A valid Will determines how your estate is dealt with after you die. Your Will can appoint an appropriate family member or trusted friend or a professional person or trustee company to administer your estate (your executor), nominate guardians for young children, determine who will receive your assets and give directions for specific funeral and burial arrangements.
Without a Will, the finalisation (administration) of your estate could be left to somebody you would not otherwise intend to have involved, 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 and intended beneficiaries.
No matter what your age, health status or financial circumstances, dying intestate (without a Will) is likely to create additional burden on your family and will prevent you from having a final say in how your estate 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 each state and territory. 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 formulae set out in legislation attempt 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.
The fact too, that the formulae for the distribution of an intestate estate differs between jurisdictions even in Australia is evidence of some differing opinion as to “society’s expectations”.
Dying intestate therefore cannot guarantee a fair or intentional estate distribution (according to the deceased) and may result in undesired consequences, such as:
- Desired 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 or members with whom the deceased shared no significant or meaningful relationship nor any intention to benefit.
Consider the example of a male in a second marriage or de facto relationship. He may have children of a former marriage whilst the current partner has no children. If he dies without leaving a Will some states will determine that the present partner will inherit the entire estate and the deceased’s children will receive nothing. In the same scenario but in other jurisdictions, the partner may receive a much smaller portion of the estate. Either case may not reflect how the deceased man really wanted to distribute his estate. In South Australia it is complicated, even more so if he was not divorced from the first spouse before commencing a de facto relationship!
The result is often uncertainty, additional legal costs, delay and avoidable tension within the family.
More convincing reasons to make a Will
An executor is the legal personal representative appointed under a Will to oversee the 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 appointment as an administrator of an intestate estate 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. Only through a Will can a person nominate a specific executor of his or her estate.
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 that is established within 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 alternative options for its administration as circumstances may require.
Having a Will gives one a voice when they die. Your testamentary wishes can be made known and your beneficiaries clearly identified. Good estate planning can also preserve the value of your assets, allow for more tax-effective distribution of your estate and protect vulnerable beneficiaries.
No matter what your age, your health status or your financial circumstances, putting off making a Will just doesn’t make sense.
Source: Donlan Lawyers