5. Intestacy

Introduction

Overview of intestacy in Victoria

5.1 If a person’s property is not disposed of by a will when they die, that person has died intestate. Intestacy can occur if the person does not have a will, if their will is not valid1 or if their will only disposes of some of their property. The laws of intestacy determine how the deceased person’s property is to be distributed to their partner, children or other relatives.

5.2 The Administration and Probate Act 1958 (Vic) establishes a statutory scheme for the distribution of property on intestacy in Victoria.2 The terms of reference direct the Commission to review and report on whether this scheme is operating effectively to achieve just and equitable outcomes.

5.3 Under the Administration and Probate Act, the deceased person’s property that needs to be distributed on intestacy is called the ‘residuary estate’. When a person dies intestate, their personal representative is responsible for selling and converting into money all property that was owned by them.3 The residuary estate, for distribution on intestacy, comprises all the money that remains after funeral, testamentary and administration expenses, debts and other liabilities of the estate have been paid.4 The residuary estate includes any part of the estate that has been retained unsold and is not required for administration purposes.5 For clarity of meaning, this report uses the term ‘intestate estate’ to describe everything that remains after payment of funeral expenses and debts that is not disposed of by will.

5.4 If the deceased person does not have a partner, children or other relatives to whom their intestate estate can be distributed, the estate belongs to the State of Victoria as bona vacantia, meaning unclaimed goods or property that has no owner.6However, if the State of Victoria becomes entitled to unclaimed property as a result of the death of any person, the Minister for Finance may distribute the property

  • any person, whether related to the deceased person or not, who was dependent on the deceased person, or
  • any person for whom the deceased person might reasonably have been expected to make provision (in the opinion of the Minister).7
  1. 5.5 Statistics in relation to grants of probate and letters of administration, provided by the Supreme Court of Victoria and published in the Commission’s consultation paper on intestacy, indicate that more than seven per cent of grants made each year are for intestate estates.8 This figure represents between 1300 and 1400 intestate estates each year.9 The figure does not include partial intestacies or take into account informal administration of intestate estates, where no grant is obtained. 

National Committee for Uniform Succession Laws

  1. 5.6 The National Committee for Uniform Succession Laws, which comprised representatives from all states and territories except South Australia, reviewed the laws of intestacy in all Australian states and territories. Its 2007 report on intestacy made 79 recommendations, which, if implemented, would involve significant reform to Victoria’s intestacy laws.10 The recommendations have been substantially implemented in New South Wales and Tasmania.11
  2. 5.7 The Commission’s terms of reference direct it, in undertaking the reference, to have regard to relevant recommendations made by the National Committee. The terms of reference also note that state and territory ministers have agreed to adopt the National Committee’s recommendations,12 with the aim of maximising national consistency.
  3. 5.8 Accordingly, the Commission takes the view that, unless there are compelling reasons to depart from the recommendations of the National Committee, the Commission should support them. New South Wales and Tasmania have already implemented the National Committee’s intestacy recommendations, so national consistency would be promoted by implementing the National Committee’s recommendations in relation to intestacy in Victoria.

Areas in which the Commission recommends reform

  1. 5.9 There are many aspects of Victoria’s intestacy scheme that would remain the same under the Commission’s recommendations. Intestacy law would continue to operate in respect of property not effectively disposed of by will; a hierarchy of next of kin who are entitled to inherit on intestacy would still exist; and there would be no change to the structure of this hierarchy. Intestate estates would still belong to the State of Victoria when the deceased person does not have next of kin who are entitled to inherit on intestacy. These features of Victoria’s intestacy scheme are already consistent with other jurisdictions, and the National Committee for Uniform Succession Laws did not recommend any change in relation to them.
  2. 5.10 While the basic framework of the intestacy scheme would remain the same, the Commission recommends changing the law concerning:
  • the definition of next of kin
  • survivorship
  • the size of the deceased person’s partner’s share and their right to elect to acquire certain estate property
  • the circumstances in which the deceased person’s children are entitled to take
  • some procedural aspects of the intestacy scheme
  • intestate estates of Indigenous people.
  1. 5.11 The reforms recommended in this chapter would bring greater clarity to intestacy law in Victoria and greater consistency to intestacy law in Australia but, if grafted onto the existing provisions of the Administration and Probate Act, would make Victoria’s law unnecessarily complex and confusing. For this reason, the Commission considers that all of the Administration and Probate Act provisions concerning the intestacy scheme should be rewritten, incorporating the reforms to the law recommended in this chapter.
  2. 5.12 The Commission notes that there are also unnecessary complexities in the intestacy provisions of the Administration and Probate Act, which could be addressed if the provisions were comprehensively redrafted. For example:
  • section 51(2) of the Administration and Probate Act provides for distribution to the deceased person’s partner on intestacy, if the deceased person is survived by one partner13
  • section 52(1)(a) of the Act also provides for distribution to the deceased person’s partner on intestacy in these circumstances.14
  1. 5.13 Section 51(2) of the Act is the correct and comprehensive provision that sets out distribution to the deceased person’s partner, if the deceased person is not survived by multiple partners. Section 52(1)(a) of the Administration and Probate Act is unnecessary as an incomplete restatement of the deceased person’s partner’s rights on intestacy. Redrafted intestacy provisions, incorporating the Commission’s recommended amendments, should address these and any other anomalies in the existing sections.

Setting a limit on next of kin

Current law

  1. 5.14 In Victoria, there is no limit on the next of kin who are entitled to inherit on intestacy. Rather, the civil law rules of distribution apply, subject to the provisions of the Administration and Probate Act. Intestate estates are distributed to the deceased person’s partner or next of kin according to the following hierarchy:
  • partner(s)15 and/or children or other issue16
  • parents17
  • siblings, or nieces and nephews when they take as representatives of their deceased parent18
  • grandparents19
  • nieces and nephews when they take in their own capacity, rather than as representatives of their deceased parent; aunts and uncles;20 great-grandparents
  • first cousins; great-nieces and great-nephews; great-aunts and great-uncles; great-great-grandparents
  • more remote kin. 

Proposed change

  1. 5.15 To ‘avoid complexity, delay and expense in the administration of intestate estates’, the National Committee for Uniform Succession Laws recommended setting a limit on next of kin who are entitled to inherit on intestacy.21
  2. 5.16 In its consultation paper on intestacy, the Commission asked whether next of kin for the purposes of intestacy in Victoria should be limited to the children of the deceased person’s parents’ siblings—that is, the deceased person’s first cousins—as recommended by the National Committee.22
  3. 5.17 Under the National Committee’s recommendations, where an aunt or uncle of the deceased person (a brother or sister of the deceased person’s parent) would have been entitled to take on intestacy, but predeceases the deceased person, leaving a child or children (first cousins of the deceased person) who survive the deceased person, those first cousins would take the deceased person’s aunt’s or uncle’s share.23 However, if a first cousin predeceases the deceased person, leaving a child or children (first cousins once removed of the deceased person) who survive the deceased person, those first cousins once removed would not take the deceased person’s first cousin’s share, and the estate would belong to the State of Victoria as bona vacantia.24
  4. 5.18 Where a brother or sister of the deceased person would have been entitled to take on intestacy but predeceases the deceased person, leaving a child or children (nieces and nephews of the deceased person) who survive the deceased person, those nieces and nephews would take the deceased person’s sibling’s share.25 If a niece or nephew predeceases the deceased person, leaving a child or children (great-nieces and great-nephews of the deceased person) who survive the deceased person, those great-nieces and great-nephews would take the deceased person’s niece’s or nephew’s share.26 Distribution would continue down this line to great-great-nieces and great-great-nephews, and so on until the entitlement is exhausted.27
  5. 5.19 If the National Committee’s recommended limit were implemented in Victoria, it would exclude the deceased person’s great-grandparents, who are the same degree of remoteness as the deceased person’s aunts and uncles in Victoria under the civil law, and the deceased person’s great-aunts and great-uncles and great-great-grandparents, who are the same degree of remoteness as the deceased person’s first cousins in Victoria under the civil law.28 The limitation would also exclude more remote relatives.
  6. 5.20 Victoria is the only state that does not limit next of kin on intestacy.29 The proposed change would bring Victoria into line with New South Wales, Tasmania, Queensland
    and Western Australia, which all set the limit at first cousins of the deceased person.30  

Views and conclusions

Setting a limit on next of kin

  1. 5.21 In submissions to the Commission, there was widespread support for limiting next of kin to the deceased person’s first cousins.31 The main reasons given in support of limiting next of kin were that:
  • Next of kin inquiries can be time consuming and expensive32 and setting a limit will lessen the difficulty and delay involved in locating remote next of kin, who may have had no relationship with the deceased person or who are overseas.33
  • National consistency would provide greater certainty, particularly for people who own property in more than one state or territory.34
  • More remote next of kin could make an application to the Minister for Finance under the Financial Management Act 1994 (Vic) or could make a family provision application in certain circumstances, where they believe they should have received a share.35
  • Cases involving remote next of kin are rare and the additional costs and time taken
    in locating them are not justified.36
  1. 5.22 Several submissions were opposed to setting a limit on next of kin on the basis that it would result in more estates passing to the State of Victoria as bona vacantia.37 The Law Institute of Victoria’s submission argued that people expect family to inherit, irrespective of whether there was a close or distant relationship.38
  2. 5.23 However, the Commission notes that fewer than five per cent of estates administered by State Trustees involve next of kin who are more remote than the deceased person’s first cousins and most fall within the first two classes of next of kin.39 If next of kin were limited to first cousins, only a relatively small number of estates that would currently be distributed to a deceased person’s more remote relatives would pass to the State of Victoria instead. The Commission agrees that the cases are so few that the time and expense involved in locating more remote next of kin is not justified. As noted in submissions, there is the potential for more remote next of kin to apply to the Minister for Finance or make a family provision claim in some circumstances, if they believe that they should have received a share.
  3. 5.24 If the unlimited definition of next of kin in Victoria were to be retained, the fact that all other states and territories limit next of kin who are entitled to inherit on intestacy means that remote next of kin of a deceased person who lived permanently in Victoria or owned immovable property in Victoria, and died intestate, may receive a windfall that they would not be entitled to anywhere else in Australia. This creates an anomaly, particularly where a deceased person owned immovable property in multiple jurisdictions. 
  4. 5.25 In the Commission’s view, the arguments against setting a limit on next of kin do not warrant departure from the National Committee’s recommendation. For practicality, and to promote certainty and national consistency, next of kin entitled to inherit on intestacy should be limited to children of the deceased person’s parents’ siblings—first cousins of the deceased person. First cousins of the deceased person would take as representatives of the deceased person’s parent’s siblings who do not survive the deceased person.40
  5. 5.26 The Commission also considers that a list of those entitled to take on intestacy should be included in the Administration and Probate Act. Distribution among relatives should
    be set out as in the Succession Act 2006 (NSW).41
  6. 5.27 Under the recommended scheme, the intestate estate would be distributed according to the following hierarchy:
  • partner(s) (in some circumstances, shared with children or other issue)42
  • children, or other issue when they take as representatives of their deceased parent43
  • parents
  • siblings, or nieces and nephews or great-nieces and great-nephews, when they take as representatives of their deceased parent44
  • grandparents
  • aunts and uncles, or first cousins when they take as representatives of their deceased parent.

Recommendations

11 The entitlements of all next of kin on intestacy should be clearly set out in the Administration and Probate Act 1958 (Vic).

12 Next of kin who are entitled to inherit on intestacy should be limited to children of the deceased person’s parents’ siblings (the deceased person’s first cousins).

 

5.28 The effect of recommendation 12, where the deceased person is not survived by a partner, is illustrated by Figure 1. (View the figure as a pdf). In interpreting Figure 1, the following points should be noted:

  • It is relevant only where the deceased person is not survived by a partner.
  • Distribution would only be to the deceased person’s parent(s) if the deceased person was not survived by any children, grandchildren, great-grandchildren, great-great-grandchildren or other issue down this line.
  • Distribution would only be to the deceased person’s sibling(s) if the deceased person was not survived by any children or other issue, or parent(s). Nieces and nephews and other descendants down this line would take as representatives of their deceased parent(s).
  • Distribution would only be to the deceased person’s grandparent(s) if the deceased person was not survived by any children or other issue, parent(s), sibling(s), niece(s)
    or nephew(s), great-niece(s) or great-nephew(s) or other descendants of their siblings.
  • Distribution would only be to the deceased person’s aunt(s) or uncle(s)—that is, siblings of their parent(s)—if the deceased person was not survived by any children or other issue, parent(s), sibling(s), niece(s) or nephew(s), great-niece(s) or great-nephew(s) or other descendants of their siblings, or grandparent(s). The deceased person’s first cousin(s) would take as representatives of their deceased parent(s),
    but there would be no distribution to children or other issue of first cousin(s) if any first cousin(s) did not survive the deceased person.
  • If the deceased person was not survived by any children or other issue, parent(s), sibling(s), niece(s) or nephew(s), great-niece(s) or great-nephew(s) or other descendants of their siblings, grandparent(s), aunt(s) or uncle(s) or first cousins, the estate would be bona vacantia.

Entitlements to take in more than one capacity

  1. 5.29 The National Committee also recommended that, where a person is entitled to take in more than one capacity on intestacy, they should be able to take in each capacity.45 This could arise where, for example:
  • The deceased person’s parents’ respective siblings marry one another and have children—for example, where the deceased person’s mother’s sister (the deceased person’s maternal aunt) and father’s brother (paternal uncle) marry and have a child (the deceased person’s first cousin). If the deceased person’s married maternal aunt and paternal uncle both fail to survive the deceased person, the deceased person’s first cousin would be entitled to take both their deceased mother’s share and their deceased father’s share.
  • The deceased person’s siblings’ respective children (the deceased person’s nieces and nephews) marry one another as first cousins and have children (the deceased person’s great-nieces and great-nephews). If the deceased person’s married niece and nephew both fail to survive the deceased person, the deceased person’s great-nieces and great-nephews would be entitled to take both their deceased mother’s share and their deceased father’s share.
  1. 5.30 The Commission considers that, as recommended by the National Committee, next of kin who are entitled to take on intestacy in more than one capacity should be permitted to take in each capacity in which they are entitled.

Recommendation

13 Persons entitled to inherit on intestacy in more than one capacity should be entitled to take in each capacity.

 

Survivorship

Current law

  1. 5.31 In Victoria, there is no requirement that a person entitled to inherit on intestacy survive the deceased person by any amount of time; it is sufficient that they survive the deceased person at all.46
  2. 5.32 This differs from the position that applies to beneficiaries under a will. They must survive the deceased person by 30 days in order to take their benefit, unless a contrary intention is expressed in the will.47 This creates an inconsistency in relation to partial intestacies, where a person is a beneficiary under the will and is also entitled to a share in relation to the partial intestacy. If this person dies within 30 days of the deceased person, they (or their estate) would not be entitled to the gift under the will, in the absence of a contrary intention in the will, but they would be entitled to their share on intestacy.

Proposed change

  1. 5.33 To achieve consistency with the survivorship requirement in relation to wills, and to address the problem of relatives dying within a short time of one another, the National Committee for Uniform Succession Laws recommended that those entitled to a share on intestacy should survive the deceased person by 30 days to take their share on intestacy, unless the survivorship requirement would result in bona vacantia.48 The bona vacantia exception recognises that, where there are next of kin within the defined classes, it is preferable for the deceased person’s estate to pass to them, even though they may die shortly after the deceased person, rather than to the State of Victoria.
  2. 5.34 Queensland already had a 30-day survivorship requirement when the National Committee made its recommendations,49 and South Australia has a 28-day survivorship requirement that applies only to the deceased person’s spouse and domestic partner,50 although neither of these states has a bona vacantia exception. Both New South Wales and Tasmania have implemented the National Committee’s recommendation.51 
  3. 5.35 The National Committee also recommended that the survivorship requirement should apply to children who were conceived, but not yet born, at the date of the deceased person’s death.52 It recommended that, to inherit their share, such children should be required to survive for at least 30 days after birth.53 As with the general survivorship requirement, it recommended that this requirement should not apply if it would result in bona vacantia.54 This recommendation has been adopted in New South Wales and Tasmania.55 Children who were conceived but not yet born at the date of the deceased person’s death are recognised on intestacy in Victoria,56 but no survivorship requirement applies to them, as no survivorship requirement applies to any person entitled to take on intestacy.
  4. 5.36 In its consultation paper on intestacy, the Commission asked whether the National Committee’s recommended approach to survivorship should be adopted in Victoria.57

Views and conclusions

  1. 5.37 In submissions to the Commission, there was general support for introducing a 30-day survivorship requirement.58 Only one submission opposed the idea.59 The main reasons given in support of the introduction of a survivorship requirement were:
  • consistency with the survivorship requirement under wills60 and the way people generally draft their wills61
  • consistency with other Australian states and territories62
  • ensuring that a deceased person’s assets generally remain in their own bloodline and avoiding the quirk that can occur when relatives die in quick succession, where property passes to one person and then shortly thereafter to their estate.63
  1. 5.38 In consultation, representatives of the NSW Trustee and Guardian said that the survivorship amendment is working well in New South Wales and noted that they have experienced a number of cases where spouses die within a short time of each other, which means that the requirement is justified.64
  2. 5.39 The reasons provided in submissions and consultations in support of a survivorship requirement were broadly similar to those given by the National Committee when recommending the requirement.65 The National Committee also noted that the period of 30 days would not delay administration unduly and, in some cases, would avoid the costs and delay involved in ‘double administration’.66
  3. 5.40 The Commission considers that the reasons in support of a survivorship requirement are compelling and that a 30-day survivorship requirement should operate in relation to intestacy, unless it would result in bona vacantia. The Commission considers that the survivorship requirement should apply to children conceived, but not yet born, at the date of the deceased person’s death, as recommended by the National Committee.

Recommendations

14 Next of kin should be required to survive the deceased person for 30 days in order to inherit on intestacy, unless the survivorship requirement would result in bona vacantia.

15 Children who are conceived but not yet born at the date of the deceased person’s death should be required to survive for at least 30 days after birth in order to inherit on intestacy, unless the survivorship requirement would result in bona vacantia.

 

The partner’s share

Current law

Recognition of partners on intestacy

  1. 5.41 If a person dies intestate leaving a partner, the hierarchy of distribution on intestacy prioritises the partner. For the purposes of intestacy, the Administration and Probate Act defines the deceased person’s partner as their spouse or domestic partner.67
    Spouse means someone who was married to the deceased person at the time of the deceased person’s death.68 Domestic partner69 means either a registered domestic partner70 or an unregistered domestic partner.71
  2. 5.42 Registered caring partner is also defined72 and included in the provisions that deal with the situation where the deceased person is survived by more than one partner.73
    However, registered caring partner is not included in the definition of partner,74 so registered caring partners do not appear to be entitled to take as the deceased person’s partner on intestacy. This is discussed further from [5.53] below. 

The partner’s share on intestacy

  1. 5.43 The deceased person’s partner’s share on intestacy will depend on:
  • the size of the estate
  • whether the deceased person is also survived by children or other issue
  • whether the deceased person is also survived by another partner or other partners who are also entitled to a share.

Distribution when the deceased person is survived by multiple partners is discussed below from [5.89].

  1. 5.44 Victorian law recognises two situations in which the deceased person’s partner is entitled to take the entire intestate estate:
  • where the deceased person is survived by one partner, but no children or other issue75
  • where the deceased person is survived by one partner, and children or other issue,
    but the value of the intestate estate does not exceed $100,000.76
  1. 5.45 If the deceased person is survived by a partner and children or other issue, and the value of the intestate estate exceeds $100,000, the deceased person’s partner must share the intestate estate with the deceased person’s children or other issue.77 In this situation, the deceased person’s partner is entitled to all of the following:78
  • the deceased person’s personal chattels79
  • $100,000 plus interest80 on that amount
  • one third of the balance of the estate.
  1. 5.46 In this situation, the deceased person’s children or other issue share the remaining two thirds of the intestate estate between them.81 The deceased person’s partner’s statutory legacy and share of the remainder are only relevant where the deceased person is survived by a partner and children or other issue who are entitled to a share on intestacy. The circumstances in which the Commission considers that the deceased person’s children should be entitled to a share on intestacy are discussed below from [5.117].

Proposed change

  1. 5.47 When the deceased person is survived by both a partner and children or other issue who are entitled to a share on intestacy, the National Committee for Uniform Succession Laws recommended increasing the partner’s share of the intestate estate as follows:
  • increasing the partner’s statutory legacy to $350,000, adjusted to reflect changes in the Consumer Price Index (CPI) between 1 January 2006 and 1 January in the year
    of the deceased person’s death,82 and
  • increasing the partner’s share of the remainder from one third to one half.83
  1. 5.48 It was the National Committee’s view that the statutory legacy should permit the deceased person’s partner to continue living in the manner to which they had become accustomed, and permit them to buy essential estate items.84 Further, the National Committee considered that the one-third share of the remainder, which the deceased person’s partner currently receives in Victoria, is too small.85
  2. 5.49 The Commission’s consultation paper on intestacy asked whether, when the deceased person is survived by both a partner and children or other issue who are also entitled
    to a share on intestacy, the deceased person’s partner’s statutory legacy and share of the remainder should be increased as recommended by the National Committee.86
  3. 5.50 Both Tasmania and New South Wales have increased the partner’s statutory legacy to $350,000, adjusted to reflect changes in the CPI by application of a formula.87 However, the New South Wales formula takes into account changes between the December 2005 CPI number and the CPI number for the quarter immediately before the deceased person’s death, while the Tasmanian formula takes into account changes between the December 2009 CPI quarter and the CPI quarter immediately before the deceased person’s death.88 The effect of this is that the statutory legacy in New South Wales is now $427,684.95,89 while in Tasmania it is only $380,063.60.90
  4. 5.51 The CPI number used in both New South Wales and Tasmania is the ‘All Groups Consumer Price Index number, being the weighted average of the 8 capital cities, published by the Australian Statistician in respect of that quarter.’91
  5. 5.52 Under the National Committee’s recommendations, the deceased person’s partner would still take the entire intestate estate if the deceased person were not also survived by children or other issue who were entitled to a share—these recommendations only relate to situations in which the deceased person is survived by both a partner and children or other issue who are also entitled to a share.92 Although the partner’s statutory legacy and share of the remainder would increase, the overall framework of Victoria’s legislative provisions in this area would remain the same. The deceased person’s partner would still receive the deceased person’s personal chattels, a statutory legacy plus interest, and a share of the remainder—only the size of the statutory legacy and share of the remainder would change.

Views and conclusions

The definition of partner

  1. 5.53 As discussed above at [5.41]–[5.42], the definition of partner in the Administration and Probate Act refers only to spouse and domestic partner,93 and domestic partner includes only registered and unregistereddomestic partners. It does not include registered caring partners.94 The right to inherit on intestacy is conferred on people who fall within the definition of partner, and so excludes the deceased person’s registered caring partner. The Administration and Probate Act defines registered caring partner,95 but this person appears only to be entitled to inherit on intestacy in limited circumstances, where the deceased person is survived by both a registered caring partner and an unregistered domestic partner.96
  2. 5.54 Submissions and consultations did not address whether registered caring partners are, or should be, entitled to inherit on intestacy in the same circumstances as spouses, registered domestic partners and unregistered domestic partners. Further, the problem does not appear to have been considered by the Probate Registry of the Supreme Court of Victoria yet, as the Commission understands that the Supreme Court only received its first intestacy claim by a registered domestic partner in 2012.97
  3. 5.55 It is unlikely that Parliament intended that registered caring partners inherit on intestacy only when the deceased person is survived by both a registered caring partner and an unregistered domestic partner, but not when they are the only surviving partner of the deceased person. Indeed, the explanatory memorandum for the bill that introduced registered caring partners into the Administration and Probate Act specified that ‘it is intended that the provisions of the Administration and Probate Act 1958 that apply to domestic partners apply equally to partners in registered caring relationships’.98
  4. 5.56 For this reason, the Commission recommends that the position of registered caring partners under the Administration and Probate Act be clarified to ensure that registered caring partners are entitled to inherit on intestacy in the same circumstances as spouses, registered domestic partners and unregistered domestic partners.

Recommendations

16 The definition of partner in the Administration and Probate Act 1958 (Vic) should be amended to include registered caring partners, as defined in the Administration and Probate Act 1958 (Vic) by reference to the Relationships Act 2008 (Vic).

17 Registered caring partners should be entitled to inherit on intestacy in the same circumstances as spouses, registered domestic partners and unregistered domestic partners.  

The partner’s statutory legacy

The amount of the statutory legacy
  1. 5.57 All submissions that responded to this issue supported increasing the deceased person’s partner’s statutory legacy,99 with most supporting an increase to $350,000 adjusted to reflect changes in the CPI.100 Reasons given in support of increasing the deceased person’s partner’s statutory legacy included:
  • promoting a nationally consistent approach101
  • ensuring that the deceased person’s partner is adequately provided for, so that
    the potential for family disputes and litigation is minimised102
  • enabling the deceased person’s partner to modestly house themselves.103
  1. 5.58 The Supreme Court of Victoria expressed the view that statutory legacy provisions ‘were originally intended to ensure that the matrimonial home (if any) was preserved for the surviving partner’.104 It considered the current statutory legacy to be inadequate and said that it ‘should be substantially increased to preserve the intention of the provisions’.105
  2. 5.59 However, some submissions that supported an increase in the statutory legacy were unsure about the amount of the increase,106 and others suggested that it should be linked to the size of the estate.107 The Property and Probate Section of the Commercial Bar Association was concerned that, if the legacy were increased to $350,000, it would reduce the children’s share and could result in claims being made against the estate that would ultimately deplete it.108 It considered that the legacy should be adjusted according to CPI, with a minimum of $150,000 and a maximum of $350,000.109 Rigby Cooke Lawyers considered that a legacy of $350,000 would be excessive for small estates, and that the legacy should be $150,000 or five per cent of the estate, whichever was greater.110
  3. 5.60 The Commission notes these concerns, but is of the view that the deceased person’s partner’s needs—for housing, for example—do not abate simply because the intestate estate for distribution is only modest. The partner’s statutory legacy should be of a fixed amount. If the intestate estate is not sufficiently large to allow for the partner’s statutory legacy and share of the remainder, as well as the deceased person’s children’s share of the remainder, the deceased person’s children’s share should be reduced to the necessary extent. This is consistent with the current approach to partners and children on intestacy—if the value of the intestate estate does not exceed $100,000, the deceased person’s partner takes the entire intestate estate to the exclusion of children or issue.111 
  4. 5.61 In consultation, representatives of the NSW Trustee and Guardian noted that the partner’s statutory legacy, increased in New South Wales in accordance with the National Committee’s recommendations, is now approximately $420,000.112 They considered the increase to be an improvement, but noted that it may not be sufficient to allow the deceased person’s partner to acquire the home, if it is located in metropolitan Sydney.113 The Commission considers that this is further reason to set the minimum statutory legacy at $350,000, adjusted to reflect changes in the CPI.
  5. 5.62 Seniors Rights Victoria considered that, where the deceased person’s partner lived with them in the principal place of residence, they should receive that residence in place of the $350,000 adjusted statutory legacy.114 However, as the partner has a right to acquire certain estate property, discussed below from [5.70]115 the Commission does not consider that changing the partner’s statutory legacy in this way is necessary.
Adjusting the statutory legacy to reflect changes in the Consumer Price Index (CPI)
  1. 5.63 Several submissions commented on the way in which the statutory legacy should be adjusted to reflect changes in the CPI. Moores Legal agreed that the CPI would be a useful mechanism for adjusting the statutory legacy without needing to amend the legislation from time to time.116 The Law Institute of Victoria expressed the view that the statutory legacy should be adjusted by the CPI on the first of January every year, ideally by regulation so that practitioners do not need to refer to the CPI.117 Seniors Rights Victoria agreed that the legacy should be in regulations, to allow for updates in accordance with the CPI, increases in property values, or a major recession.118 The Supreme Court of Victoria considered that the statutory legacy should be kept up to date by way of regulations or a statutory formula linked to the CPI or similar, without the need for statutory amendment.119
  2. 5.64 At the time of writing its intestacy report, the National Committee chose $350,000 as an appropriate base amount for the statutory legacy at 1 January 2006. By keeping the base statutory legacy amount the same, but only adjusting from December 2009, the Tasmanian formula does not take into account changes in the CPI between December 2005 and December 2009. The New South Wales formula, on the other hand, takes into account changes in the CPI between December 2005 and the last published CPI number before the deceased person’s date of death. The current adjusted statutory legacy in New South Wales is $427,684.95,120 while the current adjusted statutory legacy in Tasmania is $380,063.60.121
  3. 5.65 The Commission considers that the New South Wales approach is more representative of the National Committee’s intentions for adjustment of the partner’s statutory legacy. For consistency with New South Wales, the partner’s statutory legacy should be adjusted in Victoria as it is in New South Wales. Calculating the statutory legacy would not place an onerous burden on personal representatives administering intestate estates, as it only needs to be done quarterly. However, it would be of assistance to personal representatives if the quarterly CPI adjusted statutory legacies were published on the Supreme Court of Victoria Probate Office website. 

Recommendations

18 Where the deceased person is survived by a partner122 and children or other issue who are entitled to a share on intestacy, the deceased person’s partner’s statutory legacy should be increased to $350,000 and adjusted to reflect changes in the All Groups Consumer Price Index number according to the following formula:

A = $350,000 x B/C, where

19 The Supreme Court of Victoria should publish the quarterly Consumer Price Index adjusted statutory legacies on its website.

 

Interest on the statutory legacy 122

  1. 5.66 As recommended by the National Committee,123 and implemented in both New South Wales and Tasmania,124 the Commission considers that the deceased person’s partner should be entitled to interest on their statutory legacy if it is not paid, or not paid in full, within one year after the deceased person’s death. As in New South Wales and Tasmania, interest should be paid for the period between the first anniversary of the deceased person’s death and the date of payment of the legacy in full.125 For consistency with New South Wales and Tasmania, it should be calculated at the rate of two per cent above the cash rate last published by the Reserve Bank of Australia before 1 January in the calendar year in which interest begins to accrue.126

Recommendations

20 The deceased person’s partner should be entitled to interest on the statutory legacy to which they are entitled on intestacy, or any part thereof, that is not paid within one year after the deceased person’s death.

21 Interest on a statutory legacy to which a deceased person’s partner is entitled on intestacy should be calculated between the first anniversary of the deceased person’s death and the date of payment of the legacy in full, in accordance with a rate that is two per cent above the cash rate last published by the Reserve Bank of Australia before 1 January in the calendar year in which interest begins to accrue.

The partner’s share of the remainder

  1. 5.67 Most submissions also supported increasing the deceased person’s partner’s share of the remainder of the intestate estate, after payment of the statutory legacy, to one half.127 It was noted that this would be consistent with the way that people draft their wills and would provide the deceased person’s partner with greater resources to purchase the family home.128
  2. 5.68 However, one submission considered that the partner’s share of the remainder, as well as the statutory legacy, should be linked to the size of the estate.129 Another was unsure whether a one-half share of the remainder would be any better than one third, but noted that this was consistent with the higher priority given to the deceased person’s partner than their children on intestacy.130
  3. 5.69 The Commission recommends that, where the deceased person is survived by a partner and children who are entitled to a share on intestacy, the partner’s share of the remainder of the intestate estate after payment of the statutory legacy should be increased from one third to one half. The Commission also considers that, in these circumstances, the deceased person’s partner should continue to be entitled to the deceased person’s personal chattels.

Recommendation

22 Where the deceased person is survived by a partner131 and children or other issue who are entitled to a share on intestacy, the partner’s share of the remainder of the intestate estate should be increased to one half.

 

The partner’s right to elect to acquire an interest in certain property

Current law 131

  1. 5.70 When a person dies intestate, any place of residence or part of a place of residence owned by them becomes part of the estate that is distributed according to the laws of intestacy. Depending on the size of the intestate estate, if the deceased person is survived by both a partner and children or other issue, the intestate estate is shared between the partner and children or other issue.132 Additionally, if the deceased person is survived by more than one partner, they may have to share the intestate estate between them.133
    In these situations, it is possible that the partner who lived with the deceased person at the time of their death will not be entitled to the deceased person’s share in the home
    in which they lived.
  2. 5.71 The Administration and Probate Act contains a provision to remedy this in some circumstances. If a person dies intestate as to an interest in the shared home—that is, the principal place of residence that they shared with their partner at the time of their death—the deceased person’s partner may elect to acquire that interest at its value at
    the date of the deceased person’s death.134
  3. 5.72 If the partner elects to acquire the interest in the shared home, their share of the intestate estate is reduced by the value of that interest.135 If the value of the interest in the shared home is greater than the partner’s share of the intestate estate, the partner must pay the difference into the estate, either before distribution of the estate or within 12 months of making the election, whichever is sooner.136
  4. 5.73 If the shared home is part of a larger property and cannot be severed from that property without subdivision, then a reference to the shared home is deemed to be a reference to the entire property.137 This includes situations where the shared home is part of a farm.138
  5. 5.74 The partner’s right to elect to acquire an interest in the shared home exists despite anything to the contrary in the Administration and Probate Act.139 This raises a number
    of questions about the effect of an election on the administration of the estate:
  • Can the personal representative sell a property in respect of which a partner has made an election if it is required for estate administration purposes?
  • Alternatively, can the deceased person’s partner only make an election after the personal representative has paid debts, liabilities, funeral and testamentary expenses?

Proposed change

  1. 5.75 The National Committee for Uniform Succession Laws considered that limiting the partner’s right of election to the shared home creates unnecessary complexity in the administration of intestate estates, and observed that the deceased person’s partner may wish to acquire other property in the estate, such as a holiday home or intellectual property in relation to a business venture.140
  2. 5.76 To address these concerns, the National Committee recommended that the deceased person’s partner should be entitled to elect to acquire an interest in any estate property in the intestate estate, not just the shared home.141 It recommended that the surviving partner should provide satisfaction for the interest in the property they had elected to acquire by first relying on their share of the intestate estate, and then paying the difference into the intestate estate, if the value of the interest is greater than the value
    of their share in the intestate estate.142
  3. 5.77 The National Committee specified that elections should require court authorisation if:
  • the property forms part of a larger aggregate, and
  • the acquisition could substantially diminish the value of the remainder or make the administration of the estate more difficult.143
  1. 5.78 Examples of this given by the National Committee included:
  • a part of a building, where the deceased person had an interest in the whole building
  • registered or registrable interest in land used for agricultural purposes
  • a building used as a hotel, motel, boarding house or hostel at the time of the deceased person’s death
  • a shared home, part of which was used for a purpose other than a domestic purpose at the time of the deceased person’s death.144
  1. 5.79 When authorising an election, the National Committee recommended that the court should be permitted to impose conditions, including a condition that the partner pay compensation to the estate in addition to consideration for the property.145
  2. 5.80 The National Committee also considered that the personal representative should not be permitted to dispose of property from the intestate estate, except to a partner who has elected to acquire it, unless any of the following applies:
  • the personal representative is the partner entitled to make the election
  • time for exercising the election has elapsed and no election has been made
  • the election requires court authorisation, but such authorisation has been refused or the application for authorisation has been withdrawn
  • the partner has notified the personal representative in writing that he or she does not intend to acquire the property from the estate
  • sale of the property is required to meet liabilities of the estate
  • the property is perishable or likely to decrease rapidly in value.146
  1. 5.81 As discussed below, the National Committee recommended that rights of election should not apply where the deceased person is survived by more than one partner.147 It also made a number of recommendations about procedure, notice, time periods and property valuation for the purposes of election.148
  2. 5.82 New South Wales and Tasmania have implemented the National Committee’s recommendations in these terms, but have clarified some ambiguities that appeared
    in the National Committee’s draft legislation.149 For example:
  • The New South Wales legislation provides that the personal representative is not to dispose of property unless sale of the property is required to meet ‘funeral and administration expenses, debts and other liabilities of the estate’ (not just ‘liabilities’, as recommended by the National Committee).150
  • Both the New South Wales and Tasmanian legislation specify that, when authorising an election, the Court may ‘impose such conditions as it considers just and equitable’ (this guidance was not included in the National Committee’s draft provision).151

Views and conclusions

  1. 5.83 All but one152 of the submissions that addressed this question agreed that the partner’s right to elect to acquire estate property should be extended to other property in the intestate estate.153 The view was expressed that extending elections would promote national consistency.154 The Property and Probate Section of the Commercial Bar Association suggested that extending elections could reduce the number of claims made against the estate by partners of the deceased person, in relation to property that the partner helped to acquire or preserve although they were not registered on the title.155 Rigby Cooke Lawyers noted that it would be useful if a deceased person’s partner were able to elect to acquire an interest in a business that they had been operating with the deceased person, permitting them to generate future income.156
  2. 5.84 The submission that was opposed to extending the partner’s right of election considered that estate assets might have sentimental value to the deceased person’s children.157
    A member of the Commission’s succession laws advisory committee shared this concern, particularly in relation to second partners acquiring property to the exclusion of the children of an earlier relationship.158 Other members of the advisory committee considered that the partner’s rights of election should be extended to other estate property.159
  3. 5.85 One submission suggested that the effect of elections on children could be tempered by a right for children to elect to take the property ahead of it being sold by the personal representative.160 However, this would create unnecessary complexity, given the Commission’s recommended limits on the circumstances in which both partner(s) and children are entitled to take.161
  4. 5.86 To promote clarity and national consistency, the Commission recommends that the National Committee’s proposals in relation to elections should be implemented in Victoria, in the terms implemented in New South Wales.
  5. 5.87 The National Committee’s recommended provisions, as implemented in New South Wales, would clarify the effect of elections on estate administration and the personal representative’s duties to pay debts and liabilities of the estate. In New South Wales, the election provisions apply to any property in the ‘intestate estate’—that is, in the case of a deceased person who leaves a will, property not effectively disposed of by will and, in all other cases, property left by the deceased person.162 This means that the partner’s right of election applies to any property left by the deceased person and not disposed of by will, not just that property which remains after administration of the estate.
  6. 5.88 The legislation should also specify that the onus is on the deceased person’s partner to apply to the Court for authorisation when required, as they are the party seeking authorisation of their election. This was not made clear in the National Committee’s draft provisions or those implemented in New South Wales and Tasmania.163 Otherwise, the Commission considers that the National Committee’s recommendations in relation to elections should be implemented in the same manner as they have been implemented in division 2 of part 4.2 of the Succession Act 2006 (NSW).164 

Recommendations

23 The deceased person’s partner should have a right to elect to acquire an interest in any property in the intestate estate on intestacy.

24 If the deceased person’s partner elects to acquire an interest in property from the intestate estate, they should satisfy the price of this interest:

25 If the partner of the deceased person wishes to elect to acquire property from the intestate estate, they should be required to apply to the Supreme Court for authorisation of the election if:

26 When authorising an election by the deceased person’s partner to acquire property from the intestate estate, the Supreme Court should:

27 A personal representative should not be permitted to dispose of property from an intestate estate, except to a partner who has elected to acquire it, unless any of the following applies:

28 Details of the expanded right of the deceased person’s partner to elect to acquire property from the intestate estate, including in relation to notice requirements, time limits and valuation of property, should be based on the recommendations of the National Committee for Uniform Succession Laws,
as reflected in sections 114–121 of theSuccession Act 2006 (NSW).

 

Multiple partners

Current law

  1. 5.89 As noted above, it is possible for a deceased person to be survived by both:
  • a spouse, registered domestic partner or registered caring partner, and
  • an unregistered domestic partner.165
  1. 5.90 The Administration and Probate Act establishes a sliding scale to determine how the partner’s share is to be distributed between the partners.166 The partner’s share may comprise the entire intestate estate, if there are no children or other issue who are entitled to a share on intestacy, or it may comprise a part of the intestate estate, in accordance with the rules for distribution when the deceased person is survived by both partner(s) and children or other issue.167
  2. 5.91 Where the deceased person is survived by more than one partner, the portion of the partner’s share that each partner will receive depends on the length of the relationship between the deceased person and their unregistered domestic partner.168 To be recognised as the deceased person’s unregistered domestic partner for the purposes of intestacy, a person must:
  • have been living with the deceased person on a genuine domestic basis at the time of the deceased person’s death, and
  • have lived in that manner for at least two years immediately before the deceased person’s death, or
  • be the parent of a child of the deceased person who was under the age of 18 at the time of the deceased person’s death.169
  1. 5.92 Once these requirements are satisfied in relation to the unregistered domestic partner, division of the partner’s share between the partners is subject to the sliding scale, with the unregistered domestic partner receiving a larger share the longer the relationship.170 If the unregistered domestic relationship is six years or more in length, the unregistered domestic partner takes to the exclusion of the spouse, registered domestic partner or registered caring partner.171
  2. 5.93 The provisions in the Administration and Probate Act do not appear to deal with the situation in which the deceased person is survived by more than one unregistered caring partner.

Proposed change

  1. 5.94 The National Committee for Uniform Succession Laws proposed two mechanisms for determining shares on intestacy when the deceased person is survived by more than one partner, depending on whether the deceased person is also survived by children or other issue who are also entitled to a share.
  2. 5.95 In its consultation paper on intestacy, the Commission asked whether the National Committee’s recommended approach to multiple partners should be adopted in Victoria.172

Where there are no children or other issue who are entitled to a share

  1. 5.96 The National Committee recommended that, where the deceased person is survived by multiple partners but no children or other issue who are also entitled to a share, the intestate estate should be distributed between the partners:
  • in accordance with a written distribution agreement made between the partners, or
  • in accordance with a distribution order made by the court on application by a partner or the personal representative, or
  • equally between the partners.173
  1. 5.97 It recommended that, if the parties make a distribution agreement, the agreement should be submitted to the personal representative.174 It recommended that either a partner or the personal representative should also be able to apply to the Supreme Court for a distribution order.175 On application for a distribution order, the National Committee recommended that the Court should be able to order that the property be distributed between the partners in any way it considers just and equitable, including awarding the entire intestate estate to one partner to the exclusion of the other(s).176 The order may also include conditions.177 No criteria were recommended to guide the Court in its decision making, nor were any criteria included in New South Wales or Tasmanian legislation.
  2. 5.98 The National Committee recommended that certain notice should have been given, and certain time periods should have elapsed, before the personal representative could distribute the estate equally between the parties.178 It also recommended that, under these provisions, none of the deceased person’s partners should have specific rights to the deceased person’s personal effects or to a statutory legacy.179
  3. 5.99 The National Committee considered that, under these provisions, the distribution of particular items from the intestate estate could be subject to negotiation between
    the partners.180 These recommendations in relation to multiple partners were based on law already in operation in Queensland181 and have since been implemented in the recommended form in New South Wales and Tasmania.182

Where there are children or other issue who are entitled to a share

  1. 5.100 Where the deceased person is survived by multiple partners and children or other issue who are also entitled to a share on intestacy, the National Committee recommended that the partners should each be entitled to their own statutory legacy—rateably if there were insufficient funds—and a share of half the residue of the estate.183
  2. 5.101 Tasmania implemented the provisions as recommended by the National Committee, providing that where any children or issue are also entitled to a share, the partners receive:
  • the deceased person’s personal effects, in accordance with the sharing provisions
  • a statutory legacy each
  • a share of one half of the remainder of the intestate estate, in accordance with the sharing provisions.184
  1. 5.102 New South Wales took the same approach in all but one respect—in these circumstances, multiple partners share one statutory legacy instead of each receiving their own.185

The partner’s right to elect to acquire property

  1. 5.103 The National Committee recommended that the partner’s right to acquire certain estate property should not apply when the deceased person is survived by more than one partner.186 This is the case under the New South Wales and Tasmanian legislation.187

Views and conclusions

Where there are no children or other issue who are entitled to a share

  1. 5.104 The Commission received mixed views in submissions. Many agreed that, where the deceased person is not also survived by children or issue who are entitled to a share on intestacy, the deceased person’s partners should be able to share the intestate estate between them by distribution agreement, distribution order, or equally.188 The Property and Probate Section of the Commercial Bar Association noted that the ability to apply for a distribution order in the event of a dispute may reduce the number of family provision claims brought.189 The Law Society of New South Wales was in favour of a nationally consistent position.190
  2. 5.105 Some submissions, however, considered that there should be no change to the existing law.191 State Trustees and Carolyn Sparke SC noted that it is rare for a deceased person to be survived by more than one partner.192 Rigby Cooke Lawyers expressed concern that failure to reach a distribution agreement could result in litigation and that seeking a distribution order could result in costs to the estate.193 Some submissions noted that equal distribution between the parties would not usually be a fair outcome.194
  3. 5.106 Moores Legal suggested that a distribution agreement should be lodged with the Probate Registry.195 However, the Commission considers that submitting the distribution agreement to the personal representative in writing is sufficient.
  4. 5.107 The Institute of Legal Executives expressed the view that, if a distribution agreement is adopted, there should be no adverse duty implications.196 Under the Duties Act 2000 (Vic), distribution pursuant to a distribution agreement would be subject to the exemption for property passing on intestacy and no duty would be chargeable.197
  5. 5.108 The Commission considers that the National Committee’s recommendations about multiple partners’ entitlements, where there are no children or other issue who are entitled to a share, would allow parties or the Court to arrive at the fairest possible outcome. It is more tailored than Victoria’s current one-size-fits-all sliding scale approach and is far likelier to result in an outcome that all parties are satisfied with. Although there may be some expense involved in reaching an agreement or obtaining a distribution order, it is likely to be less than the cost of commencing family provision proceedings to redress an unfair outcome. The option for distributing the estate equally between the parties would exist, in any event, as a low-cost alternative.

Recommendation

29 Where the deceased person is survived by multiple partners, but no children or other issue who are entitled to a share on intestacy, the Administration and Probate Act 1958 (Vic) should provide for the intestate estate to be distributed:

 

Where there are children or other issue who are entitled to a share

  1. 5.109 Several submissions agreed with the National Committee that, where the deceased person is survived by multiple partners and children or other issue who are entitled to
    a share, each partner should receive their own statutory legacy.198
  2. 5.110 However, a number of submissions expressed the view that the partners should share the statutory legacy that one partner would have received, as well as sharing the deceased person’s personal chattels and one half of the remainder.199 Some submissions argued that it may be unfair for each partner to receive their own legacy200 and that this could result in the deceased person’s children missing out entirely unless the estate is large.201 The Law Society of New South Wales stated that it favoured national consistency,202 and the Commission notes that New South Wales has not implemented this recommendation—the partners share the statutory legacy that one partner would have received.
  3. 5.111 This is one area in which there is a distinction between national consistency and the National Committee’s recommendations, as New South Wales has diverged from the National Committee’s recommendation on this point. The Commission considers that, where national consistency is not possible, consistency between Victoria and New South Wales is desirable. Further, the Commission agrees that, in many circumstances, each partner receiving their own statutory legacy would exclude the deceased person’s children or issue who are entitled to a share on intestacy.
  4. 5.112 The New South Wales legislation specifies that sharing of the deceased person’s personal effects, statutory legacy and share of the remainder is to be done in accordance with the general sharing provisions—that is, by distribution agreement, distribution order or equally between the parties.203
  5. 5.113 Although the Commission recognises that a partner’s needs do not abate because of the existence of other partners, the circumstances in which multiple partners are entitled to a share is unusual. In these unusual circumstances, the Commission considers that the New South Wales position, which permits sharing of the statutory legacy between the partners by distribution agreement or distribution order, provides a better solution than Victoria’s current one-size-fits-all statutory formula.
  6. 5.114 If a partner feels that distribution in accordance with these provisions, including sharing the statutory legacy, does not make adequate provision for their proper maintenance and support, it will still be possible for them to make a family provision claim. 

Recommendation

30 Where the deceased person is survived by multiple partners and children or other issue who are entitled to a share on intestacy, the deceased person’s personal chattels, adjusted statutory legacy, interest on the adjusted statutory legacy (if any) and one half of the remainder of the intestate estate should be shared between the partners:

 

The partner’s right to elect to acquire property

  1. 5.115 The Law Institute of Victoria suggested that whichever partner had been living with the deceased person in the shared home at the deceased person’s date of death should be permitted to elect to acquire the deceased person’s interest in the shared home.204 However, the National Committee recommended against this where the deceased person is survived by multiple partners, and rights of election do not apply in New South Wales and Tasmania in these circumstances.205
  2. 5.116 The Commission considers that allowing partners to elect to acquire the home that they shared with the deceased person, where the deceased person is survived by more than one partner, would unduly complicate estate administration. It is likely that a distribution agreement reached between the parties, or a distribution order made by the Court, would take into account whether a partner resided in a house that formed part of the intestate estate. The Commission does not consider that the partner’s right of election should apply where there are multiple partners.

Recommendation

31 Where the deceased person is survived by multiple partners, there should be no right to elect to acquire an interest in particular estate property.

  

Entitlements of the deceased person’s children or issue

Current law

  1. 5.117 If the deceased person is survived by children, but is not survived by a partner, the deceased person’s children share the entire intestate estate equally between them.206
  2. 5.118 As discussed above, when the deceased person is survived by both a partner and children, and the intestate estate is large enough to accommodate both the interests of the partner and children, the intestate estate is shared between them.207 If the estate is sufficiently large, the deceased person’s partner receives: the deceased person’s personal chattels;
    a statutory legacy, which is a lump sum plus interest; and a share of the remainder of the intestate estate.208 The deceased person’s children share the remainder of the intestate estate between them in equal shares.209
  3. 5.119 If any of the deceased person’s children have already died, their children or other issue take as their representatives.210 References to ‘children’ in the following discussion include the children or other issue of children who died before the deceased person.211

Proposed change

  1. 5.120 The National Committee for Uniform Succession Laws considered that allowing for the deceased person’s children to inherit on intestacy in circumstances where their surviving parent is entitled to a share creates unnecessary complexity, given that those children could expect to inherit from their other parent later in life.212 Providing the children a share in these circumstances may necessitate sale of the family home and the National Committee expressed concern that, with an ageing population, the needs of an elderly spouse are likely to be greater than those of independent, adult children.213
  2. 5.121 In response to these concerns, the National Committee recommended that the children of the deceased person should not be entitled to a share on intestacy if:
  • their other parent survives the deceased person and is entitled to a share on intestacy, and
  • all surviving children of the deceased person are also children of that surviving parent or another partner of the deceased person who is entitled to a share on intestacy.214
  1. 5.122 To ensure that children of other relationships—that is, children who were not children
    of a surviving partner of the deceased person—are provided for, it recommended that they should be entitled to a share on intestacy.215 To prevent disharmony in families,
    the National Committee recommended that, where any such children exist, the intestate estate should be shared between the surviving partner(s) and all children of the deceased person.216
  2. 5.123 The deceased person’s children would share the remaining intestate estate, after payment of the statutory legacy and one half of the remainder to the deceased person’s partner(s), between them in equal shares.217 If any children of the deceased person did not survive the deceased person by 30 days, leaving children or other issue who survived the deceased person by 30 days, those children or other issue would take the share their deceased parent (the deceased person’s child) would have been entitled to.218
  3. 5.124 Where the deceased person is not survived by a partner, but is survived by children or issue, they would share the entire intestate estate between them, as is currently
    the case.219
  4. 5.125 Both New South Wales and Tasmania have adopted these recommendations of the National Committee.220 The Commission’s consultation paper on intestacy asked whether Victoria should adopt this approach to the entitlements of children.221

Views and conclusions

  1. 5.126 In submissions to the Commission’s consultation paper on intestacy, there was widespread support for the National Committee’s recommendations in relation to the entitlements of partners and children.222 The Law Institute of Victoria said that this approach is consistent with how people draft their wills.223
  2. 5.127 Moores Legal also suggested that children should be able to make an application to the court where the operation of the default scheme would have an unfair outcome.224 However, the Commission considers the family provision jurisdiction sufficient to redress outcomes that are perceived as unfair.
  3. 5.128 Several submissions, however, were opposed to the recommendation.225 The Property and Probate Section of the Commercial Bar Association expressed strong opposition on the basis that removing provision for children on intestacy would be inconsistent with the responsibility to provide for children that is clearly recognised in the family provision jurisdiction.226 However, the Commission does not believe that this recommendation removes provision for children of the deceased, as suggested by the Commercial Bar Association. Rather, it defersprovision for them until their surviving parent dies, with the aim of minimising disruption and prioritising the deceased person’s spouse at the time of the deceased person’s death. Despite the fact that the deceased person’s child may not be entitled on intestacy at the time of their parent’s death, they would still be able to make a family provision application at that time. This would address any immediate needs of the deceased person’s children that are not recognised by deferring their inheritance until their surviving parent dies.
  4. 5.129 Carolyn Sparke SC noted that if the partner’s statutory legacy is sufficiently large, the family home may not need to be sold, resolving one of the main criticisms of the current approach to partners and children.227 However, the National Committee’s recommendation in relation to the entitlements of the deceased person’s children would ensure that the family home would not need to be sold in the majority of cases. The Commission considers this to be a desirable outcome.
  5. 5.130 Where the deceased person is survived by partner(s) and children, the Commission considers that the National Committee’s recommended approach to distribution between partners and children strikes a fair balance. It is desirable to defer children’s inheritance and minimise disruption where their surviving parent is a partner of the deceased who is entitled to a share on intestacy. The National Committee’s recommended approach takes adequate account of children of previous relationships.
  6. 5.131 In order to promote national consistency, and simplify distribution of intestate estates between partners and children, the Commission recommends that children of the deceased person should only take where any children of the deceased are not also children of a surviving partner who is entitled to a share on intestacy. 

Recommendations

32 Children or other issue of a deceased person should not be entitled to a share on intestacy if:

33 If any of the children of a deceased person are not children of a surviving partner of the deceased person who is entitled to a share on intestacy, then all children of the deceased person should be entitled to an equal share on intestacy. 

Examples

  1. 5.132 In the example illustrated by Figure 2 (View the figure as a pdf) the deceased person’s children would not be entitled to a share on intestacy, as they are all also children of a partner of the deceased person at the time of the deceased person’s death, who is entitled on intestacy. Therefore, the deceased person’s children could expect to inherit from their surviving parent later in life. The deceased person’s partner would be entitled to the entire intestate estate. 
  2. 5.133 In the situation illustrated by Figure 3 (View the figure as a pdf) the deceased person’s children would all be entitled to a share on intestacy, because child 1 is a child of the deceased person’s previous partner, who is not entitled to a share on intestacy. In this situation, all of the deceased person’s children are entitled to a share on intestacy. The deceased person’s partner at the time of the deceased person’s death would be entitled to:
  • the deceased person’s personal chattels
  • a statutory legacy of $350,000, adjusted to reflect changes in the CPI
  • interest on the statutory legacy, if applicable
  • one half of the remainder of the intestate estate.228
  1. 5.134 Child 1, child 2, child 3 and child 4 would share the remaining one half of the intestate estate in equal shares. 

Per stirpes or per capita distribution

Current law

  1. 5.135 If a child or sibling of the deceased person would have been entitled to a share on intestacy, but did not survive the deceased person, their children are entitled to take
    their share. In Victoria, that person’s children take their share either per stirpes (by stock) or per capita (by head).
  2. 5.136 If a child of the deceased person would have been entitled to a share on intestacy but did not survive the deceased person, leaving children who survive the deceased person, that child’s children—the deceased person’s grandchildren—take their deceased parent’s share as representatives.229 Distribution to the deceased person’s grandchildren in this circumstance is per stirpes—they share their deceased parent’s share equally between them, but do not become equal recipients with the deceased person’s surviving children.230 Even if all of the deceased person’s children fail to survive the deceased person, leaving only grandchildren or other issue, those grandchildren or issue still only take per stirpes, as representatives.231
  3. 5.137 Where one of the deceased person’s siblings would have been entitled to a share on intestacy, but did not survive the deceased person, leaving children who survive the deceased person, that sibling’s children—the deceased person’s nieces or nephews—take their deceased parent’s share as representatives.232 Similarly, where some, but not all, of the deceased person’s siblings would have been entitled to a share on intestacy, but failed to survive the deceased person, leaving children who survive the deceased person, the children of those siblings take their deceased parent’s share as representatives.233 Distribution to the deceased person’s nieces and nephews in these circumstance is per stirpes—they share their deceased parent’s share equally between them, but do not become equal recipients with the deceased person’s surviving siblings.234
  4. 5.138 However, distribution to the deceased person’s nieces and nephews is different when all of the deceased person’s siblings fail to survive the deceased person. In this situation, all nieces and nephews take in equal shares, per capita, not per stirpes as representatives of their deceased parents.235 This is different from the treatment of grandchildren of the deceased, for example, when all children of the deceased person fail to survive them.236

Proposed change

  1. 5.139 The National Committee considered that it would be illogical to allow for per capita distribution to collateral relatives only (nieces, nephews and cousins),237 and not lineal relatives (grandchildren, great-grandchildren and so on).238 The National Committee also noted that, even if per capita distribution were equally applied to collateral and lineal relatives:
  • the rule would still be arbitrary
  • the need for per capita distribution would arise only rarely
  • application of per stirpes distribution in some instances and per capita in others would involve complexity and delay.239
  1. 5.140 Accordingly, it recommended that per capita distribution should be abolished and that distribution should be per stirpes in all circumstances.240 This would mean that distribution to the deceased person’s nieces and nephews would always be per stirpes, even where all of the deceased person’s siblings are deceased. This would bring distribution to the deceased person’s nieces and nephews into line with distribution to grandchildren, great-grandchildren and so on.
  2. 5.141 The Commission’s consultation paper on intestacy asked whether per capita distribution should be abolished in Victoria and per stirpes distribution applied in all circumstances or, alternatively, whether per capita distribution should be retained and extended beyond the deceased person’s nieces and nephews at each generation.241
  3. 5.142 Victoria is one of only two states that retain per capita distribution in any form when next of kin take by representation.242 Adopting the National Committee’s recommendations would bring Victoria into line with most other states and territories.

Views and conclusions

  1. 5.143 Most submissions that addressed this question agreed with the National Committee’s proposal that per capita distribution should be abolished and per stirpes distribution should be applied in all cases.243 In support of per stirpes distribution, Carolyn Sparke SC expressed the view that per stirpes distribution ‘best reflects our general notion of the way private property is passed down—that it primarily tends to pass down the family branches’.244 Some submissions agreed that distributing intestate estates per stirpes in all instances would be more consistent with the way wills are prepared,245 and with the distribution of intestate estates in other parts of Australia.246 Moores Legal concluded that, since ‘either rule is fairly arbitrary’, a rule that is consistent with broader practice is preferable.247
  2. 5.144 The Law Institute of Victoria preferred retaining per capita distribution, but applying it equally to nieces and nephews and grandchildren, when all siblings or children of the deceased person have already died.248 However, the Commission agrees with the view expressed in other submissions and by the National Committee that, given the arbitrary nature of either rule, it is preferable to promote consistency with other Australian states and territories. Only Victoria and South Australia retain any form of per capita distribution, so to promote national consistency, the Commission recommends that per capita distribution should be abolished and per stirpes distribution applied in all cases, including where all members of the preceding generation are deceased.

Recommendation

34 Where next of kin take by representation,per capita distribution on intestacy should be abolished and per stirpes distribution should be applied in all cases.

 

Examples

  1. 5.145 Distribution under the recommended scheme in the situation illustrated by Figure 4 (View the figure as a pdf) would be the same as distribution under the current Victorian law. As is the case under the current law:
  • grandchild 1 would take child 1’s share as child 1’s representative
  • child 2 would take their own share, as they have survived the deceased person by 30 days;249 grandchild 2 and grandchild 3 would not receive a share
  • child 3 would take their own share, as they have survived the deceased person by 30 days
  • grandchild 4, grandchild 5 and grandchild 6 would share child 4’s share equally between them as child 4’s representatives.

 

  1. 5.146 Distribution under the recommended scheme in the situation illustrated by Figure 5 (View the figure as a pdf) would be the same as distribution under the current Victorian law. As is the case under the current law:
  • grandchild 1 would take child 1’s share as child 1’s representative
  • grandchild 2 and grandchild 3 would share child 2’s share as child 2’s representatives
  • child 3’s share would go back into the intestate estate to be shared among the others who are entitled to a share, as child 3 is not survived by children or issue
  • grandchild 4, grandchild 5 and grandchild 6 would share child 4’s share equally between them as child 4’s representatives.

 

  1. 5.147 Distribution under the recommended scheme in the situation illustrated by Figure 6 (View the figure as a pdf) would be the same as distribution under the current Victorian law. As is the case under the current law:
  • sibling 1 would take their own share, as they have survived the deceased person
    by 30 days250
  • niece/nephew 3 would take sibling 2’s share as sibling 2’s representative
  • nieces/nephews 4, 5 and 6 would take sibling 3’s share as sibling 3’s representatives.
  1. 5.148 Distribution under the recommended scheme in the situation illustrated by Figure 7 (View the figure as a pdf) would be different from distribution under the current Victorian law. Under the current Victorian law, all nieces/nephews in Figure 7 would take in equal shares, per capita.251 However, under the recommended scheme:
  • nieces/nephews 1 and 2 would take sibling 1’s share as sibling 1’s representatives—one sixth of the intestate estate each
  • niece/nephew 3 would take sibling 2’s share as sibling 2’s representative—one third of the intestate estate
  • nieces/nephews 4, 5 and 6 would take sibling 3’s share as sibling 3’s representatives—one ninth of the intestate estate each.

Taking benefits into account

Current law

  1. 5.149 In Victoria, some types of benefit received by the deceased person’s children during the deceased person’s lifetime must be taken into account when determining that child’s share on intestacy.252 Only benefits in the form of settlement or advancement need to be accounted for.253 Advancement means something given by the parent to establish the child in life or to make provision for him or her, not ‘a mere casual payment’.254 Settlement means a gift of property for permanent provision, or provision that continues into the future.255 The rule requiring lifetime benefits to be taken into account on intestacy is referred to as the ‘hotchpot’ rule. The rule originates from the Statute of Distributions, which was enacted in England in 1670 and on which Victoria’s intestacy laws are based.256
  2. 5.150 Benefits received by the deceased person’s children or other issue under a will on partial intestacy must also be taken into account when determining their share of the intestate estate.257

Proposed change

  1. 5.151 The National Committee considered that any advantages of a rule requiring lifetime benefits to be taken into account (hotchpot) were equivocal at best, and that the difficulties involved in accounting for those benefits outweighed any perceived equality that the rule achieved.258 It recommended that this requirement be abolished.259
  2. 5.152 It also took the view that, having recommended abolition of hotchpot, there was no need to continue taking testamentary benefits into account on partial intestacy.260 It contended that abolition of the requirements to take lifetime and testamentary benefits into account when determining shares on intestacy would simplify the administration of estates.261
  3. 5.153 The Commission’s consultation paper on intestacy asked whether the requirements to take lifetime and testamentary benefits into account should be abolished or, alternatively, whether:
  • the requirements to take both types of benefits into account should be retained and extended beyond the deceased person’s children and other issue, and
  • references to advancement and settlement should be replaced with more modern, simplified terminology.262
  1. 5.154 Adopting the National Committee’s proposed change would bring Victorian law into line with the law in New South Wales,263 Tasmania,264 Queensland265 and Western Australia.266

Views and conclusions

  1. 5.155 Of the submissions to the Commission’s consultation paper on intestacy that addressed this question, all except one considered that the rule requiring lifetime benefits to be taken into account (hotchpot) should be abolished.267 In support of abolishing hotchpot, the Property and Probate Section of the Commercial Bar Association contended that abolishing the hotchpot rule would be likely to promote certainty.268 Moores Legal noted that the rule arbitrarily assumes that the deceased person would have wanted to treat their children equally, which is often not the case, and considered that there is no justification for the rule applying only to benefits received by the deceased person’s children.269
  2. 5.156 Although Carolyn Sparke SC noted that she did not have strong views on this matter, she considered that hotchpot should be retained and extended beyond the deceased person’s children and their representatives.270
  3. 5.157 In consultation, representatives of the NSW Trustee and Guardian expressed the view that taking lifetime benefits into account is very difficult and that a line must be drawn somewhere.271
  4. 5.158 Most submissions agreed with the National Committee that, once hotchpot was abolished, there should no longer be a requirement to take testamentary benefits into account.272 Again, Carolyn Sparke SC considered that the rule requiring testamentary benefits to be taken into account when determining shares on intestacy should be retained and extended beyond the deceased person’s children and representatives.273
  5. 5.159 The Commission considers that, in order to promote national consistency and in the absence of strong reasons to the contrary, there should no longer be a requirement to take lifetime and testamentary benefits received by a child of the deceased person into account when determining that child’s, or their representatives’, share on intestacy. This should be achieved by way of a specific legislative provision, in the terms recommended by the National Committee and implemented in New South Wales and Tasmania.

Recommendation

35 The Administration and Probate Act 1958 (Vic) should be amended to provide that the distribution of an intestate estate is not affected by dispositions made by the deceased person:

 

Intestate estates of Indigenous people

The problem

  1. 5.160 Intestacy laws often provide an inadequate framework for the distribution of the intestate estates of Aboriginal and Torres Strait Islander people, and the National Committee for Uniform Succession Laws questioned ‘whether it is appropriate, or always appropriate, for the general law to apply without qualification in cases where an Indigenous person dies intestate’.274 It noted that distribution on intestacy in Australian law is reflective of English law and society and may, therefore, be inappropriate for the distribution of some Aboriginal and Torres Strait Islander people’s estates on intestacy.275
  2. 5.161 Academic literature suggests that different conceptions of ownership of property,276 and different kinship patterns,277 mean that the general intestacy law is often not applicable in the Indigenous context. Further, intestacy laws affect a high proportion of Aboriginal and Torres Strait Islander people, as rates of will-making are low.278 No statistics about intestacy of Indigenous people were obtained through submissions and consultations, but the Arts Law Centre of Australia made this point:

our experience is that the personal hardship and emotional stress felt by Aboriginal and Torres Strait Islander families dealing with intestacy is so great that reforms are justified even if the statistics are low. We suspect that many families just give up in this situation either forfeiting, or failing to understand, their entitlements.279

The National Committee’s proposed change

  1. 5.162 The National Committee recommended provisions based on legislation that was already in operation in the Northern Territory.280 The provisions permit a person, who claims to be entitled to a share of an Indigenous person’s intestate estate, to apply to the Supreme Court for what is effectively a variation of the general intestacy law.281
  2. 5.163 The National Committee recommended that, as in the Northern Territory, the person who claims to be entitled ‘under the customs and traditions of the community or group’ to which the deceased Indigenous person belonged should be able to apply to the Supreme Court for an order.282 It recommended that the application be accompanied by a distribution plan, prepared in accordance with the traditions of the deceased person’s group or community.283
  3. 5.164 The provisions recommended by the National Committee have been adopted in New South Wales and Tasmania.284
  4. 5.165 In its consultation paper on intestacy, the Commission asked whether more flexible provisions are needed for the distribution of Indigenous intestate estates and, if so,
    what form they should take.285

Views and conclusions

  1. 5.166 The Commission’s consultation paper on intestacy highlighted a number of problems with the Northern Territory provisions and the National Committee’s proposed provisions. The National Committee provisions went some way to remedying two problems identified in relation to the Northern Territory legislation:
  • In the Northern Territory legislation, no guidance is provided to the Court about how the Indigenous intestacy provisions should interact with the general intestacy provisions in the event of a dispute.286 The National Committee’s proposed provisions specified that a distribution order operates ‘to the exclusion of all other provisions governing the distribution of the intestate estate’.287 However, it remains unclear whether, in the event of a dispute, the Court would make a distribution order.
  • The Northern Territory provisions apply only to Aboriginal and Torres Strait Islander people who have not entered into a marriage under the Marriage Act 1961 (Cth).288 This limitation is not included in the National Committee’s recommended provisions.289
  1. 5.167 Several other problems remain with the proposed provisions:
  • Provisions of this type have been used very rarely in the Northern Territory. This may indicate that the process of making a Supreme Court application is inaccessible.
  • The provisions are not clear about the evidence or criteria that the Court must take into account when deciding whether to make a distribution order. The references in the National Committee’s recommended provision to ‘laws, customs, traditions and practices of the Indigenous community or group to which the intestate belonged’ do not specify how such evidence should be put before the Court.290
  1. 5.168 Few submissions commented on the question of Indigenous intestate estates.291 However, those that did were in general agreement that more flexible provisions are required for the distribution of intestate estates of Indigenous people.292 Among these submissions, there were mixed views about the form that such provisions should take. Some supported provisions along the lines of the Northern Territory provisions, recommended by the National Committee.293 Other submissions suggested alternatives to the National Committee’s model.294
  2. 5.169 The Arts Law Centre of Australia reiterated that the scheme should not be dependent on a court application and made the following points:295
  • There needs to be a different starting point for Aboriginal and Torres Strait Islander people on intestacy. This should be achieved by giving less priority to the deceased person’s partner over their children and recognising traditional law adoptions, within the framework of the general intestacy law.
  • The scheme should apply if the deceased person identified as Aboriginal or Torres Strait Islander. An opt-in or opt-out approach, that relies on application to a court,
    is not workable.
  1. 5.170 Dr Mark McMillan expressed the view that any solution must be localised and recognise the differences in communities, and that a standardised national approach is unlikely to do this.296 He noted that the experience of Indigenous people in the Northern Territory is not necessarily the same as that in Victoria.297
  2. 5.171 The Commission has carefully considered the criticisms of the National Committee’s recommended model, including its opt-in application and reliance on court proceedings. Any scheme that operates parallel to the general intestacy law will necessarily involve a determination by someone about whether the provisions applying to Aboriginal and Torres Strait Islander people should apply in a particular instance, and who should be entitled to a share under such provisions. As an alternative to the Supreme Court, the Arts Law Centre suggested that a determination could be made by State Trustees or the Victorian Civil and Administrative Tribunal.298 However, the Commission does not consider that either of these processes would necessarily be more accessible, expert or substantially more cost-effective than the Supreme Court.
  3. 5.172 While the Commission considers that the National Committee’s recommended approach is broad enough to take account of traditional law adoptions and the different priority that partners have, compared to children, in some communities, it acknowledges that it does not provide a different starting point for Indigenous people. Instead, it requires people to apply to the Supreme Court for a variation of the general intestacy law. It does not import concepts of kinship and next of kin, specific to Indigenous communities, into the general law. Implementation of the National Committee’s recommended model would promote national consistency. However, the Commission is not satisfied, following research and consultation, that the recommended model would greatly assist Aboriginal and Torres Strait Islander families in Victoria.
  4. 5.173 For these reasons, the Commission does not recommend adoption of the provisions recommended by the National Committee, as implemented in New South Wales and Tasmania.
  5. 5.174 In this important area, where access and enfranchisement is of great significance, the Commission recommends that further consideration should be given to:
  • designing a more accessible scheme for distribution of Indigenous intestate estates, that does not necessarily require a Supreme Court application
  • determining whether a decision maker is needed to determine whether the Indigenous intestacy scheme applies in a particular instance and who should be entitled to a share and, if so, who that decision maker should be
  • incorporating concepts of traditional law adoption and next of kin, as relevant to Indigenous communities in Victoria, into the general intestacy law by way of definition
  • defining the types of information that should be accepted to prove the laws, customs, traditions and practices of the group to which the deceased person belonged and the existence of a relationship with the deceased person.
  1. 5.175 The Commission considers that further research and community consultation is necessary to design a scheme for distribution of the estates of Indigenous people who die intestate in Victoria. It is the Commission’s view that the general intestacy law is not appropriate for many Indigenous people and that it should be tailored to the specific needs of Indigenous communities in Victoria.
  2. 5.176 The Koori Justice Unit within the Victorian Department of Justice coordinates development and delivery of Victoria’s Koori299 justice policies and programs, including the Aboriginal Justice Agreement.300 The Unit promotes the partnership between the Victorian Government and Koori communities, and establishes networks to facilitate community engagement in Koori justice programs, policies and initiatives.301
  3. 5.177 An Aboriginal Justice Forum meets at least three times per year, and brings together senior representatives of the Koori Community and the Justice, Human Services, Health and Education government portfolios.302 There are also nine Regional Aboriginal Justice Advisory Committees, which form a network that has a number of responsibilities, including to advocate for and promote improved justice outcomes and Koori justice initiatives to both Koori communities and government agencies.303
  4. 5.178 The Commission considers that this important work should be furthered and built upon, and that the Department of Justice, through the Koori Justice Unit, the Aboriginal Justice Forum and relevant networks, should conduct further consultation in relation to the intestate estates of Indigenous people. Such consultation should be undertaken with the aim of devising an appropriate intestacy scheme that is tailored to the needs of Indigenous communities in Victoria.

Recommendation

36 The Attorney-General should have the Department of Justice prepare a report about the distribution of the intestate estates of Indigenous people in Victoria, including the need for any legislative reform. This report should build on the work of the National Committee for Uniform Succession Laws and the findings of the Commission, and be based on further community consultation.

 

Footnotes

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