If a person has not made a will before they die, they are said to have died “Intestate”. This effectively means that the deceased person had not nominated anyone to receive the assets of his estate when he/she died.

Partial intestacy may also occur if a will does exist, but fails to dispose of all the assets of the estate. For example, if there is a “lapse” with regard to a beneficiary of the residuary estate, or the will does not contain a “residuary clause”.

In addition, where a will is revoked or deemed to be invalid, intestacy may occur.

Possible undesirable outcomes that may result from a full or partial intestacy include:

• assets of the deceased passing to a person whom they did not wish to benefit;
• de facto spouses or step-children missing out on a share of the estate;
• inadequate provision for children;
• sizable CGT liabilities incurred by the estate and other disadvantageous taxation considerations;
• loss of value of estate assets when disposed of to beneficiary;
• failure of business as no one has been selected to continue running the business;
• no benefit can pass to friends or any charitable organisation;
• no control over who administers the estate;
• no ability to appoint a guardian of the deceased’s children.

Who can make a will?

Generally anyone over the age of 18 years of age may make a will, subject to having “Testamentary Capacity”.

A person has testamentary capacity if they understand:

• they are making a will;
• the extent of the property they are disposing of;
• the claims of the potential beneficiaries over they estate.

In Victoria, the Wills Act states a will made by a minor is not valid, however a minor may make a will if they are:

• contemplating marriage - (the marriage must take place);
  or
• married.

A minor may also make a will if authorised by the Court.

Executing a will

The Wills Act requires that the following execution requirements must carried out for a will to be valid:

• it must be in writing;
• the testator must be intending to make a will;
• the will is signed by the testator in the presence of 2 witnesses, (not beneficiaries in the will);
• at least 2 witnesses must sign the will in the presence of the testator (not beneficiaries in the will).

Is the will valid?

A person’s will my not be valid if the execution requirements noted above are not met. In addition, the following events will revoke a person’s will:

• the making of a subsequent will;
• express revocation by the testator;
• by an order of the court, including dispensation provisions of the Wills Act;
• marriage of the testator, except in contemplation of marriage;
• divorce of the testator, except where the testator did not intend for the will be to revoked upon his divorce.

When considering the validity of a will, the final determining factor is whether the will achieves its intended purpose.

• marriage (or beginning of de facto relationship);
• divorce (or end of de facto relationship);
• birth of child or grandchild;
• after the death of a beneficiary, or the executor appointed under the will;
• any acquisition or disposal of property, which is the subject of a specific devise or bequest.

Other Issues relating to intestacy

Unlike an executor who is appointed by the testator in his will, where a deceased person dies intestate, the law requires that a person apply to become the deceased’s personal legal representative. While an executor must simply present the deceased persons will to the Court in order to obtain a “Grant of Probate”, a potential representative must apply to the court for “Letters of Administration”.

The person who applies for Letters of Administration will most likely be the person with the greatest interest in the estate. This person effectively nominates themselves as the person that the Courts should appoint to administer the estate, under the laws relating to intestate estates.

The appointment of the administrator is always subject to the approval of the court.

As mentioned above, intestacy may occur where the deceased person has not prepared a will, or had not disposed of all the assets of the estate.

Where a will exists, but a residuary beneficiary predeceases the testator, “lapse” is said to occur on that portion of the undistributed estate that was to pass to the residuary beneficiary. Again, a portion of this estate does not belong to any beneficiary and a partial intestacy is said to occur. In practice however, the will should state that if any residuary beneficiary fails to benefit due to lapse, the other residuary beneficiaries should each take a share of the lapsed portion of the estate.

It is possible that a person's estate may be distributed to persons that he never intended to benefit.

For example:

• the estate of a woman, estranged from her abusive husband who has entered a new relationship would pass to her husband if they were not divorced.
• the estate of a man, who wanted his assets to go to his favourite charity, may instead pass to his wealthy parents.
• same sex couples may not be entitled to a share of their deceased partner’s estate.

Assets that cannot be gifted by will

Despite often quoting certain assets or financial resources as “belonging to them”, there are some items that cannot be transferred by a testator via his will.

Assets that cannot be gifted by will include:

• Jointly owned assets – these pass to the survivor of the jointly owned asset;
• Superannuation entitlements – these pass to any one or more of the deceased person’s dependants at the discretion of the Trustee of the superannuation fund. The Trustee may be bound by the deceased person’s nominated beneficiary, but the names of those nominated beneficiary/s are provided to the Trustee of the superannuation fund directly and may or may not be those beneficiaries named in the will;
• Life Insurance Policies – where a person has been nominated to benefit under the policy and the proceeds from the insurer are not paid to the deceased person’s estate;
• Assets held in Family Trusts – these are held for the benefit of the beneficiaries of the trust, of which the deceased person may or may not be one.
   

Appropriate consideration should be given to these assets to ensure they are dealt with in accordance with the testator's wishes, while maintaining tax effectiveness.

NOTE: It is possible for a persons will to be challenged where inadequate entitlement has been made for one or more beneficiaries in the will or a person excluded from benefiting from the deceased persons estate - Family maintenance provisions. Therefore caution should also be exercised in this regard.

Disclaimer:
This brochure is not highly technical in nature and is not intended to be financial planning or estate planning advice – it is general information only.
No reliance should be placed on this document by any person and no one should act on information included in this document without seeking appropriate legal advice.
Super Matters are not solicitors and the information in this brochure is our interpretation of the subject matter, based on our understanding of the laws that exist at the time of writing.