Succession

Estate constitution

What property constitutes an individual’s estate for succession purposes?

A deceased estate comprises assets and liabilities that were legally held by the deceased in their personal capacity on their date of death. If the individual had any equitable claim to property, those claims generally survive death and the executor can pursue those equitable rights.

If an individual commenced family law financial proceedings during their life, those rights survive the death of the testator and the executor can continue those proceedings in the place of the deceased. Assets that are required to be transferred to or by the deceased are done so from the deceased’s estate.

The way real property is held is a relevant factor determining whether the property forms part of a deceased’s estate. Property held by two or more persons as ‘joint tenants’, will automatically transfer to the surviving owners, and will not form part of the deceased’s estate. However, property held by two or more individuals as ‘tenants in common’, in pre-determined percentages of ownership, the deceased’s share of the property will form part of their estate.

Disposition

To what extent do individuals have freedom of disposition over their estate during their lifetime?

Individuals are generally free to dispose of their property during their lifetime if the property is not otherwise subject to asserted equitable claims, family law claims or other clawback provisions such as through bankruptcy.

Gifts of real property during an individual’s lifetime will likely trigger land stamp duty and capital gains tax, unless prescribed exemptions apply. Further, gifting assets during an individual’s lifetime can impact an individual’s eligibility to receive government welfare benefits as the gifted assets will generally be included in any income or asset eligibility test when applying for welfare assistance.

Australia does not have a principle of community (marital) property. Generally, all assets held by a party to a marriage or de facto relationship are subject to claim by the other party and entitlements are determined in accordance with the Family Law Act 1975 (Cth). There are provisions in the Family Law Act for the clawback of such assets if disposition is considered to defeat the claim of the other spouse.

To what extent do individuals have freedom of disposition over their estate on death?

Individuals generally have freedom of disposition to the extent that they may dispose of their estate by way of their will to beneficiaries of their choice, including to the exclusion of other potential beneficiaries.

This freedom of disposition is, however, balanced against a moral duty to make adequate provision to eligible next of kin such as spouses and children. The relevant succession legislation differs in each state and territory in Australia; however, all generally enable eligible applicants to contest a will on the basis the testator had a moral obligation to make adequate provision for their proper maintenance and support and failed to do so.

Intestacy

If an individual dies in your jurisdiction without leaving valid instructions for the disposition of the estate, to whom does the estate pass and in what shares?

If an individual dies without a valid will (referred to as dying ‘intestate’), each state and territory in Australia has enacted legislation to govern distribution of assets to prescribed beneficiaries. Generally, if a person dies intestate, the following beneficiaries will be entitled to a share of the estate (in order of priority):

  • a partner or partners of the deceased;
  • children of the deceased;
  • grandchildren of the deceased;
  • parents of the deceased;
  • siblings of the deceased;
  • nieces and nephews of the deceased;
  • grandparents of the deceased;
  • aunts and uncles or cousins of the deceased; and
  • the Crown.

 

The portion of the estate distributed between the beneficiaries varies according to the legislation of the state or territory in which the deceased was domiciled.

Adopted and illegitimate children

In relation to the disposition of an individual’s estate, are adopted or illegitimate children treated the same as natural legitimate children and, if not, how may they inherit?

In Australia, there is no distinction between adopted or illegitimate children and both are treated as legitimate children for the purposes of distribution upon death without a valid will (intestate). Stepchildren are not considered eligible for distribution if an individual dies intestate. However, stepchildren are generally eligible to make a claim against a deceased’s estate for provision.

Distribution

What law governs the distribution of an individual’s estate and does this depend on the type of property within it?

In Australia, the law of the jurisdiction where real property is situated applies to the distribution of the property unless there is a contrary intention such as in a person’s will.

Movable property or personal property is generally dealt with by the law of domicile of an individual.

Formalities

What formalities are required for an individual to make a valid will in your jurisdiction?

In Australia, each state and territory has their own legislation governing the validity of wills. Generally, for a will to be valid in Australia it must be:

  • in writing;
  • signed by the testator with the intention of executing a will; and
  • signed in the presence of two witnesses present at the same time.

 

The testator must also have full legal capacity to make a will and must not be unduly influenced.

Following the covid-19 pandemic, states and territories have enacted legislation to allow wills to be signed electronically, where the testator and two witnesses must appear on an audio-visual link at the same time.

Through this link, the witnesses must be able to see the testator electronically sign the will. One of the witnesses must be an authorised witness such as an Australian legal practitioner, who will then need to certify that they witnessed the will in accordance with the state or territory legislation.

Australia also recognises ‘informal wills’, being wills that do not comply with the legislative requirements determining validity but are nonetheless still deemed to be testamentary instruments. However, an application for a grant of an informal will is a costly exercise without any guarantee that a grant will be issued. For example, courts have issued grants of representations on ‘text message wills’ and other audio-visual wills. However, care should be taken if not complying with the requirements of a valid will.

Foreign wills

Are foreign wills recognised in your jurisdiction and how is this achieved?

Australia recognises international wills. An international will is a document executed by the testator with the intention to apply in any jurisdiction in the world. Australia is a party to the Convention Providing a Uniform Law on the Form of an International Will contained in the UNIDROIT Convention. The Convention was signed in Washington, DC in 1973. The states and territories of Australia have adopted the principles in the Convention that stipulate that an international will is recognised as a valid form of will by courts of countries party to the Convention. This is irrespective of where the will was made, the location of assets, or where the will-maker lives and without having to look to the internal laws operating in foreign countries to determine whether the will has been properly executed.

Further, Australia also recognises wills executed in foreign places. A will is deemed to be valid if its execution conforms to the requirements for a valid will in the jurisdiction the will was executed.

Administration

Who has the right to administer an estate?

The legal personal representative of the deceased has the right to administer the estate. In Australia, there is a priority system on who can validly represent an estate.

The order of priority for a legal personal representative of an estate is as follows.

If there is a valid will:

  • The executor or executors are validly appointed by a will.
  • If no appointment is made or an executor predeceases, then the residual beneficiary or beneficiaries with the greatest entitlement can apply to be the legal personal representative.

 

Where there is no valid will, the next of kin with the greatest entitlement can apply to be the legal personal representative.

How does title to a deceased’s assets pass to the heirs and successors? What are the rules for administration of the estate?

Distribution of an estate is dependent on whether the deceased left a valid will or not. If a deceased left a valid will, the distribution of assets will be in accordance with the terms of the will. However, if a deceased dies intestate (without a will), distribution of the deceased’s assets is governed by intestacy provisions. A grant of probate or letters of administration enables a legal personal representative to obtain title to assets of the deceased’s personal estate and distribute them to beneficiaries.

In Australia, assets are generally classified as personal assets, superannuation or other. Personal assets are those held in an individual’s name that are distributed in accordance with their will or intestacy provisions (as the case may be). Superannuation and other types of assets, such as those held on trust or by companies, are not automatically dealt with by a person’s will or intestacy provisions.

Challenge

Is there a procedure for disappointed heirs and/or beneficiaries to make a claim against an estate?

Each state and territory has its own legislation enabling eligible applicants to make a claim for provision or further provision against a deceased estate. Generally, for an application to be successful, the following elements need to be satisfied:

 

Eligible applicant

The following persons are generally considered to be eligible applicants:

  • a spouse or domestic partner of the deceased at time of death;
  • a child, including a stepchild, of the deceased; and
  • a person who was wholly or partially dependent on the deceased, to the extent the deceased had a moral obligation to provide for that person in the will.

 

Relevant considerations

A claim must generally be made within six months of a grant of representation being issued by the court. When assessing the validity of a claim the court will consider various factors including:

  • the terms of the deceased’s will (if any);
  • evidence of why the deceased drafted their will in any certain way; and
  • any evidence as to the deceased’s intentions in relation to provision for the applicant.

 

The court may also consider other factors such as:
  • the size of the estate;
  • the relationship between the deceased and the applicant;
  • the applicant’s personal and financial circumstances;
  • the circumstances of the other beneficiaries; and
  • any other circumstances that the court sees fit.

 

Australian courts have placed a strong focus on whether the deceased had a moral obligation and the adequacy of any provision made. The courts also consider whether the applicant has a need for provision from the estate.