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State borders, real estate and no will – a recipe for trouble!

If the pandemic has taught us anything in Australia, it is that living in the border regions of two states or territories can have a massive impact on how we live our lives and what laws apply to us.

But what if you die without a will and have assets in more than one State or Territory in Australia?  The short answer is – it gets complicated!

A common misconception is that if you die without a valid will, the “government” will take your assets, and your family will miss out altogether. This is simply not the case.

But what does happen is that the rules set by state governments are used to determine how your assets are distributed.  These are the rules of intestacy.

Unfortunately the rules in each state are different – so it is not always clear who is entitled to administer your estate and who the entitled beneficiaries of your assets are.

What is an intestacy?

When a person dies without leaving a valid will, this means they die “intestate” and the rules of intestacy apply when distributing the assets of the deceased’s estate to the beneficiaries.

You can die intestate if you have never made a will or if you have made a will but it cannot be found or if your will is ineffective (i.e. if all of the individuals you have nominated as beneficiaries had died before you, your will has been automatically revoked due to marriage or divorce).

But which State or Territory’s rules apply?

The general rule is that the intestacy rules of the state or territory that you lived in at the time of your death determines how your assets are distributed, unless that asset is real estate located in another state or territory. Seems simple right?  But it is not always clear what state or territory someone was living in at the time of their death.

Where individuals work away from their home state or territory for periods of time i.e. fly in/fly out miners, the state in which they reside (where they consider their home to be) is still the jurisdiction whose intestacy rules would apply if they died without a will.

For example, if you lived in Qld at the time of your death, then the Qld intestacy rules will apply to the distribution of your personal property.

What if I own assets in more than one State or Territory?

The intestacy rules will apply only to the assets held in that jurisdiction.

Financial assets/personal property etc.

The rules of the State where the deceased lived at the time of their death will apply to all of their personal property including the funds in bank account/s, any superannuation death benefit, the proceeds of any life insurance policies, any shares in public companies, motor vehicles, plant and equipment, livestock and personal effects (including jewellery).

But wait, real estate is different?

Real estate owned by a person who dies without a will is always subject to the intestacy rules of the jurisdiction in which that real estate is located.

Take Mary, who died unexpectedly leaving behind her husband and two children aged 10 and 12. Mary lived in the Northern Territory at the time of her death and had never made a will.

Mary is the sole owner of two residential properties (one in Goondiwindi, QLD and one in Moree, NSW) which are each worth $500,000 and Mary held $1 million in a bank account in her name solely.

On Mary’s death:

  • Mary’s husband will receive her personal effects in accordance with the Northern Territory rules;
  • the residential property in Goondiwindi will be distributed in accordance with the Qld intestacy rules – so Mary’s husband would receive approximately $266,666.66 (being the first $150,000 in value and 1/3 of the balance) and her children would each receive approximately $116,666.66. Mary’s children’s share would have to be held on trust for them by her husband until each of them reached the age of 18;
  • the residential property in Moree will be distributed in accordance with the NSW intestacy rules to Mary’s husband solely (as Mary had no children from any previous relationships); and
  • the funds in the bank account will be distributed in accordance with the Northern Territory intestacy rules, with Mary’s husband taking approximately $566,666 (the first $350,000 plus 1/3 of the balance) and Mary’s children each receiving approximately $216,666.

Three very different outcomes for three different assets all for one family, simply because Mary did not have a valid will when she died.

Why is a will so important?

If you have made a will, then on your death this document governs how your estate is administered including:

  • Who will be your executors and have responsibility and control of your assets
  • Who will receive your assets
  • If you have young children, who will act as their guardians and therefore have responsibility for their day to day care
  • Who will hold any inheritance your children receive from you on trust until each child reaches 18 (or if you think that’s too young, such later age as you nominate in the will)

And your will makes it clear which State or Territory rules will apply – no unexpected surprises!

In our next bulletin we will discuss some of the unexpected consequences of failing to make a will when it comes to the distribution of your assets.

For more information about administering a deceased estate that is intestate or making a will or reviewing and updating your will, please contact a member of our Estate Planning team.