“Intestacy’ refers to the circumstances when a person dies without a valid Will.
In a cross-border context, this could occur where:
1. a person dies leaving a personal estate (i.e. assets held personally, outside of trusts or controlled corporations) that is not covered under the terms of a Will; or
2. there is a “deemed intestacy” such as when a Will prepared later in time has inadvertently revoked the terms of an earlier Will in respect of another jurisdiction; or
3. the Will has not been validly prepared, executed and witnessed in accordance with the required formalities for an International Will or a valid Will in the relevant jurisdiction(s) in which that person held assets.
The consequences of an intestacy can be significant as:
1. in the U.S. it means applying to the relevant State Probate Court for the distribution of assets of the decedent, and in Australia, to the relevant State Supreme Court. This can be time-consuming and costly;
2. State intestacy succession laws generally mandate the distribution of assets to the decedent’s next-of-kin – being the surviving spouse (or a registered domestic partner), surviving children, and other blood relatives. In the absence of living relatives, the estate would be distributed to the State;
3. a de facto spouse will usually get nothing. Many States in the U.S. do not recognize common law or de facto marriages. So, unless a de facto wife or husband is specifically provided for through a valid Will, the distribution of a decedent’s assets in an intestacy (or deemed intestacy) in accordance with intestacy succession laws would bypass a de facto spouse, contrary to what may have been the true intentions of the decedent; and
4. specific gifts and donations that a decedent may have intended to make, would be ignored under intestacy succession laws.
To avoid this happening, ensure that you have a valid Will, either in each jurisdiction that you hold assets in, or an International Will that covers most, or all, of these jurisdictions (see our blog International estate planning: Should you have an “International Will”?).
Our upcoming whitepaper International Estate Planning for U.S.-Australia cross-border clients which is due for publication in April 2020 provides an in-depth analysis of international estate planning issues.
If you have any questions, please contact:
Senior Tax Advisor
U.S. Australia Tax Desk