In traditional thinking, making a will is a relatively taboo topic. In Australia, however, making a will is a common legal act. If a person wishes their estate to be distributed according to their wishes after death, making a valid will is the only way to achieve this. With growing awareness of asset planning and wealth succession, many clients have recently been asking about Australian estate law. In this article we discuss how a person’s assets are inherited if they pass away without a will. In subsequent articles we will also cover the legal issues surrounding wills in Australia.

Where there is no will, each state has slightly different rules on how the estate is distributed. We analyse the main scenarios one by one below.

Funeral and Other Expenses: Paid First

Any claim on an intestate estate ranks behind funeral expenses, related costs and debts. In other words, an intestate estate must first be used to pay funeral expenses, administration costs incurred in dealing with the estate, and other debts, with only the remainder available for distribution. If nothing is left after these items are paid, there is no estate distribution process to follow.

Letter of Administration: May Be Applied For

Where there is no will, who is responsible for actually carrying out the distribution of the estate? An application must be made to the court for a Letter of Administration.

A Letter of Administration is a court order which allows a specified person to act as executor and manage the estate where there is no will, or where the will does not appoint an executor. Once appropriate investigations confirm the deceased did not leave a will, an eligible relative may apply for a Letter of Administration. Once the court grants the application, the person named in the Letter of Administration may proceed with the administration of the estate.

None at All: Eligible Heirs

If the deceased did not leave a will and there are no eligible relatives to inherit, the estate passes to the State — that is, the State acquires the deceased’s estate. At the same time, the State also has power to presume the deceased’s wishes and deal with the estate in accordance with that presumption.

For example, if A supported B throughout A’s lifetime, but there is no kinship or adoption relationship between A and B, then B cannot inherit as of right. However, if it can reasonably be presumed that, had A made a will, A would have used part of the estate to continue supporting B, the State has power to use A’s estate to continue supporting B.

Scenario One: Children and One Spouse

Where the deceased has children and only one spouse, and the children are that spouse’s children

In this situation, the spouse inherits the entire estate. Importantly, the spouse has absolute priority in the order of succession, which differs significantly from the inheritance rules in China. Other than in special circumstances, parents and children cannot inherit from the deceased. Accordingly, where the deceased has a spouse, that spouse alone holds the first-ranking right to inherit. The “spouse” here may be a party to a marriage or a party to a de facto relationship — that is, where the requirements of a de facto relationship are met, the de facto partner is also entitled to first-ranking priority on their own.

Where the deceased has children and only one spouse, but the children are not that spouse’s children

In this situation, the deceased has children, but the children are not the spouse’s children. The spouse first receives a statutory legacy of $350,000 plus CPI adjustment and the deceased’s personal effects, and then receives half of the remaining estate.

Scenario Two: Multiple Spouses, No Children

As we have discussed previously, Australia permits a person to have more than one spouse at the same time. For example, if A and B are in a marriage, but A has also been living with C for more than 2 years and meets the other requirements of a de facto relationship, then C is also treated as A’s spouse. In that case, B and C are both spouses of A and both are entitled to inherit A’s estate.

So what are the respective shares of B and C? Is it always a 50/50 split? In certain circumstances, yes — for example, where the administrator of the estate has given written notice to B and C that the estate will be distributed equally between them, and neither B nor C reaches a distribution agreement within the following 3 months, and neither party applies to the court for a Distribution Order, then this is treated as both parties accepting equal distribution by default, and the estate will be divided equally 50/50 between B and C.

Of course, B and C may not accept an equal split. For example, A and B may have been married for 10 years, while A’s de facto relationship with C has lasted only two years. B may consider that she should receive most or all of the estate. B can apply to the court for a Distribution Order, and the court will distribute the estate between B and C on the basis of fairness and justice. In other words, in that situation the shares of B and C depend on the court’s Distribution Order, and in setting those shares the court will consider what distribution is fair and just. In a case like B and C’s, the court may take the view that, given A and B were married for a considerable time, awarding B a greater share is fair. C, however, may put forward other reasons why the estate should be divided equally — for example, C may have a serious illness requiring ongoing treatment. There is no fixed formula for determining the shares in this situation; the court must weigh all the relevant factors and arrive at what it considers a fair and just distribution.

Scenario Three: Children Only, No Spouse

In this situation the children share the estate equally, and if any of the children has died but left grandchildren, those grandchildren take the deceased child’s share by representation.

Scenario Four: Parents/Siblings Only, No Spouse and No Children

If the deceased has only parents, with no children and no spouse, the parents share the estate equally. If the deceased has only siblings, the siblings share the estate equally, and the children of any predeceased sibling take that sibling’s share by representation. If the deceased has only grandparents, the grandparents share the estate equally.

In Summary — The Order of Priority

Where there is no will, the deceased’s estate is distributed in order of priority. First in priority is the spouse, with the more complex situations arising where multiple spouses exist. Second in priority are the children, and where the children are not the spouse’s children, they share in the first-priority distribution. Next come parents, siblings, grandparents, aunts and uncles, and cousins.

A lower priority class only inherits where the preceding class has no eligible heirs at all. For example, where a spouse exists, the parents have no right to inherit; only where the deceased has no spouse and no children can the parents inherit. If no class has any eligible heirs, the estate passes to the State.

The above sets out the general principles for estate distribution in New South Wales where there is no will. The only way to override these default rules is to make a valid will during one’s lifetime, and we will discuss wills separately in future articles.