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What Happens To Your Property And Assets Without A Will?
Drafting a will isn’t difficult, but it is uncomfortable. Here’s why you should do it, however, rather than risk dying without one.
What happens to your property and assets without a will?
Drawing up a will can be an uncomfortable experience. After all, no one likes to think about their mortality, and a will is certainly going to remind you of that. In fact, so many Australians are uncomfortable with the idea of making a will that only 59 percent of them have done so.
And yet, as uncomfortable as it is, having a will that is clear, legally valid, and up to date will ensure your assets are protected and distributed according to your wishes.
What happens if I don’t have a will?
To show you how important it is that you don’t have property and assets without a will, we’ll explain what happens if you pass away without a will (or without your assets and possessions being covered by a will). In most jurisdictions you will be ruled to be “intestate”, and while the specific laws regarding intestacy will vary from state to state (and you should consult with a specialist lawyer in your state if it in any way concerns you), there are some common threads that can be observed:
When you are declared intestate, the government will step in to manage the distribution of all your assets. This means that firstly all your outstanding debts will be paid to the creditors, out of the value of the estate. These debts will include (but are not necessarily limited to): funeral expenses, taxes, any outstanding debts that are owed to financial institutions (such as a bank loan or mortgage), and any other outstanding legal/administrative costs.
- Once the debts are accounted for, the government will then pass the inheritance on, based on a very arbitrary process. Essentially, the government tracks down the highest “rank” person or persons, based on their relationship to you, and splits the inheritance evenly among them. The rankings are generally, across most jurisdictions, as follows:
- Children and grandchildren
- Aunts/ Uncles
And if none of the above apply, then the state will claim the inheritance for itself.
In many cases, this means the inheritance will pass on to the spouse, but even here there are exceptions. For example, if you have children, but with a different partner or former spouse, those children will have some of the inheritance allocated to them. Furthermore, if you have a joint-owned property with someone who is not your spouse, your share of the property will not likely be allocated to them.
How are these assets allocated?
If you do pass on with property and assets without a will, how are that property and those assets allocated?
If the passing of the inheritance is an obvious matter (for example, you have a spouse and no joint assets), then the government will consider that a “clear path of inheritance,” and your spouse will simply assume ownership of all assets.
Additionally, if everyone involved in inheritance without a will can agree on the distribution of assets, then generally speaking the government won’t step in.
However, if there is conflict and the path to inheritance is not clear, then someone will need to assume the role of an estate administrator and apply for a grant of administration. This grant comes from the courts and allows the administrator to access your accounts, pay the debts that you owe on your behalf, and legally distribute the remaining assets.
To gain a grant of administration there needs to be a thorough and proper search for a will that is ultimately unsuccessful. The prospective estate administrator needs to go through all of your papers, check and see if you’ve registered a will with the state supreme court, and consult with and all individuals you may have discussed a will with (for example, your banker and solicitor).
The application for the grant of administration then needs to explicitly detail how the estate will be distributed and needs to qualify that with reference to intestate law (i.e. the government will want proof that you’ve found the right “rank” person or people to receive the inheritance after debts are paid.
Once that is done, the application is made and, if the government is satisfied that the inheritance will be distributed properly and according to the rules, the grant of administration will be approved.
So, why do I need a will again?
We have shown you what happens to property and assets without a will.
But most people have a specific idea of how they would like for their possessions and property to be distributed after their death. Perhaps that sports car would go to a specific friend, and perhaps it’s not your intention to sell the family home to split the inheritance across a couple of children. Other people want to donate a portion (or all) of their assets to a particular favoured charity, arts body, or similar. If you are running a startup then a will is very important.
The only way to ensure that your assets are distributed according to your wishes – and the only way to make sure that people outside of your blood-related family have a claim to your assets – is to have a legal will. It’s also important to update it every time you acquire a major new asset because it is possible to have a legal will but to have left assets off it – those assets alone will become intestate upon your death.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, agencies and entrepreneurs.