The Administration and Probate and Other Acts Amendment (Succession and Related Matters) Bill 2016 was passed recently, and will come into effect on 1 November 2017. The new Act makes significant changes to the intestacy regime currently in place in Victoria.
The old formula
Previously, the legislation imposed a statutory formula for the disposition of assets amongst family members. Notably, where a deceased left behind a spouse and children, then the spouse would receive the deceased’s personal chattels, the first $100,000 of the estate plus interest, and one third of the balance. The remainder would be divided equally amongst the children. If there were no children, then the surviving spouse would receive all of the estate, and if there was no spouse, then the children would receive all of the estate. The formula also laid out the distribution amongst other family members, depending on who was left behind.
The new formula
The new regime introduces a drastic change. Now:-
- If the deceased left behind a partner, then the partner takes all;
- If the deceased left behind a partner and children who were also children of that partner, then again, the partner takes all. It is this scenario that marks a significant shift from the previous formula;
- If the deceased left behind a partner, and children who were not the children of that partner (ie. they were children of a previous relationship), then the partner takes the first $451,909 of the estate, plus one half of the balance, with the children to receive the other half.
There is no change to the definition of “partner”, which is (and was) defined to include someone with whom the deceased had been living at the date of death for a period of longer than 2 years.
It is possible for a person to have more than one partner at the time of death, and also possible to have children to more than one previous partner, and the legislation allows the various family members to come to a ‘distribution agreement’.
Other matters – ademption by attorney
The new Act provides an exemption to ademption so that, in the event that an attorney sells an asset which is the subject of a specific gift in the will, the beneficiary that would have received the gift is able to receive the value of that gift.
For ‘nuclear’ (for want of a better term) families, in which the deceased left a spouse and children, it is now less likely that there will be a forced sale of assets to fund a split of the estate amongst the spouse and children. This also accords with the classic ‘mirror’ wills, in which couples leave all assets to their spouse, on the understanding that the spouse will use those assets to provide wisely for their children.
Further, the new legislation does acknowledge that blended families are more common.
The intestacy provisions are not suitable for (nor are they intended to be suitable for) people who:-
- Are high net wealth;
- Are SME business owners;
- Have vulnerable beneficiaries;
- Have one or more inter vivos trusts (including SMSFs) or companies
- Are estranged from immediate family members for any reason.
Reliance on the legislative regime is intended to be a safety net. Just like the legislative regime, this article is not a substitute for specific legal advice tailored to individual circumstances, and it is still important to seek proper advice from a careful and qualified legal adviser.