What is Intestacy?

Here’s an overview of what happens:

1. Appointment of an Administrator:

• Role of Administrator: Instead of an executor (who would be named in a will), an administrator is appointed to manage your estate. The administrator is responsible for collecting assets, paying debts, and distributing the remaining assets according to the intestacy rules.
• Who Can Apply: The Supreme Court of NSW grants "letters of administration" to an eligible person, usually a close relative such as a spouse, child, or sibling. If no one steps forward, the NSW Trustee & Guardian may be appointed as the administrator.

2. Distribution of the Estate:

The estate is distributed according to a predetermined formula under the Succession Act. The distribution depends on your surviving relatives:

Scenario 1: If You Have a Spouse (Including a De Facto Partner) but No Children:

• Spouse Inherits Everything: The entire estate goes to your spouse.

Scenario 2: If You Have a Spouse and Children:

Shared Distribution:

• Spouse Receives: The spouse receives the personal effects (e.g., household items, cars), a statutory legacy (a fixed sum indexed over time, approximately $489,000 as of 2024), and half of the remaining estate.
• Children Receive: The other half of the remaining estate is shared equally among your children.

Scenario 3: If You Have Children but No Spouse:

Children Inherit Equally: The entire estate is divided equally among your children.

Scenario 4: If You Have No Spouse and No Children:

Order of Priority: The estate is distributed to your next closest relatives in the following order:

• Your parents
• Your siblings (and if they are deceased, their children)
• Your grandparents
• Your aunts and uncles (and if they are deceased, their children)

Scenario 5: If You Have No Surviving Relatives:

Estate Goes to the State: If no eligible relatives can be found, the estate passes to the NSW government (the Crown). However, the government may provide for dependents or other people who can demonstrate a valid claim on the estate.

3. Special Considerations:

• De Facto Relationships: A de facto partner is treated as a spouse for the purposes of intestacy, provided the relationship meets the legal definition (e.g., living together for at least two years).
• Stepchildren and Half-Siblings: Stepchildren are not automatically entitled to a share of the estate unless legally adopted. Half-siblings are treated as full siblings under the intestacy rules.
• Domestic Partners: Domestic partners who are not legally married or recognized as de facto partners may not automatically inherit unless they can prove a close personal relationship.

4. Claims Against the Estate:

• Family Provision Claims: Certain people who believe they have not been adequately provided for under the intestacy rules (e.g., a de facto partner, children, or dependents) may make a family provision claim against the estate in court.

5. Tax Implications and Debts:

• Payment of Debts: Before any distribution, the estate’s debts must be paid, including funeral expenses, taxes, and any outstanding liabilities.
• Capital Gains Tax (CGT): The estate may be liable for CGT, particularly if assets like property are sold to pay debts or distribute the estate.

6. Complexity and Delay:

• Longer Process: Dying intestate typically results in a more complicated and prolonged process for settling the estate, potentially leading to higher legal costs and delays in distributing assets.

7. Importance of Having a Will:

• Control Over Distribution: Having a will allows you to choose who inherits your assets, appoint an executor, and express your wishes for funeral arrangements and guardianship of minor children.
• Avoiding Disputes: A properly drafted will can minimize disputes among surviving relatives and reduce the likelihood of costly legal challenges.

Given these complexities, it is advisable to have a valid will in place to ensure that your estate is distributed according to your wishes and to simplify the process for your loved ones.

For more information, contact:

Michael McHugh BA LLB (Hons)

Accredited Specialist – Property Law

Australian Legal Practitioner