The sad case of a young couple torn apart by tragedy has highlighted the importance for people of all ages to prepare a Will, writes Senior Associate April Kennedy.
A Current Affair recently reported on the heartbreaking story of a bank that rendered a pregnant widow homeless despite the fact she had the money to pay out her late husband’s mortgage. In 2018, Stephanie and Ryan Stevens were delighted to receive the news they were going to become parents for the first time.
Shortly after in a shocking twist of fate, Ryan lost his life in a tragic ATV bike accident. Unfortunately, Ryan died before he had the chance to prepare his will leaving Stephanie, who was only three months pregnant at the time, to fight a five-month long battle with their mortgagee Bankwest.
Their family home was eventually repossessed and sold at a loss of $70,000.
The mortgage for the couple’s four bedroom home was in Ryan’s name solely. With no will, Stephanie found herself frozen out by the bank because she did not have legal authority to deal with his affairs. Despite being married, it took five months for Stephanie to be officially recognised as the beneficiary of the estate.
Stephanie was unable to pay the monthly repayments on her own and the mortgage increased significantly accruing interest and administration fees. She had to wait for Ryan’s life insurance and superannuation to be finalized in order to pay the mortgage. Unfortunately, Ryan’s entitlements were short $30,000 to satisfy the loan.
Thankfully, Stephanie’s parents offered to be guarantors and make up the shortfall but BankWest rejected the offer. Instead, they repossessed home and put it up for auction leaving a heavily pregnant Stephanie homeless. In 2013, the couple purchased the home for $520,000 and just five years later it was sold for $450,000.
In a statement, BankWest acknowledged that the level of support Stephanie experienced “fell short of her expectations during the distressing time”. Its apology was too little, too late.
Without a valid will, Ryan died “intestate” meaning that he died without leaving a will. Ryan’s estate was left to be administered according to the rules of intestacy in the State or Territory where he resided (or where his assets were located).
The intestacy laws identify who has the proper authority to administer or make decisions on behalf of the estate, as well as who will inherit the assets. Without Ryan’s will, Stephanie simply did not have the proper authority to make those decisions, despite being legally married.
It is an unfortunate scenario, but one that is all too common. Statistics show that more than half of all Australian do not have a properly made will. The most common reasons we hear for not having a will are:
- “I don’t want to tempt fate”
- “I’m too young to have a will”
- “I don’t own anything, I only have debt, so what’s the point”
- “I’ve heard that making a will is expensive”
The cost of preparing a will is next to nothing when compared to the emotional turmoil and cost to your loved ones by not having one in place. As you can see, the outcome for Stephanie was catastrophic.
What happens when you pass away without a Will?
The intestacy laws in each state and territory are comprehensive and they set out how a person’s assets are to be distributed upon their death when there is no will. A person’s estate comprises every asset they own at the time of their death including bank accounts, real estate, shares, investments, and superannuation (if there is no valid binding death benefit nomination). These laws are in place in every State and Territory in Australia, and they differ in each jurisdiction.
Where a will is made, the testator (or will maker) appoints an executor. This is the person who has the legal authority to administer the estate and finalize the deceased person’s affairs. Without a will, there is no person who is officially recognised as having the proper authority to make decisions on behalf of the estate.
When this happens, an application to the Court for ‘Letters of Administration’ is required. This was the frustrating situation Stephanie Stevens found herself in when trying to deal with her late husband’s BankWest mortgage.
Letters of Administration
This process requires the proposed ‘administrator’ (akin to an executor) to apply to the Court to ‘clear off’ any relatives who might be considered an appropriate person to fulfil this role. The administrator has to prove to the Court how and why they are the most appropriate person for that role. The Supreme Court in each State and Territory, guided by the Succession laws, then makes that determination.
The process of applying for Letters of Administration can take several months or even years if there is a blended family, hostile family dynamics or missing family members. For example, Stephanie was the widow and arguably the most appropriate person to be appointed the administrator and beneficiary of the estate. Despite this, the process still took five months. This is not uncommon. Without a will, the Court process is lengthy, complex and can run up thousands in legal costs.
Who benefits from the estate when there is no Will?
The administrator and beneficiaries of an intestate estate will usually be the ‘next of kin’, but this is governed by the state’s intestacy laws. If there is no family then the estate could potentially be left to the Government. Take for example the difference in Queensland and New South Wales where the deceased is married and has children:
- In New South Wales, the whole of his or her estate will pass to the surviving spouse. If there is no spouse then the next in line to inherit will be children of the deceased.
- In Queensland, the surviving spouse is entitled to the first $150,000, the household chattels and an equal share of the residuary estate. The deceased’s children are entitled to the remaining share of the estate in equal parts.
Depending on the circumstances, the outcome can vary significantly from state to state. Without a will, it is common for problems to arise in circumstances where there is a blended family or estrangement.
A common scenario we come across is where the deceased separated from an ex-spouse many years before but failed to formally divorce, and did not make a will.
In New South Wales, the former spouse will inherit the entire estate.
This is just one of the horror stories we see on a daily basis which could have been avoided if there was a will in place. It is one of the many reasons it is crucial to have your wishes recorded in a properly made will by someone who is experienced in this area of law.
Why you need a lawyer to help with your Will
The diligent preparation of a Will will save your loved ones from anguish while securing their financial future, in your absence.
Many people – perhaps daunted by the process – have not prepared, with the help of a solicitor, important legal documents such as a Will or Enduring Power of Attorney.
A basic Will can be compiled by an experienced Wills and Estates lawyer at Attwood Marshall Lawyers starting from $330.00.
This ‘simple Will’ would appoint an executor, to act in your estate and indicate who you would like to inherit your estate after you pass away.