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Modern relationships and intestacy

We live in a world where many people have several significant relationships over their lifetime: some of which produce children and some of which introduce step-children; sometimes people marry; sometimes not. What happens with these complex family arrangements if you die intestate (ie. without a Will)?

The intestacy rules are very complex and unfortunately many people are of the misunderstanding that in the absence of a Will it is “all to the other”. This is not always the case.

In very broad summary, the law depends on whether you have one or more partners when you die and whether you have children with one or more of those partners. Whilst Australia does not recognise polygamy, the intestacy rules define a “partner” as including your “spouse” and your “domestic partner” and many people do, in fact, have both. Many second relationships commence before one or both of the parties to that relationship have divorced their previous husband/wife and this is where matters get messy.

If you die with only one partner and either no children or children only with that partner, then all of your deceased estate will go to that partner (refer to one of my previous articles for direction as to what comprises your deceased estate).

If you die with only one partner and you have children who is not also the child of that partner, then your partner will receive all of your personal chattels; the first $460,000 (approx) and 1/2 of the balance of the residuary estate. The children of the deceased (being any children shared with the partner and children from other relationships) will take the other 1/2 of the residuary estate. It is therefore highly possible that if your partner dies without a Will you may be forced to sell and move out of the home in which you live! For example, Bill and Sarah are in a de facto relationship. Bill has 3 children from his first marriage and Sarah has 2 children from her first de facto relationship. Bill is divorced from his first wife. Bill and Sarah live in a house valued at $800,000 which is registered in Sarah’s name and which is Sarah’s only asset. If Sarah dies intestate, then Bill is entitled to Sarah’s personal chattels and the first $460,000. He is also entitled to 1/2 of the net balance, being approx $170,000 ($800,000 – 460,000 = 340,000 / 2). If Bill wishes to retain the house in which he and Sarah lived, then he will be required to pay $170,000 to Sarah’s children. If he cannot raise this money, then he may be forced to sell the house.

If you die with two partners and no children (for example your first wife/husband from whom you are not yet divorced and your domestic partner), then your wife/husband and your domestic partner are each entitled to 1/2 of your deceased estate unless they can agree on an alternative distribution agreement. This is the case whether or not you have finalised your property settlement with your first wife/husband.

If you die with two partners and children only with those partners, then again your husband/wife and your domestic partner are each entitled to 1/2 of your deceased estate unless they can agree on an alternative distribution agreement.

If you die with two partners and children not shared with either of those partners (eg. children from your first marriage which ended in divorce; children from your second marriage which has not yet been ended with divorce and you are now in a new domestic relationship), then your estate will be left so that:

  • your personal chattels are to be distributed equally between your two partners (wife/husband and domestic partner);
  • the first $460,000 (approx) is to be divided equally between your two partners unless an alternative distribution agreement can be agreed;
  • 1/2 of your estate is to be divided equally between your two partners unless an alternative distribution agreement can be agreed; and
  • the remaining 1/2 of your estate is to be divided equally between all of your children.

I have not drawn attention to the need to determine who should be granted Letters of Administration (ie. effectively be appointed as the executors)!!

As you can see, the intestacy rules try to achieve a good and fair balance for the distribution of a deceased estate in the absence of a Will. However, if beneficiaries are not happy with the statutory framework then they can challenge the estate.

All of this angst and complexity can be overcome with seeking early advice and drawing an appropriate and considered Will and estate plan.

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