What happens to your estate if you die without a Will?
April 19, 2023
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Have you ever wondered what would happen to your estate if you died without a Will?
The majority of us spend our lives working hard to build a financially stable future for ourselves, our children and our families. Yet despite our work ethic and efforts, unfortunately more than 50% of us will die having failed to implement any form of Will to address the transfer of our wealth to our loved ones.
After more than 10 years advising clients in the area of wills and succession planning, one thing is clear…very few clients actually understand how their estate will be divided if they die without a Will (also known as an “intestacy”). Clients can often be divided into 2 groups, the ones who worry the government will take it all and those who mistakenly believe that everything will first pass to their surviving spouse and then equally between their children. Neither of these views are entirely correct.
In WA, legislation governs the fate of your estate assets if you die without a Will. The legislation contains a table which sets out how a person’s estate is to be divided upon death. The table covers situations where a person dies with or without, partners, children, parents and/or siblings.
Let’s look at one example…
Mum, Dad and 3 children aged 12, 16 and 18. Their main asset is their family home which is registered in mum’s name only.
Mum dies leaving behind dad and the 3 children. How will her estate be divided?
Dad will receive:
- all of mum’s personal items
- the first $50,000 of mum’s estate, and
- 1/3 of the balance of mum’s estate.
The children will each receive an equal share in the remaining 2/3 of the balance of mum’s estate upon 18 years of age.
This might not appear completely inappropriate at first thought, but what does it mean in practical terms?
Well, the children upon reaching 18 years of age can force dad to sell the family home. If the 18 year old happens to have a drug addiction or a spending habit, this would mean a large sum of disposable funds would be made available to him/her at a very early age – in the meantime, dad and the younger children could be left homeless.
A Will would solve many issues in the above situation. It could provide for the home to pass to dad upon mum’s death, and divide the estate equally between the children if dad failed to survive mum. A special protective trust could be created for each of the children to ensure that their inheritances are protected until they reach a later age, perhaps 25 or 30 years of age. This type of protective trust could fund the children’s education and day to day costs but preserve the capital assets until they are each old enough to manage a large sum of money.
As you can see, an intestacy is often not reflective of a deceased’s testamentary wishes and results in undesirable distribution and tax outcomes for surviving relatives.
If you are one of the 50% without a valid Will, or perhaps someone with an outdated Will, please contact us to arrange a time to meet and discuss your requirements, your loved ones will thank you for it.
Finally, for those of you still wondering… “yes”, the State Government will take your estate but only if you are not survived by any relatives.
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