NEW INTESTACY RULES AFFECTING FAMILIES – Q & A
Succession Amendment (Intestacy) Act 2009
Now more than ever, it is vitally important to have a valid Will. Amendments to the Succession Act, which came into effect on 1 March 2010, will affect the way a person's estate is divided in the event that they die without a valid Will.
Do the rules apply to me?
If you die without a valid Will i.e. 'intestate' the new rules will determine how your assets are distributed. If you have a Will but it does not effectively dispose of all of your estate, the parts of your estate which are not dealt with under it will be distributed according to the rules.
If you have a legally valid Will the rules will not affect the way your assets are distributed, they will be distributed according to your wishes.
The new rules will only affect the estate of a person who died after 1 March 2010.
How will the rules change?
Definition of spouse
The definition of "spouse" has been altered and now means a person who is married to, or was in a "domestic relationship" with, the intestate. The term domestic relationship replaces the term de facto spouse. A domestic relationship is a de facto relationship that has been in existence for a continuous period of 2 or more years or has resulted in the birth of a child.
Spouse entitlements
Previously, when a person who had not made a Will died leaving a spouse, that person was entitled to receive a portion of the person's estate, known as the 'spousal entitlement.' This was made up of all of the deceased person's personal effects (household items, jewellery etc), a statutory legacy of $200,000 and 50% of the remainder of the estate. The other 50% of any remaining assets passed to any children.
Under the new rules if you have a spouse and no children from any previous relationship, your entire estate will pass to your spouse. Your children with that spouse will not be entitled to personally receive a share of your estate.
What about children from a previous relationship?
If you have children from a previous relationship, they will still be entitled to receive a share of the estate. However changes to the statutory legacy will affect the amount that they may receive. The statutory legacy has been increased from $200,000 to $350,000 (adjusted according to the Consumer Price Index), leaving a smaller percentage of the estate available to the children.
Therefore if you have a spouse and children from a previous relationship, the spouse will receive your personal effects, the statutory legacy of $350,000 and 50% of the remainder of the estate (if there is any). Your children will then share the remaining 50% of your estate equally.
If there is one spouse and children from a previous relationship, the spouse will have the right to elect which assets they will acquire in fulfillment of the spousal entitlement. This will usually be the deceased's share of the home, however, under the new rules, they could choose to acquire the family business.
More than one spouse eligible for the spousal entitlement
The changes also mean that more than one person may be entitled to inherit as a spouse. For example if you are separated from your husband or wife, but have not divorced, and are in a new domestic relationship, you will have two spouses for the purposes of distribution of your assets. This is in contrast to the previous rules where only one spouse (the current spouse) was entitled to benefit from the spousal entitlement.
If you have more than one spouse, each spouse will be entitled to a share in your estate. Generally the two (or more) spouses will have 3 months to either enter into a distribution agreement or apply to the court for a distribution order to determine the percentage each party will receive. If no agreement is reached or order sought within 3 months, the spousal entitlement will be divided equally between them.
How will the changes affect me and my family?
For many people without a Will, these changes may not adversely affect their family. However, not every family is the same. Problems can arise in circumstances where there are multiple spouses and children from current and previous relationships. Disagreements about entitlements can lead to family disputes and cause delays and extra costs in the administration of the estate. The best way to avoid such problems is to create a Will and update it if your circumstances change substantially.
LOUISE JANSSON
Law Clerk
