The Consequences of Having No Will or Power of Attorney
Planning for what happens after you're gone isn't anyone's idea of a joyful task. It's tough, but it's crucial. Creating a thoughtful estate plan not only provides peace of mind knowing your loved ones will be cared for, but it also helps prevent disputes among family members.
Despite the clear benefits of putting an estate plan in place, the majority of Australians don’t have a Will. Even if you do, your loved ones may not.
This article explores what happens if you pass away without a Will or lose the ability to make decisions due to mental incapacity.
Dying Without a Will
If you pass away without a Will in NSW, intestacy rules come into play. These rules dictate how your estate is distributed, prioritizing beneficiaries like spouses, children, parents, siblings, grandparents, and aunts/uncles. Here are a few key things to know about intestacy:
1. Priority of Beneficiaries: In NSW, spouses and family members come first.
2.De Facto Relationships: Establishing a de facto relationship's eligibility under intestacy rules can be complex. Two legal cases highlight the challenge:
Unsuccessful Claim: In Sadiq v NSW Trustee and Guardian [2016], Mr. Sadiq's claim was dismissed due to insufficient evidence of cohabitation. Evidence by neighbours and the state of the property upon the deceased's death indicated the deceased lived alone.
Successful Claim: Conversely, in NSW Trustee and Guardian v McGrath [2013], the court recognised a de facto relationship based on substantive evidence beyond formal cohabitation. There was a question as to whether Mr McGrath and the deceased "lived together" as they did not formally move in together, but the deceased was a regular guest at Mr McGrath's home. The Court looked at substance of the relationship and not the label put on it - Mr McGrath did not describe himself as the de facto partner.
3.30-Day Survivorship Requirement: To inherit under intestacy, a beneficiary must outlive the deceased by 30 days. This requirement is unnecessary with a valid Will.
4.Administration of Estates: Without a Will, a family member (or suitable person) must apply to the Supreme Court to be appointed as the estate’s administrator, which can then empower them to deal with funeral arrangements, debt settlement, asset collection and distribution. This process can take 10-12 weeks and is likely to cost at least $10,000 – far more than the cost of writing a Will in the first place.
5.Bona Vacantia: If no rightful heir is found, the State may clam the estate and decide how assets are distributed.
Losing Mental Capacity without a Power of Attorney
Losing mental capacity without having Power of Attorney (POA) documents in place can create a much bigger headache for your family than simply dying without a Will. Whether it’s due to dementia, a stroke, an accident, or something else that leaves you unable to make your own decisions, the legal and practical implications can be overwhelming.
An Enduring POA allows someone you trust to make important financial and legal decisions on your behalf. An Enduring Guardian, which may have different names depending on where you live, gives someone the power to make decisions about your health and lifestyle. One person can hold both roles if that works best. These powers only apply while you’re alive and end once you pass away.
If you lose mental capacity and have not appointed a POA, several legal and practical challenges can arise:
1. Guardianship and Administration
If you become mentally incapacitated and have no POA, a court-appointed guardian or administrator will be assigned to manage your affairs. This process can take several months, during which time no one can deal with your assets or bank accounts.
2. Court-Ordered Appointments
There is a chance the court could appoint the Public Trustee to manage your financial matters. This means every time your family wants to make a decision on your behalf, they’ll need to get approval from the Public Trustee. If you know anyone who has dealt with them, you’ll know it can be costly and frustrating. The Public Trustee charges for its services, and while the fees are supposed to be reasonable, they can vary based on the complexity of the case. For example, we’ve seen situations where a family had to pay $200 just for approval to pay a $100 invoice.
3. Family Disputes
Without an enduring guardian, family members might disagree about who should make decisions for you. This can create tension, especially if there are multiple people in your family who all believe they should have control. You might find your family in the middle of legal battles if one relative wants the authority to act on your behalf but another objects.
Are you at risk from inaction by loved ones?
Not having a solid estate plan in place is a real risk to your financial future.
For clients of Lorica Partners, we work to ensure you receive expert legal advice when drafting Wills and POAs.
But it’s not just your own planning that matters—if your family members haven’t sorted out their estate plans, that could create problems for you down the road. It’s worth having conversations with your loved ones to make sure they’re not leaving you in a difficult situation.
Author: Rick Walker