A person who dies without a will at law dies intestate. The Wills Probate and Administration Acts (NSW) sets out how a person's estate is distributed if they die without a will.
The Act sets out the estate will be divided as follows:
If a person dies leaving a spouse or a de facto spouse with no children and the whole of the estate passes to the surviving spouse or de facto.
If there is a spouse or a de facto spouse and children then assets to the value of $200,000.00 or the principal place of residence which ever is the greater passes to the spouse or the de facto, together with the household effects and then the balance is divided so that the spouse receives a one half share of the balance and the remainder is divided equally between the children.
If no spouse or de facto spouse survives then the estate is divided equally between the children.
Where there is no spouse and no children, then the estate passes to the parents in equal shares.
The Act then provides the order of classes are: Brothers and sisters or their children, half brothers and sisters or their children, grandparents, uncles and aunts and then uncles and aunts resulting from the marriage of the deceased grandparents.
If there are no relatives then the estate passes to the State of New South Wales.
Anyone over the age of 18 should give consideration to making a will.
DYING WITHOUT A WILL
The major disadvantages of dying without a will are:
The law sets out how your assets are to be divided. If you die without a will and leave a wife and children and your assets exceed $200,000.00, then the surviving partner could be restricted by the fact that half the assets over $200,000.00 go to the children. Often it is more practical to leave the whole of your estate to your partner on the basis that they will look after the best interests of the children.
It can be much more costly to finalise the estate of a person who dies without a will as there are more formalities and paperwork.
You do not appoint your administrator who handles the estate. Under a will you can appoint your executor.
WHAT IS A WILL?
A will is a legal document which sets out how a person's estate (assets) is to be divided on death.
There are certain requirements for a will to be enforceable and it is an advantage to arrange for a solicitor to prepare a will and supervise the execution of the will.
The key parts of a will are:
The will sets out that it is binding until another will is made.
The will sets out who the Executor or Executors will be. The Executor or the Executors is the person or persons who control the collection of the estate assets and the distribution of the assets in accordance with the will.
Where children are involved, the executor or executors are often appointed trustees as the executor's role ends when the assets have been distributed to the beneficiaries. Often where children are involved the assets cannot be distributed until the children attain the age of majority (18) and therefore, the trustee role is to control the assets until they can be finally distributed.
The will then sets out how the assets are to be divided.
If assets are being left to children, they become entitled to the assets when they attain the age of majority which is 18 or at an age specified in the will.
The will can also include:
The appointment of guardians for the children.
Directions regarding burial.
Directions that personal assets be divided in accordance with any list that may be prepared by the deceased.
WHEN IS A WILL CANCELLED?
A will is cancelled:
When a new will is made.
Upon the marriage or remarriage of a person
Upon the divorce of a person, a gift to the spouse is cancelled.
CHANGING A WILL
A will should be changed when a person's circumstances change. Other circumstances include where special arrangements need to be made for the benefit of children with disabilities and other such circumstances.
Probate in the past was used to describe death or gift duties. There are no death duties payable on any estate in NSW.
In certain circumstances a grant of probate has to be obtained from the Supreme Court of NSW. The grant of probate is the proving of the will and the probate document authorises the transfer of assets in accordance with the terms of the will.
A grant of probate has to be obtained where a real estate is involved (except in the case where real estate is held as joint tenants with another person) and where assets such as investments are in the sole name of the deceased and exceed $5,000.00
Often where the only assets are investments a solicitor can arrange for the assets to be released without a grant of probate depending upon the size of the investment and the beneficiary.
Where there is no will then the closes relative can apply for Letters of Administration and then the estate will be divided according to the Wills Probate Administration Act. This can be a costly and a time consuming procedure due to the extra paper work required.
POWER OF ATTORNEY
The Power of Attorney can be registered in the Registrar General's Office at Sydney.
A Power of Attorney can be cancelled at any time by the person granting the Attorney provided they have legal capacity.
If a Power of Attorney is witnessed by a solicitor, barrister or court house office then the Power of Attorney will continue whether or not the person losses their legal capacity through dementia etc.
Under the Power of Attorney a person can place various conditions upon the exercise of the Power of Attorney such as:
- The Attorneys must act jointly or at least two of four children.
- The document could state that the Attorney could only act if a person is declared medically unfit by their treating medical practitioner or if the person granting the Power of Attorney is outside a 300 Kilometre radius of the their principle place of residence for at least two weeks.
- The document can specifically state that the Attorney can only act in very restricted circumstances.
Under a general Power of Attorney the Attorney can carry out all the business affairs of the person granting the Power of Attorney except they cannot change the persons will or vary the Power of Attorney or grant Power of Attorney.
Banks, Centrelink and other Government Departments have various Authority forms that allow people to authorise others to act on their behalf.
Under the Guardianship Act a person can appoint another person or persons to be responsible for decisions in relation to their health, life support units, where they are to reside and medical treatment.
I would recommend people give consideration to entering into an Enduring Guardianship so that if a person looses their legal capacity to make decisions there is a clear statement as to who has the authority. This can be very helpful when dealing with doctors, nursing homes, etc. In order to be enforceable the Enduing Guardianship must be witnessed by a solicitor or courthouse officer and the persons granting the Enduring Guardianship and the person being appointed the Guardian must be present when the document is signed.
BEWARE OF THE PUBLIC TRUSTEES OFFER OF A FREE WILL
There is a saying "nothing in life is for free". The initial will might be free, however the costs of administering the will are well in excess of the regulated scale costs of a solicitor handling an estate.
The Public Trustee charges a percentage of the value of an estate as follows:
- First $100.000 4.4%
- Second $100,000 3.3%
- Third $100,000 2.2%
- Every dollar above $300,000 1.1%
Therefore to quote the Public Trustee (another way of looking at it is) 3.3% is charged for the first $300,000. Therefore the charge is $9,900. Under the Supreme Court scale the costs payable in relation to an estate totalling $300,000 to obtain Probate is $2,100 up to the grant of Probate and then the work carried out after the grant of Probate is on an hourly basis.
If the value of the estate was $500,000 the Supreme Court scale that solicitors can charge is $2,900 whilst the Public Trustee would be charging $12,100.
No wonder the Public Trustee is offering free wills when the wills are being subsidised by the commission the Public Trustee charges. People could organise numerous wills over many years with a local solicitor and still the total cost of the preparation of the wills and the finalisation of the estate would be a lesser cost than the Public Trustee.
Before finalising a Public Trustee will people should discuss with a local solicitor the advantages and disadvantages of a Public Trustee will as compared to a will prepared by a solicitor, taking into account the following:
The overall costs.
The difficulties of dealing with the Public Trustee who is based in Sydney with the local court house being the agent. Especially the smaller courthouses as they do not have the experienced staff to deal with such matters and people are referred to Sydney which can be awkward and difficult. Have you tried to ring a government department or a bank in Sydney recently?
The local knowledge, skill, experience and expertise of a local solicitor.
I would be prepared to debate the above issues with a representative of the Public Trustee.
JOINTLY HELD ASSETS
If an asset such as a house or bank account is held as joint tenants then upon the death of one of the joint tenants the asset automatically passes to the surviving joint tenant. However if an asset is held as tenants in common then the asset passes as per the deceased will or if there is no will as per the terms and conditions of the Wills, Probate and Administration Act. It is generally advisable that a couple has at least one bank account that is held as joint tenants as this will allow the survive to continue to be able to operate the account.
A bank account in the sole name of a person is frozen until either probate is granted or the bank agrees to release except the bank will allow a funeral account to be paid.
SOLE NAME TO JOINT NAMES
Stamp duty exemption in relation to the transfer of the principle place of residence. A Stamp duty exemption allowing a person to transfer their principle place of residence where they and their spouse live into their joint names and the stamp duty payable is $10.00. Any person who owns a house in their sole name should give consideration to transferring to the joint names of they and their spouse as this will save the need for a probate application on the death of the first of the couple. This could save costs of at least $1,500 - $2,000 as a probate application would not be required on the death of the first of the spouses.