Changes to Intestacy, Ademption and Executors’ Commission in Victoria

The Administration and Probate and Other Acts Amendment (Succession and Related Matters) Act 2017 will come into force on 1 November 2017 which amends the Administration and Probate Act 1958 (Vic) dealing primarily with intestacy, ademption and executors’ commission.

Some of the major amendments are discussed below.

Intestacy

An intestacy arises when a person dies without a valid Will, or has a Will which does not distribute their Estate in its entirety. The legislation in Victoria sets out how an intestate Estate is to be distributed.

Prior to the amendments, if a person dies intestate, their Estate will be distributed as follows:

Partner with no children

100% to the partner

 

Partner with children

Partner will receive:

(1) personal chattels

 

 

(2) 100% if <$100,000

 

 

(3) $100,000 if >$100,000

 

 

(4) interest on $100,000

 

 

(5) one third of balance

 

Children will receive two thirds of balance

 

Children with no partner

Equally between children

 

The rules go on to set out the distribution where there is more than one partner (i.e. a spouse and a domestic partner) or where there is no partner and no children.

Consider this example. A couple purchase a family home, however it was registered solely in the deceased’s name. The family home is the main asset of the couple. There are two young children of the relationship. In this case, the partner would only receive the first $100,000 and one third of the value of the home. The children could potentially be entitled to more than half of the value of the home which must be held on trust for them until they turn 18. This creates a situation where the partner might have to sell the family home because they cannot afford to cover the mortgage payments with their share of the estate.

Under the amendments, if a person dies intestate, their Estate will now be distributed as follows:

Partner with no children

100% to the partner

 

Partner with children of relationship

100% to the partner

 

Partner with children of previous relationship

Partner will receive:

(1) 100% if <$451,909 increased by CPI

 

 

(2) $451,909 if >$451,909

 

 

(3) interest on $451,909

 

 

(4) one half of balance

 

Children of previous relationship will receive one half of balance

 

Children with no partner

Equally between children

 

Again, the rules go on to set out the distribution where there is more than one partner (i.e. a spouse and a domestic partner) or where there is no partner and no children – parents, siblings and then remoter relations. However, the base line now stops at cousins before the Estate is distributed to the Crown. Previously, remoter relations could benefit.

Using our example above, the partner would now receive the entire estate as the children were the children of that relationship. This is a significant shift in the legislation.

‘Partner’ is now defined as a spouse, domestic or registered caring partner.

There are other important changes that you should discuss with us should you be dealing with an intestate estate.

Ademption

Ademption can occur where someone gives a particular asset to a beneficiary in their Will, but at the time of their death, the asset does not form part of their Estate. They may have sold or transferred that assets during their lifetime. The outcome is that the intended beneficiary does not receive the asset which was intended to be given.

The amendments now incorporate what can be described as ‘anti-ademption’ laws to avoid this situation occurring in certain circumstances.

Importantly, where an asset is sold pursuant to an Enduring Power of Attorney, the gift will not have adeemed, and the intended beneficiary may be able to trace the proceeds of sale.

This amendment is very important not only for Willmakers to review their Wills when dealing with their assets during their lifetime but also for anyone selling or dealing with property under a Power of Attorney.

Executors’ Commission

The Supreme Court of Victoria will now have the power to review and reduce the fees, charges or commissions charged by Executors or Administrators of deceased Estates including any claim for reimbursement of expenses. This is despite such remuneration being fixed in a Will.

The amendments to apply to any Wills executed after 1 November 2017 or to the Estates of persons who die after 1 November 2017.

With Tasha Eliassen

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