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The Cost of Death

06-05-2011

By Zeena Anthony-Quereshi, Mellor Olsson Lawyers

Further to Andrew Goode’s article on 11th November 2010 on avoiding being the "unhappiest corpse in the cemetery" I wish to expand upon this by explaining the importance for people, both young and old, to have a Will.

I speak to many people who do not realise the consequences of not making a Will. The simple fact is that if a person dies without leaving a Will, otherwise known as dying "intestate", it is left to State legislation to determine how that person’s estate should be distributed. The relevant State/Territory in which a person dies will govern which rules are applied to an intestate estate.

It is a commonly held belief that making a Will is for the older generation. In fact, anyone who is 18 years or older and has testamentary capacity (meaning the capacity to make a Will) is entitled, by law, to make a Will. It is only with leave of the South Australian Supreme Court that a person under the age of 18, or a person suffering from mental or physical incapacity, is capable of making a Will.

The main reason for making a Will is to protect the assets that you have accumulated during your lifetime and to set out the way you would like them to be distributed on your death. Another important reason is to ensure that the right person has been appointed to administer your estate. This could be a person who knows your financial situation and asset structure well, or an independent person who is capable of acting as an intermediary where there is concern a dispute may arise between family members. It is quite common to have a lawyer as the independent person, sometimes in conjunction with a family member.

In South Australia when a person dies intestate the provisions of the Administration and Probate Act 1918 ("the Act") are applied. The Act sets out a formula for calculating how a person’s estate should be distributed upon their death. Simply put, the Act states that if a person dies with an estate valued at less than $100,000 (after deducting costs for funeral expenses, debts and administering the estate) then the spouse/domestic partner will inherit the whole estate. If however, the estate is valued at $100,000 or greater then the estate will be divided between the spouse/domestic partner and any children of the deceased. As an example, Bob and Mary have two children, John and Sarah. If Bob dies with an estate worth $500,000, Mary will automatically inherit $100,000 and the remaining $400,000 will be divided equally between Mary, John and Sarah. This scenario does not sit well with most families who want their surviving spouses to be the primary beneficiary. The Act continues by outlining the "next of kin" who should inherit a person’s estate, and in what proportions, if they are not survived by a spouse/domestic partner or children.

If you die intestate your estate will be placed entirely in the hands of the Public Trustee for a period of time following your death rather than a family member or friend and/or an independent lawyer.

Estate planning is imperative for families who wish to ensure the continuity of any family business. This could be a farm, or a private company, which has either been around for generations or newly established. In this event, a Will is crucial to secure succession and to dictate who will carry on the enterprise.

A topic for another day is the need to also have a Power of Attorney.

I implore everyone to plan their estates properly. If you do not, your families are the ones who will suffer. Not knowing the consequences can no longer be used as an excuse. Time to get your affairs in order!

Details:  zanthony-quereshi@mellorolsson.com.au   or   8414 3400