Administration and Probate and Other Acts Amendment (Succession and Related Matters)

Act 2017 (the Amending Act)

The Amending Act came into operation on 1 November 2017. It enacted amendments to the Administration and Probate Act 1956, the Guardianship and Administration Act 1986 and the Powers of Attorney Act 2014.

This paper is limited to the amendments to the Administration and Probate Act 1986 (the Principal Act) insofar as they affect changes to the law relating to intestacy. The changes are inserted into the Principal Act as

Part 1A - Intestacy

and are set out in Section 70A to Section 70ZL. The amending act applies to the estates of persons dying on or after 1 November 2017.

The changes are significant and affect the traditional expectation of family members as to how an intestate estate will be distributed. I intend to just highlight the significant changes.

The Amending Act

1. Part 1A applies if a person dies without leaving a will or leaves a will that fails to dispose of the whole or any part of the deceased’s estate (Section 70A)
   
2. Independently of the definitions in the principal act in Section 3(1) and Section 5 there are further definitions applicable to the provision of Part 1A. There are new terms which include:

• Acquisition Authorisation Order
• Distribution Agreement
• Distribution Order
• Partner’s property election

1. To be entitled to benefit from the estate of an intestate the beneficiary must survive the intestate for at least 30 days (Section 70C (1)). However, this does not apply if the result is that the intestate’s estate will pass to the Crown. Section 70C (3)).
   
2. If a person has an entitlement to share in the estate in more than one capacity, he or she will take in each capacity. I suggest that this could be as a cousin of the intestate and also as a registered caring partner of the intestate.(Section 70D) Registration is under the Relationships Act 2004.
   
3. Any entitlement to a share of an intestate estate is not affected by an inter vivos gift nor in the case of a partial intestacy, a gift in the intestate’s will. The Hotchpot rule no longer applies (Section 70G)
   
4. The personal representative no longer holds an intestate estate on a trust for sale but has a discretionary power of sale and conversion, the power to postpone any such sale and the power to invest. Further, personal chattels must not be sold pending any partner’s property election being made except for the purposes of administration and/or a special reason (Section 70H and Section 70I)
   

Where survived by one partner:

• One partner no children – whole estate to partner
• One partner only children with the partner – whole estate to partner
• One partner and children who are not the children of the partner –

Partner receives the personal chattels, statutory legacy ($401,909), plus interest at the legacy interest rate from the date of death plus half the residuary estate (if any).

• Balance of the residuary estate to the children of the intestate who are not the children of the surviving partner. Sections 70J, 70K, 70L.

Note:

• The children of the partner with the intestate do not receive any benefit from the estate if the intestate is survived by their other parent.
• The issue of the intestate take equally per stirpes.
• The statutory legacy is adjusted for CPI Melbourne all groups index each year but is not reduced. Negative results are offset against future increases.
• On or before July 1 in each year the Minister is to publish in the Government Gazette the amount of the partner’s statutory legacy calculated under Section 70M for the following financial year. (Section 70N)

Property Election:

1. If the intestate leaves one partner and issue who are not issue of the partner:

• the partner may make a partner’s property election to acquire property from the intestate’s estate A partner’s property election may be made even if the partner is the personal representative or the trustee of the estate or a minor. (Section 70O and Section 70P).
• The value at which the partner is to acquire the property is the value as at the date of death in accordance with the provisions of Section 70V or value as agreed by the partner and all other beneficiaries.
  

1. The procedure to be followed for the notice of the right to make, the time for making, the exercise of and any revocation of the partner’s property election is set out in Sections 70Q, 70R, 70S, 70T and 70U:

• Within 30 days of the Grant the personal representative must give the partner notice of right to make the election;
• The partner has 3 months from the date of the notice to make the election;
• If the partner is the personal representative of the intestate estate, he or she has three months from the Grant to make the property election;
• The Court may extend the time for making the election;
• The election must be made in writing identifying the property elected to be acquired and, unless the Court orders otherwise, a copy delivered to the personal representative, each beneficiary and the registrar;
• A partner may revoke the property election at any time before the property is transferred to the partner by notice on writing delivered to those persons who were entitled to receive a copy of the property election.
• If the property affected by the property election is part of a larger aggregate and the acquisition by the partner could substantially diminish the value of the remainder of the property or create difficulties for the administration of the estate or the election requires the Court to determine the partner’s legal or equitable interest in the property, an acquisition authorisation order is required from the Court.
• An acquisition authorisation order may impose conditions including but not limited to the requirement for the partner to pay compensation in addition to consideration for the acquisition.

1. The price to be paid for the acquisition of the property from the estate shall be first satisfied from the partner’s entitlement to part of the estate and if that is insufficient, paid by the partner on or before the date of the transfer. (Section 70W.)
   
2. There are restrictions on disposal of estate property until the time restraints for property election have expired or the Court has dealt with the application for an acquisition authorisation order or the partner has given written notice that the partner does not propose to exercise his or her election right. However this does not apply if the sale of the property is required to meet estate liabilities or the property is perishable or likely to decrease rapidly in value. (Section 70Y)
   
   Where survived by multiple partners and no issue or by multiple partners with child or other issue of one or more of the partners:
   
3. The partners are entitled to the intestate’s estate accordance with:

• Any distribution agreement or
• Any distribution order made by the Court; or
• In equal shares in accordance with s.70ZE
  (Sections 70Z and 70ZA)
  
  Where survived by multiple partners with child or other issue not the child or issue of one or more of the partners:

1. (a) The intestate’s personal chattels are shared in accordance with:

• Any distribution agreement or
• Any distribution order made by the Court or
• In equal shares in accordance with s.70ZE.

          (b) If the residuary estate is worth not more than the statutory legacy it is shared in accordance with:

• Any distribution agreement;
• Any distribution order made by the Court;
• In equal shares in accordance with s.70ZE.

          (c) If the residuary estate is worth more than the statutory legacy then the statutory legacy and
           interest and one half of the balance of the residuary estate is shared in accordance with:

• Any distribution agreement;
• Any distribution order made by the Court;
• In equal shares in accordance with s.70ZE.

           The balance of the residuary estate is shared among the intestate’s issue not issue of any of the partners and if more than one equally per stirpes.
            (Section 70ZB)

13. The partners can enter into written agreement for the distribution of the partners share (Section 70ZC)

14. If an intestate has more than one partner, a partner may apply for a distribution order. If the personal representative has given notice under Section 70E(1) [see below] such an application must be made within three months of the date of the notice unless the Court orders otherwise.

The Court may order the distribution of the intestate’s residual estate in any way that the Court considers is just and equitable including the imposition of appropriate conditions and can order that the whole of the residual estate be allocated to one partner. (Section 70ZD)

15. Section 70E provides the personal representative with a process to progress the administration:

Subject to the requirements to distribute one half of the residuary estate among the intestate’s children who are not children of one of the partners, the personal representative must distribute the residuary estate equally among the partners if either in his or her discretion or at the request of a partner notice is given to the partners that after three months this will be done unless the personal representative has received:

• A written distribution agreement executed by all the partners or
• Notice of an application to the Court for a distribution order or
• An application for a distribution order has been made to the Court and has been dismissed or withdrawn.

16. Distribution of an intestate estate where the intestate does not leave a partner is as follows:

• No partner – to issue per stirpes.
• No partner or issue – to parents equally or to surviving parent.
• No partner or issue or parent – to siblings with siblings surviving children to take the parent’s share equally.
• No partner or issue or parent or sibling or niece or nephew – to grandparents equally or surviving grandparent(s)
• No partner or issue or parent or sibling or niece or nephew or grandparent – to aunts and uncles with cousins taking deceased parents share.
• No partner or issue or parent or sibling or niece or nephew or grandparent or aunt or uncle or cousin – then to the Crown.

Problems ahead:

Division of chattels among partners – note the definition of personal chattels in the Principal Act. It includes motor vehicles, paintings, furniture, wine.

How will multiple partners reach agreement as to distribution of the estate?

How will the Court decide applications for Acquisition Authorisation Orders and Distribution Orders?

There is no legislative guidance as to what is to be taken into account as there is with Part IV applications.

Part IV applications by children excluded from a parent’s intestate estate if estranged from the surviving parent. Will this be a consideration?

Family money may well move into inter vivos trusts and other structures to quarantine it away from succession legislation affecting intestacy.

How will families deal with provision made for children with disabilities?  The role of Special Disability Trusts may well be relevant.