was not signed and witnessed as required by the law, and the Probate Court is not satisfied the person intended the document to operate as their will.

Some major changes to the law of Intestacy have come into affect as of March 2010.

The Succession Amendment (Intestacy) Bill received assent of the New South Wales Parliament on 9 June 2009 and commenced on 1 March 2010.

Generally speaking, if a person dies intestate then the people entitled to the estate are (in order of priority): the spouse and children, parents, grandparents, siblings, aunts, uncles and finally (if there is no one in the earlier categories) the New South Wales government.

Below is a table setting out the differences between the old law and new law, in circumstances where a person dies intestate.

As can be seen from the above table, one of the most significant changes to the law is the way an estate is distributed if a person dies leaving a spouse and children. Below is an example of a common family situation:

Assume that Bob dies without a Will and he has the following assets:

House in his sole name worth:

$800,000.00

Bank accounts in his sole name worth:

$200,000.00

Total:

$1,000,000.00

Under the old law, Bob’s wife is entitled to the first $200,000.00 from the estate and half the remainder. His children are entitled to share the remaining half between them. Accordingly the entitlements to the estate are as follows:

Jan: $200,000.00 + (½ x $800,000.00)

$200,000.00 + $400,000.00

= $600,000.00

Amy and Todd: ½ x $800,000.00 between them

$400,000.00

= $200,000.00 each

Assuming Jan and Bob were living in the house owned by Bob at the time of his death, then as the surviving spouse, Jan has a right to the house, even though it is worth more than $600,000.00. If Jan decides to keep the house, her entitlement is increased to $800,000.00 and the entitlements of Amy and Todd will be reduced to $100,000.00 each.

If the estate happened to be worth less than $200,000.00, under the old law Jan would receive it all. Todd and Amy would receive nothing.

Under the new law, the entitlements to the estate would be very different. Under the new law, if a person dies leaving a spouse and has children only to that spouse, then the spouse takes the entire estate regardless of the value and the children receive nothing. Accordingly, in the example above, Jan would receive the whole estate and Todd and Amy would receive nothing.

Assume now that Bob’s family situation is more complex and he has a child, Fred, from an earlier relationship as follows:

Under the old law, Jan’s entitlement remains the same (ie. she is entitled to $600,000.00 OR she can elect to take the house worth $800,000.00). The remainder of Bob’s estate would be divided between his 3 children equally.

Under the new law, as Bob has died leaving a child that is not a child of Jan’s, Bob’s children will have an entitlement to the estate. The calculation of the entitlements is as follows:

Jan:

$350,000.00 + (½ x remainder of estate)

$350,000.00 + (½ x $650,000.00)

$350,000.00 + $325,000.00

= $675,000.00

Amy, Todd and Fred:

½ x $650,000.00 between them

$325,000.00

= $108,333.33 each.

Under the new law, Jan does not necessarily have an entitlement to take the marital home. She could do so if she wished, but only if the value of the home was equal to or less than $675,000.00. As the home in our example is worth $800,000.00, if Jan wished to retain the home, she would have to pay into the estate an amount of $125,000.00. If she could not afford to do so, the home would have to be sold.

Note that under the new law, if the estate is worth less than $350,000.00, then Jan would receive the whole estate, and Bob’s children would receive nothing.

The information in the article is general only. It does not cover every situation and highlights only some of the issues that may arise.

The law of intestacy can be quite complex. If you do not have a valid Will in place, then your estate may not be distributed in the way you would want. Further, in circumstances where you have two people in your life who can be defined as your spouse (usually where you are married and separated and have entered into a de facto relationship) the law does not specifically set out what each spouse is entitled to, and so there is a lot of room for argument and potential for the spouses to have an argument which will have to be decided by the Court. This could result in a significant portion of your estate being consumed in legal costs.

For these reasons, it is very important that you have a valid Will in place that reflects your wishes. You should review your Will on a regular basis, at a minimum, every 2 years. However you should also review your Will if something significant happens in your life. If you marry you should make a new Will. You should also review your Will at other times in your life including when you separate or divorce, have a child, your assets change, you change your name or any of your beneficiaries change their names.

If you would like to talk to us about your Will or Estate, please do not hesitate to contact either Warwick Gilbertson, Natalie Darcy or Adrian Corbould of Turnbull Hill Lawyers on 4904 8000 to discuss.

Disclaimer - This article is offered for general information purposes only. It is not offered as and does not constitute specific legal advice or opinion. The accuracy of the information is not guaranteed. You should not act or rely upon any of the information contained within this article without seeking the advice of a qualified solicitor who specialises in the particular area of expertise and jurisdiction that you require.