Three’s A Crowd: Leaving Behind A Spouse And Partner But No Valid Will

By Deborah Kliger, Lawyer, MST Lawyers

Contrary to popular belief, where a person dies without a valid Will (“intestate”), their estate assets do not automatically pass to the government. Rather, the deceased’s assets are divided among their significant other(s), children and next of kin, according to a hierarchy set out in the Administration and Probate Act 1958 (“intestacy rules”). Where a gift in a Will fails, or the Will does not deal with all of the estate assets, the intestacy rules will apply to those assets.

Sweeping changes to the rules of intestacy have been proposed in a Bill which is currently before the Victorian Parliament. This article outlines a number of significant changes to the rules for distributing estate assets where a person dies intestate leaving:

1. a spouse; and
2. a domestic partner

A person may be considered to have both a spouse and partner if:

1. they are married or separated but not divorced; and also
2. have an extra-marital relationship (of more than two years or from which a child is born).

If the Bill is passed in its current form, these changes (with some modifications) will take effect on or before 1 November 2017.

Spouse vs Partner: the current rules

Under the existing rules, if a person dies without a Will leaving a spouse or partner (of more than two years) and no children, that spouse/partner will inherit the whole estate.  

Currently, if a person dies intestate leaving a spouse or partner and one or more children, the spouse/partner’s entitlement depends on the size of the estate. If the value of the estate is:

1. Less than $100,000 – the spouse/partner will receive the entire estate;
2. Over $100,000 – the spouse/partner will receive the deceased’s personal effects, the first $100,000 and one-third of the balance. The remaining two-thirds of the estate will be inherited by the deceased’s child or children (in equal shares).

The above rules apply regardless of whether the spouse/partner is the biological parent of the child or children.

Also under the current rules, where the deceased leaves both a spouse and partner but no Will, each of the spouse and partner will receive a fixed percentage of the estate. The percentage is determined by the length of the domestic partnership. A relationship spanning six years or more will entitle the partner to receive 100% of the estate, depriving the spouse of any benefit under the estate.   

One or more partners: the changes ahead

The proposed new laws redefine the term “partner” to include a spouse, domestic partner or registered caring partner. 

Notably, a major shift is expected in relation to the entitlements of children whose parent(s) die without a valid Will. As mentioned, currently, if a person dies intestate leaving a single partner and one or more children, those children are entitled to share in two-thirds of the estate balance.

Under the proposed changes, where a deceased leaves:

1. a single partner; and
2. one or more children (who are the offspring of the deceased and that partner)

the partner will take the entire estate, leaving the children with no direct benefit under the estate.

Different rules apply where a deceased leaves a partner and children from a prior relationship.

Further, if a person dies intestate leaving more than one partner and no children, those partners will be together entitled to the whole estate. The deceased’s estate will be divided between the partners as follows:

1. According to the terms of any agreement reached by the partners (“distribution agreement”), or failing that;
2. By way of a court order (made on application by at least one partner) determining what percentage of the estate (if any) each partner will receive (“distribution order”);
3. Otherwise, equally between the partners

What do these changes mean?

If the proposed changes come into force, we can expect increased conflict (including litigation) between the partners of those who die intestate. If the deceased leaves multiple partners and no valid Will, the surviving partners will have no guarantee of receiving assets under the estate. Importantly, if a partner issues proceedings for a distribution order, they risk the court exercising its discretion to award the entire estate to the other partner.

With these changes looming, it is essential to seek professional advice regarding your estate plan and finalise your Will.  

If you have any questions about your Will or any Estate Planning matter, contact our Wills & Estates team by email or by telephone +61 3 8540 0200.