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If you die without a valid Will, it can be complex and expensive for your loved ones. If your loved ones cannot locate a valid Will, you are considered to have died ‘intestate’.

What happens if you die without a valid Will in New South Wales?

The Succession Act 2006 (NSW) details how your estate will be distributed when you die. What the law says will happen with your estate, may not be what you want. Having a valid Will ensures that you can make your own decisions about who will inherit your estate.

Who is an eligible relative?

The rules of intestacy specify the order of entitlement as to who inherits and in what proportion. The order of who is entitled to inherit your estate is as follows:

  • Surviving spouse, de facto partner or civil partner (“spouse”)
  • Children or grandchildren.
  • Parents
  • Brothers and sisters
  • Grandparents
  • Aunts and uncles
  • Cousins.

If there is no one in the above categories to inherit your estate, it goes to the State Government.

Let’s have a look at some examples of how the intestacy rules work.

Scenario 1 – surviving spouse and children inside of that relationship

  • Daniel is married to Jessica
  • Daniel and Jessica have 2 children together, Jack and Emily
  • Daniel dies without a Will and is survived by his wife and children

Daniel and Jessica have the following assets:

ASSETS

Assets Value
House – Daniel and Jessica own as joint tenants $500,000.00
Bank account (term deposit) – in Daniel’s name only $150,000.00
Bank account (term deposit) – in Daniel’s name only $200,000.00
Shares – in Daniel’s name only $350,000.00
Superannuation with QSuper– Daniel has a binding death benefit nomination to Jessica $900,000.00
Total $2,100,000.00

LIABILITIES

Liability Amount Owing
Funeral expenses $15,000.00
Legal costs $10,000.00
Personal Loan – in Daniel’s name solely $15,000.00
Total $40,000.00

What forms part of Daniel’s estate?

The only assets that form a part of Daniel’s estate are:

Assets Value
Bank account (term deposit) – in Daniel’s name only $200,000.00
Shares – in Daniel’s name only $350,000.00
Total $550,000.00

The house and everyday bank account do not form part of Daniel’s estate, as they are jointly held assets. They automatically pass to the surviving joint owner, Jessica.

Estate assets ($550,000.00) minus estate liabilities ($40,000.00) means Daniel’s net estate value is $510,000.00. This is also called the ‘residue’ of his estate.

What does and does not form part of your estate?

Below is a general non-exhaustive list.

In your estate Out of your estate
  • Property – owned solely by you, or your % share if owned as tenants in common
  • Bank accounts held solely by you
  • Shares in a company held solely by you
  • Superannuation – if you do not have a binding death benefit nomination in place and the trustee decides all or part of your superannuation and death benefits will be paid to your estate.
  • Property owned as joint tenants
  • Bank accounts held jointly
  • Life insurance
  • Assets held by companies
  • Assets held in trusts, for example a family trust
  • Superannuation – if you have a current binding death benefit nomination in place, or you do not have this in place and trustee decides to pay your benefits to an eligible beneficiary.

Distribution

In scenario 1, Daniel has one surviving spouse (Jessica) and two children of their relationship (Jack and Emily). Under the New South Wales rules of intestacy, the whole of the residue of Daniel’s estate goes to his wife, Jessica.

Scenario 2 – Surviving spouse and children outside of that relationship

What would happen in the above scenario if Daniel died but Daniel and Jessica did not have children together. Instead, they each have children to a previous relationship?

Let’s say:

  • Daniel has two children – Dylan and Diane.
  • Jessica has two children – Justine and James.
  • Daniel dies without a Will and is survived by Jessica, Dylan, Diane, Justine and

 

Distribution

In scenario 2, Justine and James would not be entitled under the intestacy laws to receive any part of Daniel’s estate. In New South Wales, a stepchild is not considered a child of a deceased for intestacy purposes. However, adopted children are.

For scenario 2, Daniel’s estate would be distributed as follows:

Jessica Dylan Diane
  • $350,000.00 (statutory legacy), *adjusted by the CPI for the June 2020 quarter = $477,804.29
  • Daniel’s personal effects
  • 1/2 of the residue ($16,097.85)
  • 1/4 of the residue ($8,048.93)
  • 1/4 of the residue ($8,048.93)

*Under the Act, the statutory legacy is calculated using the prescribed formula and is based on the consumer price index.

If the statutory legacy is not paid to the surviving spouse within 12 months from the date of the deceased’s death, interest is also payable.

It is important to note that a stepchild is not automatically considered an eligible person to make a family provision claim in NSW. There are additional criteria to be considered to determine if a stepchild can make a claim.

See our article Contesting a Will (part 1): https://littlelawyers.com.au/contesting-a-will-part-1/

Your estate planning is important

Having a valid Will in place is extremely important. Your estate planning is not just about having a Will. There is a lot more to it! You need to have sound estate planning advice to protect your assets now and when you pass away.

Talk to us about your estate planning.

* The above information is a general guide only and does not represent legal advice.