When we meet with clients, we often ask why they have decided to come to see us – often they are looking to clearly define an estate distribution for blended families to make sure that everyone is provided for – other times our client is simply looking to put in place a Will that establishes a level of protection for their beneficiaries’ inheritance. For those who haven’t been through an estate planning exercise before, we often hear that “I want to make my Will because I don’t want everything to go to the government”.
“The government” is a broad term, and the assumption we generally encounter is that, if a person hasn’t left a Will naming a beneficiary of their estate, the residue of the estate (being the balance after the payment of funeral costs, debts and testamentary expenses) will simply be distributed to the government, without consideration of the deceased’s family.
In reality, this is not the case. While there are circumstances under which “the government” can receive payments under a Will, these are generally limited to estate debts and taxes – such as capital gains tax and income tax for gains realised and income received by the deceased during their lifetime and in the course of administering their estate. Aside from this, there are very limited circumstances in which the government will become the beneficiary of your estate.
A person who dies without a Will, or who leaves a Will which does not effectively dispose of their estate, is said to die “intestate”. The Succession Act 1981 (Qld), at Part 3, provides the direction for the distribution of an estate of an intestate person. The rules of intestacy consider the persons relationship to the deceased, and the deceased’s relationship circumstances at their date of death.
For example, as set out at Schedule 2 of the Succession Act, if a married person dies leaving two children, the spouse of the deceased is entitled to receive $150,000 plus the household chattels, with the balance of the estate divided with 1/3 distributed to the spouse and 2/3 distributed equally to the children of the deceased.
If a single person with no children dies, but is survived by one or both of their parents, the parents (or the survivor of them) are entitled to the entire rest and residue of the estate in equal shares.
Only in the circumstance where the deceased is not survived by a spouse, child, parent, brother, sister, grandparent, aunt, uncle, niece, nephew or cousin (defined as next of kin at section 35), does the government become entitled to the residue of the estate.
Whilst the rules of intestacy set out in the Succession Act may allay the concern that the government will take the residue of your estate upon your death, this is not to say that you do not need to make a Will.
Intestacy can create a much more complex estate administration process than administration with a Will. Administration of an estate pursuant to a Will often requires the executor to obtain a grant of Probate; if the Will has been correctly prepared and executed, this application is generally a straightforward process wherein the executors advertise and make application for the grant from the Court. The requirement for the issue of a grant of probate will sometimes be waived by financial institutions and other asset holders, if the value of the asset held by them is a low value asset and therefore the expense and delay of obtaining probate is not justified.
However, in the case of intestacy, letters of administration from the Court must be obtained – otherwise, asset holders are unable to ascertain that the person that they are dealing with has the proper authority to administer the estate. As this process must be completed, and there are various addition documents that must be prepared and executed, the application for letters of administration can be a costly and time consuming exercise.
Whilst the myth that the government will receive your estate if you don’t have a Will on your death is false, that is not to say that you don’t need a Will. A properly drafted Will is the best method of ensuring your estate is administered in accordance with your wishes, that costs are minimised and that beneficiaries receive the gift you intend.