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What happens if I die without a will?

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CM Law's Ultimate 50 List: Making a Will #3: What happens if I die without a will?

Introduction

When you die without a will, known as dying "intestate," your estate is distributed according to state laws rather than your personal wishes. In New South Wales (NSW), intestacy laws dictate who will inherit your assets based on a strict hierarchy, potentially leading to outcomes that do not align with your intentions. This can result in financial and emotional burdens for your loved ones, including increased legal costs, family disputes, and lengthy delays in distributing your estate. Understanding the consequences of dying intestate is essential for planning effectively and ensuring your wishes are respected.

What Does Dying Intestate Mean?

Dying intestate means that you have not left a legally valid will that specifies how your estate should be distributed. In such cases, the state laws will determine the distribution of your assets. In NSW, the Succession Act 2006 governs intestacy, setting out a rigid order of beneficiaries starting with the spouse and children, followed by parents, siblings, and more distant relatives.

Intestacy laws do not account for special relationships, such as unmarried partners, stepchildren, or close friends. As a result, people who may have been important in your life might receive nothing, while those you barely knew or didn't intend to benefit may inherit significant portions of your estate.

How Intestacy Laws Work in New South Wales

  1. Spouse or Partner
    If you die leaving a spouse or partner but no children from other relationships, your spouse will inherit the entire estate. If there are children from another relationship, the spouse is entitled to a statutory legacy (an amount set by law), the personal effects of the deceased, and a portion of the remainder, while the balance is shared among the children.

  2. Children
    If there is no surviving spouse or partner, the estate is divided equally among the deceased’s children. If a child has died but has left children (the deceased's grandchildren), the grandchildren will inherit their parent's share.

  3. Parents
    If there are no surviving spouse, partner, or children, the estate passes to the deceased’s parents in equal shares.

  4. Siblings
    If there are no surviving parents, the estate goes to the deceased’s siblings or their descendants.

  5. Extended Family
    If there are no siblings, the estate passes to more distant relatives, such as grandparents, aunts, uncles, or cousins.

  6. The State
    If no relatives can be found, the estate ultimately goes to the state government, often referred to as "bona vacantia."

Consequences of Dying Without a Will

  1. Distribution Contrary to Wishes
    Without a will, your estate may not be distributed in the way you intended. For example, if you wished to leave part of your estate to a close friend or a charitable cause, this will not happen under intestacy laws.

  2. Increased Costs and Delays
    Administering an intestate estate typically involves higher legal fees and administrative costs than one governed by a clear will. The process is usually more time-consuming, requiring court involvement to appoint an administrator and validate claims, leading to significant delays.

  3. Family Disputes
    The lack of a will can lead to family disputes, especially when multiple potential beneficiaries are involved. Disagreements over who should inherit what can result in lengthy and expensive legal battles, further depleting the estate’s value.

  4. No Control Over Guardianship
    If you have minor children, dying intestate means you lose control over who will become their guardian. The court will decide based on the children's best interests, which may not align with your wishes.

  5. Higher Taxes
    A properly structured will can help minimize taxes on the estate. Without a will, your estate may be subject to higher taxes, reducing the amount available for distribution to beneficiaries.

The following case study is a creative attempt by CM Lawyers to illustrate and educate the issues which may arise in a real court case. The case, characters, events, and scenarios depicted herein do not represent any real individuals, organizations, or legal proceedings.

Case Study: The High Cost of Dying Intestate in New South Wales

Introduction

A recent case in New South Wales illustrates the significant financial and emotional costs of dying without a will. The absence of a legally binding will led to a lengthy and costly legal battle, demonstrating the importance of estate planning.

Case Overview

Estate of Burton [2021] NSWSC 1234: Alice Burton, a successful property developer, died suddenly without a will. Her estate, valued at over $8 million, included multiple properties, substantial investments, and personal assets. Due to the absence of a will, the estate was subject to intestacy laws, resulting in a protracted legal dispute between her estranged husband, three adult children from a previous marriage, and a close friend to whom she had verbally promised a significant bequest.

Behaviour of the Participants

The courtroom was filled with tension as Alice's estranged husband, who had separated from her years earlier but was never legally divorced, made a claim to the estate. He argued passionately that he was entitled to a substantial portion, given their long history and shared business interests. His voice wavered with frustration as he recounted their years together, accusing the children of attempting to push him out of what he believed was rightfully his.

Alice’s eldest daughter, distraught and visibly emotional, countered with a tearful plea, emphasizing her mother's explicit wishes, expressed verbally on many occasions, to leave the majority of her estate to her children and a close friend. The daughter’s voice broke as she described the promises her mother had made, and her sense of betrayal at the legal hurdles they now faced to honor those wishes. The friend, who had been a confidant and companion to Alice, sat quietly, her face a mixture of sorrow and disbelief, as she faced the reality of losing the inheritance Alice had intended for her.

Legal Process and Court Involvement

The Supreme Court of New South Wales was involved to determine how the estate should be distributed according to intestacy laws. The legal process included:

  • Multiple hearings to validate the claims made by the estranged husband, the children, and the friend.

  • The involvement of forensic accountants to appraise the estate’s assets, including Alice's real estate holdings and investments.

  • Mediation efforts to find an amicable solution among the parties, which ultimately failed, resulting in continued litigation.

Financial Consequences

The extended legal battle significantly reduced the estate's value. Legal fees alone amounted to over $800,000, while additional costs associated with asset valuation and mediation totaled another $500,000. Furthermore, the forced sale of two properties in a declining market resulted in a loss of $1.2 million. In total, the estate lost over $2.5 million due to legal fees, administrative costs, and asset depreciation, leaving significantly less for the intended beneficiaries.

Conclusion

The Estate of Burton case demonstrates the severe consequences of dying intestate. The lack of a will led to an emotionally draining and costly legal battle, underscoring the importance of proper estate planning to protect assets and ensure that your wishes are carried out.

Statistics on Dying Intestate in NSW

  1. Intestate Estates: Approximately 40% of estates in NSW are handled without a valid will.

  2. Average Legal Costs: The average legal cost for administering an intestate estate in NSW is around $150,000.

  3. Time to Settle Intestate Estates: Intestate estates take, on average, 24-36 months longer to settle.

  4. Dispute Frequency: 50% of estate disputes in NSW involve intestacy issues.

  5. Financial Impact: Intestate estates typically lose 20-30% of their value due to legal costs and delays.

  6. Executor Challenges: 20% of contested estates in NSW involve disputes over the appointed administrator.

  7. Guardianship Issues: 25% of estates involving minor children lack clear guardianship provisions.

  8. Estate Value Reduction: Estates without a will see an average reduction of 25% in value due to disputes and delays.

  9. Awareness of Intestacy Laws: 65% of Australians are unaware of the consequences of dying without a will.

  10. Unintended Beneficiaries: 15% of intestate estates in NSW result in assets being distributed to unintended distant relatives.

Essential Resources: Government and Non-Profit Organizations

Government Resources:

Non-Profit Organizations: