We all know the words "my last will and testament". We've all seen those scenes in classic films where a will is read out. But few of us really know what happens when someone dies, particularly where real estate is concerned.
If there is a valid will, it will usually both have said who benefits from the estate - whether that's a partner, the kids, or Maneki Neko Cat Rescue - and who should administer the estate (the 'executors'). Often, a legal firm is given the job of administering the estate. If the beneficiaries don't want the house - often the case when children have moved away in the course of their careers - then the executor will get on with selling it.
Dying Intestate - What Happens if there's No Will
But if a person doesn't make a will, things are different. In legal terms, they "die intestate" (without a testament). In this case, the law says who gets what. A surviving spouse, for instance, is entitled to a statutory legacy and one half of the remaining estate, as well as the deceased's personal effects. Children inherit the whole estate, if there is no surviving spouse.
(And if you have no surviving spouse, children, parents, cousins… the government gets everything. If you 're not happy about that, either make sure you die with debts that are bigger than your asset base, or make a will!)
There are special provisions relating to property in cases of intestacy. If it was jointly owned, then it passes to the other owner (usually a partner or spouse). If the deceased owned it in their sole name, the partner has a right to live there for three months and has a right to buy out any other beneficiaries (eg children), or can apply for the court to postpone the sale till the children turn 18.
And because without a will, there are no executors, one of the beneficiaries will need to apply for Letters of Administration.
In either case, the estate isn't immediately handed out. Instead, all the assets are held in trust by the administrator or executors until the estate has been settled and property can be transferred to the beneficiaries in an orderly way.
So if you own a house, you ought to think about what you want to happen to it. Do you want your partner to be able to carry on living in it? What about your children - do they want to stay, or have they moved away? Do you have a step-family, or children from a previous marriage? If you don't want the state to dictate what happens in the event of your death, it's time to talk to a lawyer about making a will.
Buying from a Deceased Estate
If you're looking to buy a house, this is all useful stuff for you to know, as well. Buying properties from a deceased estate can be a way to find bargains. If an older person has lived in the house for years without doing much in the way of redecoration or even upkeep, the property could have great potential for renovation.
Executors are often tasked with selling the house so that all the beneficiaries can be paid out in cash. The terms of the trust means they need to sell at market value, but they're not motivated to push the price as far as they can; they tend to prefer a quick sale without fuss. They'll often put the property up for auction, because an auction is totally transparent - they can show that they did the right thing.
But if you're buying from a deceased estate, you need to know a few of the legal wrinkles. For instance, title should not be in the name of the deceased (at least in NSW and Queensland) - it should be in the name of the seller.
You should also make sure that probate has been granted. The grant of probate is what gives an executor the right to sell property from the estate. In the case of intestacy you'll want to see the Letters of Administration. (Sometimes sales are made subject to grant of probate - so you won't pay until probate has been granted.)
Get a lawyer to check your deal - family feuds can resurface years later, but if you've got a watertight deed, you'll be okay. And if there's a battle between family members to divide up the estate, that won't challenge your title; they will just be battling for possession of the purchase price, not the property.