At our recent Advisor Day event we received plenty of questions about estate planning and how to construct an effective Will that can give proper effect to your wishes in the event of your death.
Questions we hear often include “Do I really need a Will?” and “Aren’t there laws that will make sure my property goes to my family if I don’t have a Will?”
We’re certain that every adult does need a Will, and in terms of what happens if an adult doesn’t have a Will, whilst there are standard laws dictating what happens with assets, lots adults may not like how those standard laws are applied. Let’s explore that a little further…
Approximately 50 per cent of Australians die without a valid Will and are therefore deemed to have died “intestate”.
Intestate estates are administered according to the rules of intestacy contained in the Succession Act 1981 (Qld). These rules dictate how a deceased person’s assets are distributed based on whether or not the deceased had any surviving spouse/s, children or next of kin.
Why does it matter if the rules of intestacy are applied?
While the rules of intestacy are applied to thousands of estates every year, these rules do not take into consideration the specific circumstances of a deceased person’s estate or any personal wishes of the deceased. As a result, it is possible that:
- assets you would expect to go solely to a spouse may be split between a spouse (and there may be arguments over who the spouse actually is) and your children;
- infant children or children with special needs will not be adequately provided for;
- family members and friends will not receive specific gifts that were perhaps “promised” to them by the deceased;
- the distribution of business assets (such as shares in a company or assets required to run the business) will be transferred to persons who are unable or unwilling to continue the operation of the business (forcing the closure of the business); and
- the tax payable by the estate and the beneficiaries will not be minimised.
Most Queenslanders are not aware of the rules of intestacy and therefore do not appreciate the potential position they are placing their loved ones in by not preparing a Will before they die. In our experience intestacy causes significantly more stress to a family.
Who is in charge of administering an intestate estate?
Usually an “executor” is appointed under a Will and is given the power to administer the estate under that document. Where there is no valid Will, someone has to apply to the Supreme Court for a grant of Letters of Administration.
Unfortunately it is almost impossible to administer an intestate estate without Letters of Administration (unlike an Estate with a valid Will that can be administered informally if required). This is not a simple process and usually requires legal advice. This step can take up to 12 weeks depending on the length of time taken to issue the death certificate and Grant, and the current filing fee for Grant of Letters of Administration is $735.60.
The lack of a Will can also cause uncertainty around who should apply for the Letters of Administration and disputes can arise between family members as to who should apply.
How long does it take to finalise an intestate estate?
The time that it takes to finalise an intestate estate will depend on a number of factors including:
- whether the application for Letters of Administration is contested;
- the complexity and quantity of the estate assets; and
- the attitudes taken by beneficiaries and dependents, including whether any disputes arise.
For larger and more complex intestate estates, it is not uncommon for the beneficiaries to need to enter into a Deed of Arrangement whereby the beneficiaries effectively agree to distribute the estate assets in a way that differs from the rules of intestacy in order to avoid unintended consequences and to take advantage of any applicable tax benefits.
This process can take months to complete and will usually result in far higher legal costs than the preparation of a Will and an estate distribution process relying on that Will.
In addition to the issues raised around the rules of intestacy above, added complications arise where a person who dies has interests in a business at the time of death. A proper estate plan deals with control issues associated with having controlling interests in a business. Failing to deal with these control issues in a Will can cause difficulties for businesses which exist and survive the death of the business owner.
Yes, you absolutely need a Will. In order to ensure your loved ones are adequately provided for after you have passed away and to ensure your estate is administered without unnecessary cost and delay, it is imperative that you take the time to plan your estate with a qualified practitioner who will ensure your wishes are accurately documented. Involving other advisors is also critical to avoid delays, mistakes and any duplication of costs.
If you would like to discuss planning your estate with one of our experienced Tax, Structures + Planning Team please contact our office today.