New Changes to Inheritance Law
Wills and Estates: 18 March 2019
What happens to your assets if you die without a Will? When a person dies without Will, the distribution of their estate can add to a family's grief. The Victorian Law Reform Commission reviewed the law and said the current process is 'unjust' and 'impracticable' and recommended changes. Some changes have already been implemented by the government. From November 1, new changes have been made relating to:
- Intestacy (where a person dies without a valid Will that deals with all their assets.
- Executors fees
- Ademption (when a gift in a Will has been sold or given away before the Will-maker dies).
Intestacy - who gets what?
Until now, if a person died without a will (intestate) and leaving a partner (a spouse, domestic partner or registered caring partner) plus a child or children, the assets were divided so that the partner was entitled to the personal belongings, a lump sum of $100,000 and 1/3rd of the estate. The child or children received the other 2/3rds.
The new law distinguishes between situations where the intestate has children from different relationships. Now, where the deceased leaves a partner and children of that relationship, the partner is entitled to the whole estate. The children don't receive anything.
Where the intestate person has a partner and children from a different relationship:
- the partner receives the personal belongings
- a lump sum which starts at $451,909 and is adjusted each year for CPI increases
- 50% of the balance
- The children receive the other 50%.
What if there is more than one surviving partner?
It sometimes happens that a person leaves behind more than one current partner. For example, the deceased might have been separated (but not divorced) and also have a new partner. Or they may just have more than one active relationship. Until now, the law provided a formula where each partner's entitlement was based on the number of years they had been in the relationship.
Under the new law, if there is more than one partner, the entitlements must be distributed between the partners either:
- by agreement
- by a distribution order from the court; or
- equally, if there is no agreement or court order.
There are procedures and time limits for applying for a court order.
What if there is no partner or children?
There are intestacy rules which set out what happens if an intestate person dies with no partner or children. It works by next-of-kin - parents come first, then siblings, grandparents, etc. until a relative is found, no matter how distant. It was only if there were no relatives that the assets went to the State. The new law limits the next-of-kin to first cousins. If there are no first cousins, all the assets go to the State.
Executors Fees
Most executors of deceased estates are family members of the deceased and don't receive any executor's fees. However, sometimes a Will appoints a professional executor eg. accountant, or a trustee company. A professional executor can only charge fees if the Will authorises the payment, the beneficiaries agree or the court approves the payment.
There has been concern that charging clauses in Wills might not be well understood by the Will-maker or that beneficiaries don't understand their rights to agree to fees or to receive fee estimates. The new law requires 'informed consent' of the will-maker or the beneficiaries. 'Informed consent' means that executors must tell each beneficiary, in understandable language, the basis on which they claim payment; how the payment is calculated and the estimated value of the payment.
The law also gives the court power to review and vary the fees, charges and commissions charged by executors.
Ademption
Ademption can occur where a Will-maker makes a will leaving a particular asset to a beneficiary but, by the time the Will-maker dies, the asset no longer exists. For example, if the family home is left to a beneficiary but the home is later sold to pay for an accommodation bond, the beneficiary can miss out completely. The Will-maker might have intentionally sold the home. However, it is becoming more common that the home is sold when the Will-maker has lost capacity. The home might have been sold by others such as an attorney or an administrator, who is unaware of the contents of the Will. The new law incorporates 'anti-ademption' provisions to prevent an unjust outcome.