Funeral Wills and Estates Lawyers NSW

What are the changes to the Law of Intestacy?

What is Intestacy?

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.

What are the changes to the Law of Intestacy?

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.

SURVIVED BY..  Law if Death is prior to 1 March 2010 Law if Death is on or after 1 March 2010
Spouse (married or defacto) and no children Whole estate to spouse Whole estate to spouse
Spouse (married or defacto) and children, where all children are the children of the deceased and surviving spouse Spouse receives: household chattels, $200,000.00 and half of the remainder of the estate*

Children receive: the remainder of the estate equally between them

 

*If the spouse lived in a home owned by the deceased he/she can elect to take the marital home even if it is worth more than their share of the estate based on the formula above, resulting in the children receiving less

Whole estate to spouse
Spouse (married or defacto) and children (where one or more children are not children of the surviving spouse) Spouse receives: household chattels, $200,000 and half of the remainder of the estate*Children receive: the remainder of the estate equally between them

*If the spouse lived in a home owned by the deceased the spouse can elect to take the marital home even if it is worth more than their share of the estate based on the formula above, resulting in the children receiving less.

Spouse receives: personal effects, $350,000 and one half of the remainder of the estate*Children receive: the remainder of the estate equally between them

*The spouse can elect to acquire particular assets from the estate up to the value of the spouse’s share based on the above formula. If the spouse wishes to acquire assets worth more than his/her share, he/she must pay for the balance from his/her own funds. Therefore the spouse no longer has the right to take the marital home if it is worth more than his/her entitlement, unless the excess amount is paid into the estate by the spouse.

Two spouses (eg. a defacto partner and a married spouse from whom the deceased was separated but not divorced) and no children One spouse will be entitled to the whole estate. As to who is entitled, it depends on the length of the defacto relationship. The defacto spouse will be entitled to the whole estate to the exclusion of the married spouse if he or she was the de facto spouse of the deceased for a continuous period of at least two years before death and if the deceased did not live with his or her spouse during any part of the two year period. Otherwise, the married spouse takes the whole estate. If the defacto relationship was for less than 2 years, the married spouse takes the whole estate.If the defacto relationship was for more than 2 years and continued up to the death, the married spouse and defacto spouse together share the whole estate either:

1. Pursuant to an agreement between the spouses.
2. As ordered by the Court; or
3. In default of agreement or court order, they take half of the estate each.

Two spouses (eg. a defacto partner and a married spouse from whom the deceased was separated but not divorced) and children, where all children are children of the deceased and one or both spouses One of the spouses* will receive: the household chattels, $200,000 and half of the remainder**Children receive: half of the remainder.

* If the defacto partner had been in relationship with the deceased for a continuous period of at least two years before death and if the deceased did not live with his or her spouse during any part of the two year period then the defacto spouse will be entitled to the exclusion of the married spouse. Otherwise, the married spouse takes the share of the estate as set out above.

**If the spouse lived in a home owned by the deceased he/she can elect to take the marital home even if it is worth more than their share of the estate based on the formula above, resulting in the children receiving less

If the defacto relationship was for less than 2 years, the married spouse takes the whole estate.If the defacto relationship was for more than 2 years, the married spouse and defacto spouse together share the whole estate either:

4. Pursuant to an agreement between the spouses.
5. As ordered by the Court; or
6. In default of agreement or court order, they take half of the estate each.

The children receive no entitlement.

Two spouses (eg. a defacto partner and a married spouse from whom the deceased was separated but not divorced) and children, where one or more children are not children of the surviving spouses One of the spouses* will receive: the household chattels, $200,000 and half of the remainder**Children receive: half of the remainder.

* If the defacto partner had been in relationship with the deceased for a continuous period of at least two years before the death and if the deceased did not live with his or her married spouse during any part of the two year period then the defacto spouse will be entitled to the exclusion of the married spouse. Otherwise, the married spouse takes the share of the estate as set out above.

**If the spouse lived in a home owned by the deceased he/she can elect to take the marital home even if it is worth more than their share of the estate based on the formula above, resulting in the children receiving less

Assuming the defacto relationship was for more than two years, the spouses share between them: personal effects, $350,000 and one half of the remainder of the estate either:1. Pursuant to an agreement between the spouses.
2. As ordered by the Court.
3. In default of agreement of court order, half each.Children receive: the remainder of the estate equally between them.
Children (no spouse) The children share the estate equally. If any children of the deceased have died leaving children of their own, then those children (being grandchildren of the deceased) take the share of the estate their parent would have received. The children share the estate equally. If any children of the deceased have died leaving children of their own, then those children (being grandchildren of the deceased) take the share of the estate their parent would have received
Parents (no spouse and no children) The parents of the deceased share the estate equally. If only one parent survives the deceased he or she takes the whole estate. The parents of the deceased share the estate equally. If only one parent survives the deceased he or she takes the whole estate.
Brothers and sisters (no spouse, children or parents) Full blooded brothers and sisters share the estate equally between them, to the exclusion of any half brothers and sisters. Half brothers and sisters receive the estate only if there are no full blooded siblings.If any brother or sister died leaving children, then those children (being nieces and nephews of the deceased) take the share their parent would have received. All brothers and sisters share the estate equally, regardless of whether they are full blooded or half blooded siblings.If any brother or sister died leaving children, then those children (being nieces and nephews of the deceased) take the share their parent would have received.
Grandparents (no spouse, children, parents, brothers or sisters) The grandparents share the estate between them equally. If only one grandparent survives, they take the whole estate. The grandparents share the whole estate between them equally. If only one grandparent survives, they take the whole estate.
Aunts and Uncles (no spouse, children, parents, brothers, sisters or grandparents) The uncles and aunts (who are full blooded brothers or sisters of a parent of the deceased) share the whole estate between them.

Uncles and aunts (who are half blooded brothers or sisters of a parent of the deceased) only become entitled if there are no full blooded brothers and sisters of a parent of the deceased.

If an uncle or aunt dies leaving children, those children (being cousins of the deceased) do not receive any entitlement.

The uncles and aunts (who are brothers or sisters of a parent of the deceased) share the whole estate between them.There is no distinction between half blooded and full blooded brothers and sisters of a parent of the deceased. All are entitled to share in the estate.

If an uncle or aunt dies leaving children, those children (being cousins of the deceased) are entitled to the share their deceased parent would have received.

The NSW Government If there is no one in any of the earlier categories, the NSW Government is entitled to the whole estate. If there is no one in any of the earlier categories, the NSW Government is entitled to the whole estate.

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:

What is an example 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 (Amy & Todd) 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 situation above, Jan would receive the whole estate and Todd and Amy would receive nothing.

What about children from earlier relationships?

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.

What do I need to know about the Law of Intestacy and what should I do about it?

The information in this 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 further information about Intestacy, or you’d like to talk to us about your Will or Estate, please don’t hesitate to contact our Wills & Estates Team.


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