When someone dies, their loved ones generally have a good idea about who the deceased would've wanted their estate to go to, but they may not have a valid will or a named beneficiary. Therefore, who inherits if there is no beneficiary is not always obvious.
It can leave a gaping hole between the person responsible for administering the estate and the loved ones of the person who passed. Fortunately, there are ways to mitigate the issue and determine how to distribute the assets.
Why is there no beneficiary?
The most common reason for there to be no beneficiary is that there’s no will. Still, there are other ways you can end up with an estate without heirs.
- There is a valid will, but the named beneficiary is deceased.
- The will name’s a beneficiary, but the will is invalid.
- The super or life insurance account name’s a beneficiary, but the beneficiary is deceased.
How do you determine beneficiaries?
Typically, when there are no beneficiaries, the person who passed didn’t have a valid will. When this occurs, it’s also referred to as dying intestate. In Australia, intestacy is part of succession law which includes both legislation and common law.
Unfortunately, there is no single intestate succession law in Australia. Instead, each state and territory govern how to handle intestate estates. Therefore, the administrator of an estate without a valid will must comply with their state or territory rules.
Generally, the order of administration of an estate depends on the relationship to the deceased person. Depending on the state or territory, It can occur in the following order:
- The spouse or de facto partner
- Parents if there’s no surviving spouse or children
- Then grandparents, siblings, aunts or uncles if no other surviving family members
How are intestate estates distributed?
Depending on the state or territory, the descending priority list mentioned above determines who is entitled to inherit assets from an intestate estate. What goes to the spouse vs children also depends on the location of the estate.
Typically, smaller estates go entirely to the surviving spouse, but larger estates are divided. In addition, there are different classes of assets that require different distribution. For example, a spouse usually inherits personal possessions and household goods.
In some situations, a spouse, whether they are a joint tenant or not, may also inherit the matrimonial home regardless of the size of the deceased estate. If the deceased has no spouse or children, other close family members will inherit the estate’s assets.
If there’s no family, the entire estate will pass to the state after payment of any debts and funeral expenses.
Do you need Probate when there are no beneficiaries?
Now, with or without a will, there is a way to determine the estate’s beneficiaries. But before you can distribute the estate, you may need to apply for Probate. Grant of Probate is only necessary when there is a valid will and a named executor.
The Probate grant is a Supreme Court order identifying the executor as the person to deal with the deceased person’s estate. If there is no valid will or a valid will with no executor, you will need to apply for a Letters of Administration.
What is the anti-lapse rule?
The absence of a will is not the same as a will where the sole beneficiary is deceased. In the first situation, the court has no idea what the deceased may have wanted. Thus, intestate succession takes over.
In the second example, the court knows what the deceased wanted, but they cannot carry out their wishes because the beneficiary has died. In some states, you can resolve this issue using the anti-lapse rule where the inheritance passes to the deceased person’s heirs.
Who inherits if there is no beneficiary can be confusing, especially when trying to wrap your head around the estate after someone you love has passed away. When in doubt, it’s best to seek professional legal advice to ensure you’re handling the estate responsibly.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.