A valid Will determines how your estate is dealt with after you die. Your Will can appoint an appropriate family member or trusted friend to administer your estate (your executor), nominate guardians for young children, determine who will receive your assets and give direction for specific funeral and burial arrangements.
Without a Will, the finalisation (administration) of your estate could be left to somebody you would not wish to involve, 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.
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 life earnings 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 the relevant jurisdiction. 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 formula set out in legislation attempts 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.
Dying intestate therefore cannot guarantee a fair or intentional estate distribution (according to the deceased) and may result in undesired consequences, such as:
- 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 with whom the deceased shared no significant or meaningful relationship.
Imagine, for example, a man in a second marriage or with a de facto partner. The man has children of a former marriage however the current partner has no children. If the man 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.
Further complexities arise where a deceased person is survived by more than one spouse. The result is often uncertainty, additional legal costs and angst within the surrounding family – all at a time when a person’s life has been lost. The take-home point is that the rules are prescribed and not negotiable for the intestate’s family.
More convincing reasons to make a Will
An executor is the legal personal representative appointed under a Will to oversee 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 this role 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 contained in 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 for different scenarios.
Summary
Having a Will gives you a voice when you die. Your testamentary wishes can be made known, and your beneficiaries identified. Good estate planning can also help provide for more tax-effective distribution of your assets 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.
This information is of a general nature only and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact us on 02 9792 8413 or email [email protected].