The majority of people realise that its important to make a Will, but with our busy lives its often not a priority and is pushed aside and forgotten. Time moves on and unfortunately, it becomes too late, because the person has passed away without ever finding the time to write a Will. When someone dies without leaving a Will, they have died intestate, but what does that mean to their dependents?
An Estate Administrator must be appointed
Essentially, when a person dies intestate, the division of their assets cant proceed until an estate administrator is appointed. This person is responsible for distributing these assets in accordance with the state or territorys laws concerning intestacy, so they need to be trustworthy, honest and willing to take on this role.
However, before they can distribute these assets they must apply to the courts for a grant of administration. This allows them to make withdrawals from a deceased persons bank accounts, divide their assets and pay any outstanding debts.
Debts are always paid first
Once the estate administrator has received this grant of administration, they cant proceed to divide the deceased persons assets before paying their debts. The repayment of outstanding debts must always be the first action of the estate administrator. Debts that must be repaid include, but are not limited to taxes, funeral expenses, loans or mortgages, legal fees, and any administrative expenses.
Division of assets
Following the payment of any outstanding debts, the deceased persons assets can now be distributed to their dependents. There is however, a hierarchy that must be followed when a person dies intestate. The first person to inherit the deceased persons assets is their spouse or de-facto partner, and if there are no children from this union, they will inherit all the assets.
Where children are involved, the situation becomes more complicated. For example, if the deceased person has children with a prior partner, the current partner or spouse can inherit all personal property, but only an additional $100,000. The remaining assets may be distributed to these children, but it depends on the length of time the de-facto relationship has existed and if the deceased person had been married before, whether they were divorced or not when they died.
If they were not divorced and the de-facto relationship lasted for less than four years, the legal spouse receives 2/3 of the assets and the de-facto partner 1/3. The longer the de-facto relationship lasted, the greater the percentage distributed to this partner, until it reaches more than six years, when the de-facto receives all the assets and the legal spouse none. A divorce lawyer can provide more information on this.
If there is no spouse or de-facto partner, then the assets are distributed to the children in equal shares. If there are no living children, grandchildren will inherit; if there are no living grandchildren, then the deceased persons parents, followed by any siblings, grandparents, aunts, uncles, great-grandparents, nieces and nephews, first cousins, grand nieces and nephews, will inherit.
This hierarchy must be followed when a person dies intestate. However, its important to note that as far as inheritance is concerned, no distinctions are made between biological children, stepchildren and adopted children.
If you want to be sure that your assets are distributed according to your wishes when you pass away, you must write a legal Will, sooner rather than later. Otherwise, your assets will be distributed according to the above rules, which might not be what you had in mind.