Major Changes to Intestacy Laws in Victoria

By Troy Palmer, Special Counsel and Isobel Feben, Lawyer

An intestacy commonly arises when a person dies without a valid will, or has a will which does not distribute the estate in its entirety. A strict legislative formula dictates how an intestate estate must be distributed amongst family members. Currently, if a person dies with a spouse and children, the estate must be distributed amongst both the spouse and children. This can result in surviving spouses and children suffer through a range of complex and undesirable intestacy circumstances — on top of the already heavy burden of having a loved one pass.

Intestacy is something that should be avoided for other reasons, too, including:

• You have no control over who benefits from your estate and the proportions in which they benefit (therefore, your preferred beneficiaries may miss out or receive less than you would have liked them to).
• You have no control over who administers your estate.
• There is no protection nor tax effectiveness built into the distribution which may leave beneficiaries vulnerable.
• You do not nominate the guardian for your children.
• The cost of administering estate may be more expensive.
• There may be a dispute as to whom is the “next of kin”.

Accordingly, we recommend that a properly constructed will be implemented in order to avoid the above issues.

It is worth noting that the Administration and Probate and Other Acts Amendment (Succession and Related Matters) Act 2017, which comes into force on 1 November 2017, significantly overhauls how estates will be distributed on intestacy in Victoria, particularly where there is a surviving partner.

Under the new provisions, by way of summary, where a deceased leaves:

1. one partner and no children, then that partner takes the whole of the estate of the deceased.
2. one partner and child/ren of that relationship, then the partner will benefit from the whole of the estate (this is very different from the earlier provisions in Victoria whereby the partner would take the first $100,000 and 1/3^rd of the balance with the remaining 2/3rds amongst children).
3. one partner and children born of a different relationship, then the partner will receive all the personal chattels, the 1^st $451,909 and 50% of the balance with the remaining 50% amongst the children.
4. multiple partners there are some relatively complex provisions dealing with this situation.
5. no partners, the estate is divided equally amongst children and if a child of the deceased has already passed away, that deceased child’s children take equally.
6. no partners, nor children, then the estate is divided equally between parents of the deceased and if no parents then equally between siblings and if none there is a pattern of distribution thereafter “down the line”.

One of the more difficult issues that I have seen arise is where someone claims to have been an unmarried (de facto) partner of the deceased and other family members deny this. Such contest can result in the diminishing of estate assets in establishing the claim as well as broken relationships.

Interestingly, the base line now stops at cousins before the estate ends up with the Crown (i.e. the Government), whereas previously remoter descendants could benefit.

The disadvantages of an intestacy are best avoided by having a properly constructed will whereby you decide how your estate is distributed.

Contact Mills Oakley

Troy Palmer
Special Counsel
T: +61 3 8568 9574
E: tpalmer@millsoakley.com.au